Facts of the Case:

The petitioner was engaged in the business of transportation of goods and was intercepted by the GST authorities during transit. Upon interception, the Proper Officer alleged serious discrepancies in the accompanying documents such as mis-declaration of goods, inconsistencies in e-way bills, and other circumstances indicating a deliberate attempt to evade tax. Instead of initiating proceedings strictly under Section 129 of the CGST Act, 2017 (detention, seizure and release of goods and conveyance in transit), the Proper Officer directly invoked Section 130 of the CGST Act by issuing Form GST MOV-10, proposing confiscation of goods and conveyance along with imposition of penalty.

The petitioner challenged the action primarily on the ground that Section 129, being a special provision dealing with goods in transit and containing a non-obstante clause, must be exhausted first; and Post-amendment (w.e.f. 01.01.2022), confiscation proceedings under Section 130 cannot be initiated unless proceedings under Section 129 culminate. It was further contended that deletion of the non-obstante clause from Section 130 indicates legislative intent to subordinate confiscation proceedings to Section 129.

The respondents defended their action by submitting that Sections 129 and 130 are independent and mutually exclusive provisions, and confiscation could be initiated even at the stage of interception if the facts clearly disclose an intention to evade tax.

Issue:

Whether, after the amendments effective from 01.01.2022, confiscation proceedings under Section 130 of the CGST Act can be initiated independently of proceedings under Section 129? Whether the presence of a non-obstante clause in Section 129 bars direct invocation of Section 130 in cases of interception during transit? 

Held that:

The High Court held that Sections 129 and 130 of the CGST Act operate independently and are mutually exclusive, even after the amendment brought by the Finance Act, 2021. The Court reaffirmed that confiscation under Section 130 is not dependent upon or subject to proceedings under Section 129, and that payment of tax and penalty under Section 129 does not bar initiation of confiscation proceedings under Section 130, if incriminating material indicating intention to evade tax is found.

The Court noted that although the non-obstante clause has been deleted from Section 130, this amendment does not dilute the substantive power of confiscation. Section 129 continues to be a standalone provision applicable where there is no element of intention to evade tax, whereas Section 130 is attracted only when such intention is evident from the facts and circumstances. The legislative intent to delink both provisions is apparent from the enhanced penalties under amended Section 129 and the grave consequences attached to confiscation under Section 130, where goods vest in the Government.

The Court clarified that confiscation at the threshold stage is permissible, but only in cases involving serious and grave violations such as fake or forged documents, fake registrations, absence of documents, manipulated e-way bills, or complete mismatch of goods, clearly revealing intention to evade tax. Routine procedural lapses or minor discrepancies cannot justify confiscation.

It was further held that the proper officer must form an opinion regarding intention to evade tax within the strict timelines prescribed under Rules 138B and 138C of the CGST Rules, and such opinion must ordinarily be formed within a maximum period of six days from interception. If no such opinion is formed within this period, the goods and conveyance must be released by resorting only to Section 129.

The Court also held that FORM MOV-10 and MOV-11 issued for confiscation by officers lacking jurisdiction under Rule 138B are without authority of law. All confiscation notices and orders issued contrary to these principles were directed to be re-examined and withdrawn, if found inconsistent with the law laid down.

Case Name: M/s. Panchhi Traders Through Its Authorized Signatory Narendra Danabhai Daki Versus State Of Gujarat Through Deputy Commissioner (Enforcement) & Anr. dated 11.12.2025

To read the complete judgement 2025 Taxo.online 3278