Detention under Section 129 should have been initiated before proceeding to confiscation under Section 130

Facts of the Case:-  The Petitioner was involved in the purchase of iron scrap from an unregistered dealer, and its subsequent sale to M/s. Agarwal Foundries Private Limited. While the goods were in transit, they were detained due to allegedly insufficient documentation. The petitioner claimed to have valid documentation, including an invoice and Way Bill.

The Petitioner, here challenged the actions of Respondent department, who detained the goods and vehicle without following the due process under Section 129 of the Central Goods and Services Tax (CGST) Act, 2017. The respondent instead proceeded to auction the confiscated goods under Section 79 of the CGST Act, 2017. 

The petitioner argued that the Respondent Authorities bypassed the procedure outlined in Section 129 of the CGST Act, 2017, and directly invoked Section 130, resulting in the confiscation of goods and the scheduling of an auction. Therefore, these actions were illegal, arbitrary, high-handed, and in violation of principles of natural justice.

Held:  The court noted that the confiscation proceedings under Section 130 of the CGST Act, 2017, were initiated without providing the petitioner the stipulated fifteen-day period to respond, which violated principles of natural justice. Also, highlighted that Section 129 and Section 130 of the CGST Act, 2017, are independent and mutually exclusive, meaning detention under Section 129 should have been initiated before proceeding to confiscation under Section 130.

The Court examined the petitioner's claim and determined that the authorities failed to follow the correct legal procedures. Specifically, the authorities detained the petitioner's goods and vehicle without first initiating proceedings under Section 129 of the CGST Act, 2017, and instead directly proceeded under Section 130. 

The court set aside the auction notice and ordered the release of the detained goods and vehicle, subject to specific conditions. The petitioner was required to deposit 25% of the goods' value and execute a personal bond for the balance, and to execute a personal security bond for the vehicle. Further, The petitioner must establish the genuineness of the sale transaction from the unregistered dealer. The authorities are permitted to initiate proceedings under Section 129 of the CGST Act, 2017, giving the petitioner an opportunity to present their case. 

The writ petition is thereby disposed of, allowing the respondents to proceed according to the proper legal framework under Section 129, ensuring the petitioner is given a fair chance to prove the legitimacy of the transaction

To read the complete judgment 2024 Taxo.online 1103