Facts of the Case:

In this case, the petitioner was transporting goods accompanied by valid tax invoice and e-way bill when the vehicle was intercepted by the GST authorities. Forms GST MOV-01, MOV-02 and MOV-04 were issued for inspection under Section 68 of the CGST Act read with the procedure prescribed in Circular No. 41/15/2018-GST issued under Section 168. Thereafter, without issuing any formal detention order under Section 129(1), the authorities directly issued a notice in Form GST MOV-10 proposing confiscation under Section 130 of the CGST Act and demanded fine in lieu of confiscation. Thereafter, without issuing any formal detention order under Section 129(1), the authorities directly issued a notice in Form GST MOV-10 proposing confiscation under Section 130 of the CGST Act and demanded fine in lieu of confiscation. Aggrieved by the continued retention without a formal detention order, the petitioner approached the High Court.

Issue:

Whether Section 130(2) of the CGST Act permits provisional release of goods pending adjudication of confiscation proceedings.  Whether Section 130(2) of the CGST Act permits provisional release of goods pending adjudication of confiscation proceedings. Whether the prohibitory direction contained in Form MOV-02 can substitute a statutory detention order under Section 129.

Held that:

The Court examined the statutory scheme under Sections 67, 68, 129 and 130 of the CGST Act along with the procedural framework under Circular No. 41/15/2018-GST. It noted that earlier, in Sales Tax Officer v. Y. Balakrishnan, the Court had interpreted Section 130 to permit release of goods upon payment of fine in lieu of confiscation even during adjudication.

The Court held that after the Finance Act, 2021 amendments, the statutory scheme relating to detention and confiscation underwent substantial change. Section 130(2) does not contemplate provisional release of goods pending adjudication. The provision provides an option to pay fine in lieu of confiscation only after a final order of confiscation is passed, which is evident when read along with Section 130(7), prescribing payment within three months from the date of confiscation order. The word “authorized” in Section 130(2) refers to confiscation adjudged by a final order, not a mere proposal in MOV-10.

The Court further held that Section 130 does not confer power to detain goods pending confiscation. Detention in transit is specifically governed by Section 129, which mandates issuance of a formal detention order and adherence to statutory timelines. In the absence of such an order, continued retention of goods violates Article 300A of the Constitution. The prohibitory direction in MOV-02 cannot substitute a statutory detention order, as exercise of power must trace to a clear statutory source, consistent with constitutional principles.

Accordingly, the Court concluded that the Section 130(2) does not permit provisional release pending adjudication. Initiation of confiscation proceedings does not, by itself, authorize retention of goods. In the absence of a valid detention order under Section 129, possession of goods by the authorities becomes illegal.

Case Name: M/s. Authentic Metals Versus The Enforcement Officer, The Assistant State Tax Officer, Palakkad, State Goods And Service Tax Department. dated 20.02.2026