The Supreme Court has declined to interfere with the Gujarat High Court’s judgment laying down important safeguards on the detention, seizure and confiscation of goods in transit under the GST law. 

The bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe condoned the delay in filing the Special Leave Petition but dismissed the petition, while clarifying that the petitioner could separately challenge the legality and validity of an order passed by the Deputy Commissioner of State Tax, Mobile Squad, Gujarat. 

The Supreme Court expressly clarified that it had not expressed any opinion on the merits of that separate matter. 

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The Supreme Court proceedings arose from the Gujarat High Court’s judgment in a batch of petitions concerning the scope of Sections 129 and 130 of the Central Goods and Services Tax Act, 2017. The Gujarat High Court had examined whether GST authorities could confiscate goods under Section 130 after those goods had been intercepted and detained during transit under Section 129, particularly after the amendments to both provisions that came into effect from January 1, 2022. 

The Gujarat High Court, comprising Justice A.S. Supehia and Justice Pranav Trivedi, dealt with a large batch of petitions in which goods transported through trucks and other conveyances had been intercepted by GST authorities. Upon examination of the e-way bills and other supporting documents, the authorities issued notices in FORM GST MOV-10, proposing confiscation of the goods and conveyances. The petitioners challenged the action, alleging that Section 130 was being invoked mechanically and prematurely during proceedings under Section 129. 

The primary controversy before the Gujarat High Court was whether the authorities, after initiating proceedings under Section 129 for detention and seizure of goods in transit, were required to complete the entire Section 129 process before considering confiscation under Section 130.

The petitioners argued that, following the Finance Act, 2021 amendments, Section 129 had become a complete and self-contained mechanism for dealing with contraventions relating to goods in transit. They pointed out that the non-obstante clause remained in Section 129 but had been removed from Section 130, contending that Section 129 therefore had overriding effect in matters involving detained goods in transit. 

The State, however, relied upon the Gujarat High Court’s earlier decision in Synergy Fertichem Private Limited v. State of Gujarat, arguing that Sections 129 and 130 operate independently and that there was no statutory prohibition against invoking Section 130 where the facts disclosed gross tax evasion. 

The Gujarat High Court ultimately held that the decisive factor for determining whether confiscation under Section 130 could be resorted to is the presence of an “intention to evade payment of tax.”

The Court clarified that where goods are intercepted and detained under Section 129 but there is no intention to evade tax, the proper officer must follow the procedure prescribed under Section 129 and cannot simply resort to Section 130. However, where the surrounding circumstances disclose a genuine intention to evade tax, Section 130 can be invoked. 

The Bench specifically rejected the proposition that the removal of the non-obstante clause from Section 130 completely prevented the authorities from invoking that provision in appropriate cases. According to the Court, the two provisions continue to operate in their respective fields.

The High Court issued a strong caution against the mechanical use of confiscation powers.

It held that confiscation is a last-resort measure carrying serious consequences and therefore cannot be based merely on suspicion or the unilateral assertion of the proper officer. The officer must examine the genuineness of the invoices, e-way bills, consignment notes, registration particulars and other documents produced at the time of interception. 

The Court further clarified that the conduct or omission of a person who is not directly or proximately connected with the transaction cannot, by itself, form the foundation for confiscation of another person’s goods.

The Court distinguished between minor documentary errors and serious violations indicating tax evasion.

Errors such as limited discrepancies in the vehicle number, certain document-number mistakes, address-related errors or other minor e-way bill discrepancies should not automatically result in seizure and confiscation. Where there is a contravention but no intention to evade tax, the appropriate mechanism is the penalty procedure under Section 129. 

The Court held that confiscation should be reserved for blatant and serious violations having a direct nexus with tax evasion.

Examples include fake or forged documents, forged e-way bills, absence of dealer particulars, fake registration and substantial or deceptive mismatch between the goods and their accompanying documentation. 

The Gujarat High Court also examined the timeline within which the proper officer must form an opinion regarding intention to evade tax.

Referring to Rule 138C of the CGST Rules, the Court noted that the inspection report has to be initiated promptly and that the final inspection report cannot be extended beyond the prescribed six-day period. If blatant tax evasion is found within this framework, the goods and conveyance may be seized and FORM GST MOV-10 may be issued. 

If no opinion regarding intention to evade tax is formed within the prescribed period, the goods and conveyance are required to be released by following the Section 129 mechanism.

The Court, however, clarified that release of goods under Section 129 does not necessarily prevent subsequent confiscation proceedings.

If the goods or conveyance are released after payment of tax and penalty under Section 129, but a subsequent inquiry uncovers serious incriminating material against the owner, the authorities may still initiate proceedings under Section 130. 

Thus, the ruling does not completely restrict the department’s confiscation powers. Instead, it requires the authorities to establish the statutory basis for invoking such severe powers.

The High Court did not examine the individual merits of each confiscation notice. Instead, it remanded the matters to the concerned authorities with detailed directions.

The authorities were directed to re-examine notices issued in FORM MOV-10 and orders passed in FORM MOV-11in light of the judgment. Where confiscation was found contrary to the principles laid down by the Court, the proceedings were required to be withdrawn. Where only a Section 129 infringement was established, the goods or conveyance were to be released in accordance with Section 129. 

The Court further directed the authorities to pass necessary orders within 12 weeks and warned that officers acting in defiance of the judgment could face contempt proceedings, considering the severe commercial and financial consequences of confiscation. 

The subsequent Supreme Court order provides an important development in the matter. The Court condoned the delay but declined to interfere with the Gujarat High Court judgment.

At the same time, the Supreme Court made it clear that the petitioner could challenge the separate order dated March 3, 2026 passed by the Gujarat State Tax authorities. The Supreme Court specifically stated that it had not expressed any opinion on that issue and dismissed the SLP with that clarification.

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