Safiya Malik

The High Court of Gujarat Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi disposed of a batch of writ petitions by remanding the matters to the GST authorities to re-examine confiscation notices and orders issued in Form MOV-10/MOV-11, withdraw them if inconsistent with the court’s guidance, and pass fresh orders within 12 weeks, while directing release of seized goods or conveyances by applying the Section 129 detention-and-release mechanism wherever that provision alone is attracted. The petitions arose from transit interceptions where consignments and vehicles were detained or seized and confiscation was initiated under Section 130, which the petitioners contended was invoked midstream on alleged documentation or compliance discrepancies. The Bench clarified that Sections 129 and 130 operate independently, and that confiscation action during transit is justified only where the material indicates an intent to evade tax.

In a group of petitions before the High Court of Gujarat, the petitioners challenged the respondent authorities’ action of initiating confiscation proceedings for goods seized during transit under the Central Goods and Services Tax Act, 2017. The Court noted that the goods were “seized and detained while in transit” and that, after examining “the e-way bills and other supporting documents”, notices in Form GST MOV-10 were issued proposing confiscation.

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The issues arose in the context of amendments to Sections 129 and 130 made effective from 01.01.2022 by virtue of the Finance Act, 2021. The petitioners contended that the Proper Officer, having detained goods under Section 129, was required to complete the procedure under Section 129 and could not “straightaway travel to Section 130” while the Section 129 process was still underway. They also relied on the post-amendment position regarding the non-obstante clause in Section 129 and its effect vis-à-vis Section 130. The petitioners further referred to the post-amendment regime (including Rule 144A and amended Rule 154) to contend that Sections 129 and 130 operate independently, and that MOV-10 invoking Section 130 cannot be based merely on suspicion or portal data discrepancies.

The Court recorded that “in the present group of petitions, we are called upon to examine the contours of Sections 129 and 130 of the Central Goods and Services Tax Act, 2017” and that the petitioners were “aggrieved by the action of the respondent–authorities for confiscation of goods which were seized during transit under Section 129 of the CGST Act.” It noted that the goods were “seized and detained while in transit” and that, “upon examination of the e-way bills and other supporting documents, notices in Form GST MOV-10 were issued proposing confiscation of the goods.” The Court also recorded the petitioners’ grievance that the respondents had “mechanically invoked Section 130 of the CGST Act for confiscation of goods immediately upon interception under Section 129 of the CGST Act.”

On the amended framework, the Court recorded that “Section 129 of the CGST Act has now become a self-contained and complete code for dealing with contraventions relating to goods in transit” and that, because amended Section 129(6) provides for auction on non-payment of penalty, “there is no necessity or statutory justification for invoking Section 130 of the CGST Act in cases where proceedings are initiated under Section 129 of the CGST Act.”

It further recorded that “Section 129 of the CGST Act is a special provision governing detention of goods in transit” and that once detained, “the entire mandate of Section 129 of the CGST Act must be strictly followed.” The Court recorded that Section 129, “being a special provision containing a non-obstante clause, shall prevail over other provisions of the Act, including Section 130 of the CGST Act.” It also recorded that “The non-obstante clause has been consciously removed from Section 130… and retained in Section 129… thereby completely delinking both provisions,” and that “in the event of any conflict, Section 129 shall supersede Section 130.”

On the basis for MOV-10, the Court recorded: “The Notice in MOV-10 invoking Section 130 cannot be issued merely on suspicion or portal data discrepancies” and added that “such discrepancies may be at the end of a supplier’s supplier.” It also recorded that the rule changes effective from 01.01.2022 “clearly indicates that both the provisions (i.e., Sections 129 and 130) are made independent.”

The Court ordered that “All the matters are remanded to the respondent-authorities” and issued the following directions.

“The Notices issued under FORM MOV-10 or Order under FORM MV-11 shall be re-examined in light of the aforesaid observations. In case, it is found that the confiscation Notice or Confiscation runs contrary to the observations made in the present judgement and order, the same shall be withdrawn.”

The Court directed: “The goods or conveyance, seized during transit shall be released by resorting to the provisions of Section 129 of the Act in case any infringement is found under that Section. Since, in some of the matters, the goods which are confiscated are already released, such release is made subject to final outcome of confiscation proceedings, and if there is stay operating on confiscation, the same shall continue to operate till final order is passed.”

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“In case, the authorities find that confiscation is imminent, then such action shall not be taken for period of two (02) weeks to enable the petitioners to approach this Court again. Necessary orders shall be passed within a period of 12 weeks from the date of receipt of the writ of this order.”

Finally, it clarified: “…in case it is found that the authorised officers have acted in defiance of the observations made by this Court, then they shall be liable to be prosecuted for committing contempt of Court.”

“With these observations and directions, the present writ petitions stand disposed of. As a sequel, the civil applications do not survive and are accordingly disposed of. RULE made absolute to the aforesaid extent. No order as to costs.”

Advocates Representing the Parties

For the Petitioners: Mr Tushar Hemani, Sr. Advocate; Ms Vaibhavi Parikh; Mr Avinash Poddar; Mr Jatin Harjai; Mr Chetan K. Pandya; Mr Monal S. Chagla(n)i; Mr Uchit N. Sheth; Mr Hardik P. Modh, Advocates.
For the Respondents: Mr Kamal Trivedi, Advocate General; Mr Vinay Bairagra; Mr Harshvardhan Sharma; Mr Utkarsh Sharma; Ms Shrunjal Shah, Assistant Government Pleader; Ms Nimisha Parekh, Assistant Government Pleader.

Case Title: M/S Panchhi Traders Through Its Authorized Signatory Narendra Danabhai Daki v. State Of Gujarat Through Deputy Commissioner (Enforcement) & Anr.
Case Number: R/Special Civil Application No. 9250 of 2020
Bench: Justice A. S. Supehia, Justice Pranav Trivedi