2025 (6) TMI 1070 - HC - GST

Maintainability of petition - availability of alternative remedy of appeal - seeking to quash the confiscation order - HELD THAT - In view of there being an alternative efficacious remedy available under Section 107 of the KGST Act against an order of confiscation under Section 130 of KGST Act this Court is not inclined to accept the argument of the learned counsel for the petitioner and agrees with the arguments put forth by the learned AGA with regard to maintainability of the petition and alternative efficacious remedy being available to the petitioner. This petition is disposed of. The petitioner is at liberty to approach the Appellate Authority by invoking appropriate provisions of law and seek for release of confiscated goods and the vehicle if so advised. If any such application is moved by the petitioner the same shall be considered expeditiously not later than two weeks from the date of its filing.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the writ petition seeking to quash the confiscation order under Section 130 of the Karnataka Goods and Services Tax Act (KGST Act) and Central Goods and Services Tax Act (CGST Act) is maintainable in the presence of an alternative statutory remedy under Section 107 of the KGST Act read with Section 20 of the IGST Act.

- Whether the confiscation of goods and vehicle along with imposition of fine and penalty under Section 130 of the KGST/CGST Act was justified in the facts and circumstances of the case.

- Whether the petitioner, having purchased goods in good faith after due diligence and having paid the tax component, is entitled to release of confiscated goods and vehicle.

- Whether the petitioner's contention that it is willing to deposit the disputed tax amount suffices to challenge the confiscation order.

- The scope and applicability of the writ jurisdiction in cases involving confiscation orders under the KGST/CGST Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of Writ Petition in Presence of Alternative Remedy

Relevant Legal Framework and Precedents: The KGST Act under Section 130 empowers authorities to confiscate goods and vehicles involved in tax evasion or irregularities. Section 107 of the KGST Act and Section 20 of the IGST Act provide for an appellate remedy against such orders. The principle of exhaustion of alternative statutory remedies before approaching the writ jurisdiction is well settled in administrative law and taxation jurisprudence.

The Court relied on a coordinate bench judgment wherein in a similar factual matrix, the writ petition was held not maintainable as an alternative efficacious remedy by way of appeal under Section 107 KGST r/w Section 20 IGST was available. The Court extracted paragraphs 32 and 33 of that order, which held that the officer under Section 6 of KGST is a proper officer under Section 4 of IGST and appeals against confiscation orders are maintainable under the said provisions. The coordinate bench declined to exercise writ jurisdiction and granted liberty to approach the appellate authority.

Court's Interpretation and Reasoning: The Court concurred with the coordinate bench that the existence of an alternative statutory remedy precludes the exercise of writ jurisdiction. The petitioner's attempt to invoke writ jurisdiction to quash the confiscation order was held to be premature and not maintainable. The Court emphasized that the petitioner must first exhaust the appeal remedy before the Appellate Authority.

Application of Law to Facts: The petitioner had not availed the appellate remedy under Section 107 KGST and Section 20 IGST. Despite the petitioner's plea for quashing the order, the Court held that the proper course was to file an appeal. The Court directed that if such appeal is filed within four weeks, it shall be considered on merits without reference to limitation.

Treatment of Competing Arguments: The petitioner argued the writ petition was necessary as it had purchased goods in good faith and was willing to deposit the tax component. The State contended that the writ was not maintainable and the petitioner might be colluding with the supplier who absconded. The Court preferred the State's argument on maintainability and alternative remedy, thereby rejecting the petitioner's plea for writ relief.

Conclusion: Writ petition was not maintainable in view of the alternative efficacious statutory remedy of appeal under Section 107 KGST/Section 20 IGST.

Issue 2: Justification for Confiscation and Penalty under Section 130 KGST/CGST Act

Relevant Legal Framework: Section 130 of the KGST/CGST Act empowers the tax authorities to confiscate goods and vehicles involved in tax evasion or irregularities in transportation without valid documents such as E-way bills. The provision also authorizes imposition of fine and penalty.

Key Evidence and Findings: The petitioner had purchased scrap batteries from respondent No.4 and obtained an E-way bill generated by respondent No.4 for transportation. The vehicle carrying goods was intercepted by Commercial Tax Department officers. Despite production of E-way bill, weighment ticket, and tax invoice, the goods and vehicle were confiscated. Respondent No.4 did not appear before the authorities despite summons, raising suspicion of irregularity.

Court's Interpretation and Reasoning: The Court noted that the petitioner had conducted due diligence by verifying the supplier's GST registration, PAN, and other documents and had paid the consideration through banking channels. However, the absence of the supplier at the inquiry and the confiscation order passed under Section 130 and 122 were not challenged on merits in the writ petition but only on maintainability grounds.

Application of Law to Facts: The Court did not delve into the substantive correctness of the confiscation order but observed that the petitioner's willingness to deposit the disputed tax amount of Rs. 2,18,743/- was noted. However, the petitioner was still liable for the entire invoice value of Rs. 14,33,983/- as per the State's contention. The Court left the determination of these issues to the appellate authority.

Treatment of Competing Arguments: The petitioner argued good faith purchase and readiness to pay disputed tax amount justified release of goods and vehicle. The State argued possible collusion and non-appearance of supplier justified confiscation and penalty. The Court refrained from adjudicating these factual disputes in writ jurisdiction.

Conclusion: The confiscation and penalty order under Section 130 KGST/CGST Act was not interfered with in writ jurisdiction due to availability of appeal remedy.

Issue 3: Entitlement to Release of Confiscated Goods and Vehicle

Relevant Legal Framework: The KGST/CGST Act allows release of confiscated goods and vehicles upon payment of due tax, fine, and penalty. The appellate authority has jurisdiction to order release subject to conditions.

Court's Interpretation and Reasoning: The Court granted liberty to the petitioner to approach the appellate authority for release of goods and vehicle. It directed that no auction or precipitate action shall be taken till the appeal is decided. The Court mandated expeditious consideration of any such application within two weeks.

Application of Law to Facts: The petitioner's readiness to deposit the disputed tax amount was acknowledged. However, the Court did not grant immediate release but left the matter to the appellate authority's discretion after hearing parties.

Treatment of Competing Arguments: The petitioner sought immediate release on good faith purchase and partial payment. The State required full payment of invoice value. The Court balanced these by preserving the status quo and directing expeditious appellate consideration.

Conclusion: Release of confiscated goods and vehicle is subject to appellate authority's decision after hearing and compliance with statutory requirements.

3. SIGNIFICANT HOLDINGS

"In view of the preceding analysis, I hold that the petition before this Court is not entertainable, in the light of existence of an alternative statutory remedy of filing an appeal under Section 107 of the KGST r/w Section 20 of the IGST. Petitioner is granted 4 weeks time to file an appeal. In the event, the appeal is preferred within 4 weeks from the date of receipt of the copy of this order, the Appellate Authority shall consider the issue on its merit, without reference to limitation."

"Till such time, the confiscated goods and the vehicle shall not be auctioned or no precipitate action shall be taken."

Core Principles Established:

• Writ jurisdiction is not to be exercised where an alternative efficacious statutory remedy is available, particularly in taxation matters involving confiscation under the KGST/CGST Act.
• The appellate remedy under Section 107 KGST and Section 20 IGST is the appropriate forum to challenge confiscation orders under Section 130 KGST/CGST Act.
• Good faith purchase and willingness to deposit disputed tax amount do not automatically entitle release of confiscated goods without appellate adjudication.
• The Court can protect the petitioner's interest by restraining auction or disposal pending appellate adjudication and directing expeditious hearing.

Final Determinations:

• The writ petition challenging the confiscation order was dismissed as not maintainable.
• The petitioner was directed to avail the appellate remedy within four weeks, with liberty to seek release of goods and vehicle from the appellate authority.
• The confiscated goods and vehicle shall not be auctioned or disposed of until the appellate authority decides the matter.