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2025 (5) TMI 1680 - HC - GSTSeeking release of the goods and quantification of the tax and penalty - Seizure of a consignment of areca nuts - No proper documentation - presupposes issuance of a Show Cause Notice - challenging the impugned communication/order - HELD THAT -Clearly the search itself took place on 1st May 2025 in the godowns of the Petitioner in Delhi and the letter dated 2nd May 2025 was written by the Petitioner where a clear undertaking was given that the Petitioner was willing to deposit the tax and penalty in response to which the computation was done. The Petitioner appears to have had a change of mind and now does not wish to deposit the amount. Thus it is clarified that the impugned communication dated 6th May 2025 would only be treated as a response to the letter dated 2nd May 2025 and not an adjudication order. The Petitioner at this stage prays for provisional release of the goods subject to furnishing a bank guarantee. This Court is not inclined to consider the said prayer in this writ petition as the same can be raised with the concerned authorities as well. Let the GST Department proceed to issue a Show Cause Notice in accordance with law. If the Petitioner moves an application for provisional release the same be considered by the concerned Adjudicating Authority as well. The petition is disposed of.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Nature of the Impugned Communication (Adjudication Order or Response) Relevant Legal Framework and Precedents: Under the CGST Act, 2017, the imposition of tax and penalty requires a formal adjudication process, which includes issuance of a Show Cause Notice, opportunity for hearing, and passing of an adjudication order as per Sections 73 and 74. The communication under challenge must be examined in light of these procedural requirements. Court's Interpretation and Reasoning: The Court observed that the impugned communication dated 6th May, 2025 was issued in response to the Petitioner's letter dated 2nd May, 2025, wherein the Petitioner voluntarily offered to deposit the tax and penalty for provisional release of seized goods. The Court held that this communication does not amount to an adjudication order passed after due process but is merely a computation of tax and penalty in response to the Petitioner's request. Key Evidence and Findings: The letter dated 2nd May, 2025 clearly shows the Petitioner's willingness to deposit tax and penalty. The impugned communication provides detailed quantification of tax and penalty based on the invoice produced by the Petitioner, but does not indicate any adjudicatory findings or opportunity for hearing. Application of Law to Facts: Since the communication lacks the procedural safeguards of adjudication, it cannot be treated as an order under Sections 73 or 74 of the CGST Act, 2017. It is a preliminary response facilitating provisional release subject to deposit of dues. Treatment of Competing Arguments: The Respondent's counsel rightly submitted that the communication is not an order-in-original but a response to the Petitioner's request, and that if the Petitioner refuses to deposit the amount, the Department would initiate proper adjudication by issuing a Show Cause Notice. Conclusion: The impugned communication dated 6th May, 2025 is not a final adjudication order but a response to the Petitioner's offer to deposit tax and penalty for provisional release. Issue 2: Legality of Imposition of Penalty Without Issuance of Show Cause Notice Relevant Legal Framework and Precedents: Sections 73 and 74 of the CGST Act, 2017 mandate issuance of a Show Cause Notice before imposing tax and penalty for non-payment or short payment of tax. Section 130 read with Section 122 deals with penalty for confiscation of goods. The principles of natural justice require that no penalty can be imposed without giving the person an opportunity to be heard. Court's Interpretation and Reasoning: The Court noted the Petitioner's submission that penalty imposition without issuance of a Show Cause Notice is untenable. The Court agreed that penalty under Sections 73 and 74 presupposes a Show Cause Notice and adjudication process. Since the impugned communication is not an adjudication order, no penalty has been formally imposed. Key Evidence and Findings: The absence of any Show Cause Notice or adjudication order in the record supports the Petitioner's contention that no formal penalty has been imposed. Application of Law to Facts: The Department cannot demand penalty under Sections 73 and 74 without following due process. The communication is only a preliminary quantification, and formal proceedings must follow for penalty imposition. Treatment of Competing Arguments: The Respondent's counsel conceded that if the Petitioner declines to deposit the amount, the Department will issue a Show Cause Notice and proceed as per law. Conclusion: Imposition of penalty without issuance of a Show Cause Notice is not legally sustainable. The impugned communication does not amount to penalty imposition. Issue 3: Binding Effect of Petitioner's Undertaking to Deposit Tax and Penalty Relevant Legal Framework and Precedents: An offer to deposit tax and penalty for provisional release of goods is a voluntary undertaking but does not preclude the Petitioner from challenging the quantum or validity of tax and penalty in proper proceedings. Court's Interpretation and Reasoning: The Court observed that the Petitioner initially offered to deposit tax and penalty but subsequently changed position and challenged the demand. The communication dated 6th May, 2025 was issued pursuant to this offer and cannot be treated as a binding adjudication. Key Evidence and Findings: The Petitioner's letter dated 2nd May, 2025 and subsequent challenge to the impugned communication demonstrate a change of stance. Application of Law to Facts: The Petitioner's undertaking does not bar the Department from initiating formal adjudication or the Petitioner from contesting the demand in such proceedings. Treatment of Competing Arguments: The Respondent contended that the offer was accepted conditionally and the Department retains the right to proceed if the Petitioner does not comply. Conclusion: The undertaking to deposit tax and penalty is not a final waiver of rights and is subject to formal adjudication and challenge. Issue 4: Provisional Release of Seized Goods and Bank Guarantee Relevant Legal Framework and Precedents: Provisional release of seized goods under GST law is governed by Section 130 of the CGST Act, 2017, which allows release on furnishing security or bank guarantee. The procedure is subject to discretion of the Adjudicating Authority. Court's Interpretation and Reasoning: The Petitioner sought provisional release subject to furnishing a bank guarantee. The Court declined to entertain this prayer in the writ petition, directing the Petitioner to approach the concerned authorities for such relief. Key Evidence and Findings: No formal application for provisional release was pending before the Court; the request was made in the writ petition. Application of Law to Facts: The Court emphasized that procedural remedies under the CGST Act must be exhausted before seeking judicial intervention. Treatment of Competing Arguments: The Respondent did not oppose the Petitioner approaching the Adjudicating Authority for provisional release. Conclusion: The Petitioner's prayer for provisional release with bank guarantee is to be addressed by the Adjudicating Authority and not in the writ petition. Issue 5: Appropriate Course of Action and Jurisdiction of the Court Relevant Legal Framework and Precedents: Article 226 of the Constitution of India empowers High Courts to issue writs for enforcement of fundamental rights and for any other purpose. However, writ jurisdiction is discretionary and not a substitute for statutory remedies. Court's Interpretation and Reasoning: The Court held that since the impugned communication is not an adjudication order, the appropriate course is for the Department to issue a Show Cause Notice and proceed as per law. The writ petition challenging the communication was disposed of accordingly. Key Evidence and Findings: The procedural status of the impugned communication and the Petitioner's willingness to deposit tax and penalty were relevant considerations. Application of Law to Facts: The Court emphasized adherence to statutory procedures and the need for the Petitioner to exhaust statutory remedies before seeking judicial intervention. Treatment of Competing Arguments: The Petitioner sought judicial intervention for release of goods and quashing of demand, while the Respondent urged adherence to statutory process. Conclusion: The Court directed the Department to issue Show Cause Notice and proceed, and declined to grant relief in the writ petition. 3. SIGNIFICANT HOLDINGS "The impugned communication dated 6th May, 2025 would only be treated as a response to the letter dated 2nd May, 2025 and not an adjudication order." "An imposition of penalty and taxes under Section 73 and 74 of CGST Act, 2017 presupposes issuance of a Show Cause Notice and in the absence thereof, no such demand can be raised." "The Petitioner's prayer for provisional release of the goods subject to furnishing a bank guarantee cannot be considered in this writ petition and can be raised with the concerned authorities." "Let the GST Department proceed to issue a Show Cause Notice in accordance with law." Core principles established include the necessity of following due process under the CGST Act, 2017 for imposition of tax and penalty, the non-adjudicatory nature of communications responding to voluntary offers to deposit dues, and the importance of exhausting statutory remedies before approaching the Court for relief. Final determinations:
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