2025 (6) TMI 1665 - HC - GST

Maintainability of petition - availability of alternative remedy - lack of jurisdiction - Detention of goods - levy of tax and penalty - reliance placed upon reasons which were not part of the show cause notice - power of judicial review - HELD THAT - This Court has carefully examined the impugned order dated 03.06.2025 in the context of the material available on record the statutory provisions under the CGST Act and the principles of natural justice. The impugned order reflects due application of mind to the facts and submissions presented. The order sets out the factual matrix records the reply submitted by the Petitioner and provides cogent reasons for rejecting the same. No procedural impropriety manifest illegality or violation of the principles of natural justice has been demonstrated by the Petitioner. The authorities have acted within the scope of their powers under Section 129(3) of the CGST Act and their conclusions are based on a reasonable appreciation of the available evidence. The power of judicial review under Article 226 of the Constitution does not extend to reappreciation of evidence or substitution of factual findings particularly when an efficacious alternative remedy is available under the statute. This Court is of the considered view that the writ petition is devoid of merit and does not warrant interference under Article 226 of the Constitution. Accordingly the present writ petition stands dismissed. However the Petitioner is granted liberty to pursue the remedy of statutory appeal under Section 107 of the CGST Act 2017 if so advised.

Summary

The core legal questions considered by the Court in this matter include:

1. Whether the order passed under Section 129(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) detaining goods and imposing tax liability and penalty was valid and lawful.

2. Whether the Petitioner was justified in bypassing the statutory appellate remedy under Section 107 of the CGST Act and approaching the High Court by way of writ petition under Article 226 of the Constitution.

3. Whether the weighment procedure and the evidence relied upon by the Respondent authorities to determine excess quantity of goods were in accordance with statutory requirements and principles of natural justice.

4. Whether the valuation of goods adopted by the Respondent authorities, which led to enhanced tax liability and penalty, was justified and sustainable.

5. Whether the Petitioner's contentions regarding procedural irregularities, lack of jurisdiction, and imposition of penalty without establishing intention to evade tax were valid.

Issue-wise Detailed Analysis

1. Validity and Lawfulness of the Order under Section 129(3) of the CGST Act

The relevant legal framework is Section 129(3) of the CGST Act, which empowers authorities to detain goods in transit if they suspect evasion of tax, and to impose tax and penalty accordingly. The Court examined the weighment report prepared by the Respondent authorities, which recorded the gross weight of the vehicle with goods as 48,550 kg and the unladen weight as 13,450 kg, resulting in net goods weight of 35,100 kg. This exceeded the declared net weight of 35,003 kg by 590 kg.

The Court noted that the Petitioner failed to provide any reliable material to dispute these weighment figures. The absence of supplementary documents such as purchase invoices, weighment certificates at loading, or bank transaction proofs further undermined the Petitioner's case. The driver's statement indicating ignorance of consignor and consignee, and discrepancy in transporter details, reinforced the Respondent's suspicion of evasion.

The Court found that the authorities acted within their powers and followed due procedure, recording reasons and considering the Petitioner's reply before passing the final order. No procedural irregularity or violation of natural justice principles was established. The Court observed that the valuation and factual determinations made by the authorities were based on reasonable appreciation of evidence and were not amenable to interference in writ jurisdiction.

2. Maintainability of the Writ Petition and Bypass of Statutory Appeal

The Court highlighted that the impugned order is appealable under Section 107 of the CGST Act. The Respondent raised a preliminary objection regarding maintainability, asserting that the Petitioner should have availed the statutory appeal remedy. The Petitioner contended that the order suffered from lack of jurisdiction and that requiring a pre-deposit for appeal would cause grave injustice.

The Court emphasized that judicial review under Article 226 does not extend to reappreciation of evidence or substitution of factual findings, especially when an efficacious alternative remedy exists. The Court therefore dismissed the writ petition on maintainability grounds but granted liberty to the Petitioner to file a statutory appeal within the prescribed time. The appellate authority was directed to dispose of the appeal expeditiously and strictly in accordance with law, without being influenced by the observations made in the writ proceedings.

3. Weighment Procedure and Evidence Reliance

The Petitioner challenged the weighment slip's validity, arguing it was not prepared in accordance with any statutory procedure under the CGST Act or Rules and that the goods should have been weighed in the presence of the driver. The Respondent countered that the weighment was conducted in the presence of the driver and two independent witnesses, following usual administrative practice.

The Court found no merit in the Petitioner's contention. The weighment slip was accepted as reliable evidence, especially since the Petitioner did not place any contradictory material on record. The Court also noted that the Petitioner failed to produce documents that could rebut the inference of excess quantity, such as approximate weight per bag or loading weighment certificates. The driver's statement further corroborated the Respondent's position.

4. Valuation of Goods and Imposition of Penalty

The Petitioner argued that the tax liability was calculated based on an unsubstantiated market value rather than the declared transaction value, and that penalty imposition was excessive and unwarranted without proof of intention to evade tax. Reliance was placed on various precedents holding that penalty cannot be imposed without establishing mens rea and that valuation cannot be enhanced arbitrarily.

The Court observed that valuation and penalty issues involved factual determinations and were not suitable for adjudication in writ jurisdiction. The Court reiterated that such matters should be examined in appeal. The Court also noted that the impugned order did not demonstrate any manifest illegality or procedural infirmity warranting interference.

5. Procedural Irregularities and Natural Justice

The Petitioner contended that the Respondent authorities relied on grounds not mentioned in the show cause notice and thereby violated principles of natural justice. The Court reviewed the impugned order and found that the authorities had recorded the factual matrix, considered the Petitioner's submissions, and provided cogent reasons for rejecting them. No procedural impropriety or violation of natural justice was found.

Significant Holdings

"The impugned order reflects due application of mind to the facts and submissions presented. The order sets out the factual matrix, records the reply submitted by the Petitioner, and provides cogent reasons for rejecting the same. No procedural impropriety, manifest illegality, or violation of the principles of natural justice has been demonstrated by the Petitioner."

"The power of judicial review under Article 226 of the Constitution does not extend to reappreciation of evidence or substitution of factual findings, particularly when an efficacious alternative remedy is available under the statute."

"The valuation adopted by the Respondent, although disputed by the Petitioner, cannot be adjudicated upon by this Court in the present writ jurisdiction as it involves factual determinations that are more appropriately examined in the appellate proceedings under the statutory framework."

"Accordingly, the present writ petition stands dismissed. However, the Petitioner is granted liberty to pursue the remedy of statutory appeal under Section 107 of the CGST Act, 2017, if so advised. In the event the Petitioner prefers such an appeal within the time prescribed under law, the appellate authority shall consider and dispose of the same expeditiously and strictly in accordance with law, without being influenced by any observations made in the present order."