Safiya Malik

The High Court of Calcutta Single Bench of Justice Om Narayan Rai declined to interfere with GST detention and penalty orders, while recording that CBIC (Central Board of Indirect Taxes & Customs) circulars are binding on departmental officers but must operate within the statutory framework and cannot be used as a protective shield where the genuineness of the transaction, invoices or e-way bill is in doubt. The dispute arose from detention of an areca-nut consignment and the vehicle in transit after officers reported an excess quantity over the invoice and questioned the supplier’s existence and supporting documents. The Court directed the dealer to file a statutory appeal within one week for disposal within four weeks and ordered conditional release of the goods and conveyance on payment of the Section 129(1)(a) penalty and a bank guarantee for the balance.

The writ petition concerned a challenge to an order passed by the Assistant Commissioner, Central GST & Central Excise, Siliguri, imposing penalties under the GST law in connection with detention of a consignment of areca nuts.

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The petitioner was engaged in the business of trading areca nuts across India and had sold a consignment for inter-State movement. While the goods were in transit, the vehicle was intercepted and subjected to physical verification. The authorities recorded a discrepancy between the quantity mentioned in the tax invoice and the quantity found on weighment. Summons were issued to the driver and thereafter the consignment and conveyance were detained.

A show cause notice was issued proposing penalties on the ground of excess quantity and alleged doubts regarding the genuineness of the supplier. The petitioner submitted a reply along with supporting documents, including invoices and e-way bills, and claimed that personal hearing was not afforded despite appearance before the authority. The impugned order rejected the explanation and imposed penalties under two separate provisions. The petitioner approached the High Court alleging violation of natural justice and improper invocation of statutory provisions, while also seeking release of the detained goods on the ground that areca nuts are perishable in nature.

The Court observed, “It is now well settled that existence of an alternative remedy does not bar entertainment of a writ petition if it can be demonstrated that the case with which the writ court has been approached falls within any of the four categories i.e, if there is violation of principles of natural justice or there is a case of infringement of fundamental rights or there is a challenge to the vires of a statute or the impugned action by an authority answering the definition of State within the meaning of Article 12 of the Constitution of India which is wholly without jurisdiction.”

It recorded, “in the peculiar factual setting of the case the truth of the petitioner’s assertion would not be so effectively ascertainable on the basis of affidavit evidence in a writ proceeding as in the statutory appellate proceeding.” The Court stated, “The order impugned however records that none appeared for the petitioner before the respondent GST authority.” It observed, “Such a matter would require a deeper probe and that can be better undertaken by the appellate authority under Section 107 of the said Act of 2017.”

The Court recorded, “This Court has gone through the order impugned. The same reveals several factual issues appreciation whereof should and could be best done by the appellate authority.” It stated that the order “returned several factual findings” and then extracted, “Physical examination of the goods and the documents revealed following discrepancies- (a) The Quantity of goods as per ivoice is 17500 kgs whereas on weighment it was found to be 18800kgs. Thus there is an excess of 1300 kgs. (b) For verification of genuineness of procurement of goods by the said supplier, E-way bill date for their inward supplies were verified from the said E-way Bill portal and it was noticed that there is no inward E-way bill for goods. Further, as per statement of the driver, the supplier existence is dubious and requires further verification of procurement of goods as well as genuineness of suppliers is required.”

It also recorded from the extracted portion, “Considering above, it appears that the Supplier … is procuring and supplying dries areca nut procured from other source evading duty and reflecting under his own firm under the guise of their own GST credential and Bills. As such, a detailed verification is imperative to unearth further violations including tax evasion, in the interest of revenue.”

On the limits of writ intervention on the material before it, the Court stated, “this is neither a case of “no notice no hearing” nor can the order impugned and the act of the respondent GST authorities be said to be wholly without jurisdiction,” and further recorded, “It would, therefore, not be proper for this Court to intervene in this matter at this stage. It would be best to leave the petitioner free to approach the appellate authority in terms of Section 107 of the said Act of 2017.”

On reliance placed on the CBIC circular, the Court stated, “This Court is of the considered view that the said Circular cannot be applied to such cases where the very transaction or the genuineness thereof doubted and where the invoices and/or the e-way bill are/is under question.” It recorded, “It cannot be doubted that a circular issued by the Central Board of Indirect Taxes & Customs would be binding on all its officers but at the same time there can also not be any cavil to the proposition that a circular issued by the Board whether instructive or clarificatory or otherwise has to operate within the statutory framework and has to be applied only when there is no doubt raised regarding the genuineness of the consignment and the transaction and the documents are in order.” The Court stated, “The said Circular should not be treated as shield to ward off legal scrutiny and shelve legal action in cases involving undisclosed transactions, and/or dubious invoices and bills.”

The Court directed that “the petitioner should be left free to approach the appellate authority under Section 107 of the said Act of 2017 by filing an appeal against the order impugned. If such appeal is filed within a period of one week from date, the same shall be decided in accordance with law within a period of four weeks without granting any unnecessary adjournment to the petitioner.”

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“If the petitioner pays the amount of penalty determined by the order dated July 31, 2025 in terms of Section 129(1)(a) of the said Act of 2017 and furnishes security for the balance sum determined under Section 129(1)(b) of the said Act of 2017 in the said order dated July 31, 2025 in the form of bank guarantee in favour of the respondents,” the GST authorities “shall release the petitioner’s goods and conveyance within two days of payment of such penalty and furnishing of such security.”

“The respondents-GST authorities shall provide GST ID and password to the petitioner in order to enable the petitioner to file the appeal, if so required.” It clarified that “this Court has not gone into the merits of the petitioner’s case and all points are left open, to be decided by the appellate authority, strictly in accordance with law, without being influenced by any observation made hereinabove.”

Advocates Representing the Parties

For the Petitioners: Mr. P. Verma, Advocate; Ms. Pooja Sah, Advocate
For the Respondents: Mr. Ratan Banik, Advocate; Mr. Bishwaraj Agarwal, Advocate

Case Title: M/s. JJ Traders v. Union of India & Ors.
Case Number: WPA 2144 of 2025
Bench: Justice Om Narayan Rai