C/SCA/4730/2019CAVJUDGMENT

INTHEHIGHCOURTOFGUJARATATAHMEDABAD

R/SPECIALCIVILAPPLICATIONNO.4730of2019
With
R/SPECIALCIVILAPPLICATIONNO.6125of2019
With
R/SPECIALCIVILAPPLICATIONNO.6118of2019
With
R/SPECIALCIVILAPPLICATIONNO.9105of2019
With
R/SPECIALCIVILAPPLICATIONNO.10018of2019

FORAPPROVALANDSIGNATURE:

HONOURABLEMR.JUSTICEJ.B.PARDIWALASd/­

and
HONOURABLEMR.JUSTICEA.C.RAOSd/­

1WhetherReportersofLocalPapersmaybeallowedYes
toseethejudgment?

2TobereferredtotheReporterornot?Yes

3WhethertheirLordshipswishtoseethefaircopyNo
ofthejudgment?

4WhetherthiscaseinvolvesasubstantialquestionNo

oflawastotheinterpretationoftheConstitution
ofIndiaoranyordermadethereunder?

SYNERGYFERTICHEMPVT.LTD
Versus
STATEOFGUJARAT

Appearance:

SCANO.4730OF2019

MR.UCHITNSHETH,LD.ADV.forthePetitioner(s)No.1,2

Page1of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

SCANO.6125OF2019

MR.D.K.PUJ,LD.ADV.forthePetitioner(s)No.1

SCANO.6118OF2019

MR.UCHITSHEHT,LD.ADV.forthePetitioner(s)No.1

SCANO.9105OF2019

MR.PARESHM.DAVE,LD.ADV.ForthePetitioner(s)No.1,2

SCANO.10018OF2019

MR.TUSHARHEMANI,LDADV.withMS.VAIBHAVIK.PARIKH,LDADV.
forthePetitioner(s)No.1

MR.KAMALB.TRIVEDI,LD.ADV.GENERALwithMS.MAITHILIMEHTA,
LD.AGPwithMR.SOHAMJOSHI,LD.AGPfortheRespondent(s)No.1,2
inallthepetitions.

CORAM:HONOURABLEMR.JUSTICEJ.B.PARDIWALA
and
HONOURABLEMR.JUSTICEA.C.RAO

Date:23/12/2019

CAVJUDGMENT

(PER:HONOURABLEMR.JUSTICEJ.B.PARDIWALA)

1.Sincetheissuesraisedinallthecaptionedwrit
applicationsarethesame,thosewereheardanalogously
andarebeingdisposedofbythiscommonjudgmentand
order.

2.Wehavebeencalledupontolookintoandinterpret
theprovisionsofSections129andSection130respectivelyofthe
CentralGoodsServicesTaxAct,2017(forshort”the
CGSTAct”)amidstlotofhueandcryattheinstanceofthe

Page2of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

writapplicants(dealers)redressingthegrievancethatthe
authoritiesconcernedareinvokingthepowertoconfiscate
thegoodsandtheconveyanceunderSection130oftheGST
Actarbitrarilyandwithoutanyapplicationofmind.Insuch
circumstances,weneedtolookintothetwoprovisionsand
trytoascertainwhetherthetwoprovisionsoverlaporare
independentofeachother.Wetakenoticeofthefactthat
boththeprovisions,i.e.,Sections129and130oftheGST
Actstartwithanon-ostanteclause.

3.Forthesakeofconvenience,wetreattheSpecialCivil
ApplicationNo.4730of2019astheleadmatter.

4.BythiswritapplicationunderSectionArticle226ofthe
ConstitutionofIndia,thewritapplicantshaveprayedfor
thefollowingreliefs;

“(A)ThisHon’bleCourtmaybepleasedtoissueawrit
ofmandamusorawritinnatureofmandamusorany
otherappropriatewrit,orderordirectionquashingand
settingasidenoticedated1.3.2009(annexedat
AnnexureA)issuedbythelearnedRespondentNo.2;

(B)ThisHon’bleCourtmaybepleasedtoissueawrit
ofmandamusorawritinnatureofmandamusorany
otherappropriatewritororderdirectingthelearned
Respondentauthoritiestoforthwithreleasegoodswith
truckno.GJ-07-UU-7250byquashingandsettingaside
thedetentionnotices/ordersissueforsuchpurpose
(annexedatAnnexureF);

(C)Pendingnotice,admissionandfinalhearingofthis
petition,thisHon’bleCourtmaybepleasedtodirectthe
learnedRespondentauthoritiestoforthwithrelease
goopswithtruckno.GJ-07-UU-7250detained/seizedin

Page3of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

purportedexerciseofpowersunderSection129and
130oftheGSTActs;

(D)ExparteadinterimreliefintermsofprayerCmay
kindlybegranted;

(E)Suchfurtherrelief(s)asdeemedfitinthefactsand
circumstancesofthecasemaykindlybegrantedinthe
interestofjusticeforwhichactofkindnessyour
petitionersshallforeverpray.”

5.Thefacts,givingrisetothiswritapplicationinthe
wordsofthewritapplicants,aspleadedinthewrit
application,areasunder;

“1.BywayofthispetitionunderSectionArticle226ofthe
ConstitutionofIndiathePetitionersprayforwritof
mandamusquashingandsettingasidenoticedated
1.3.2019issuedundertheCentral/GujaratGoodsand
ServicesTaxAct,2017(hereinafterreferredtoas”the
GSTActs”).ThePetitionersalsoprayforwritof
mandamusdirectingthelearnedRespondentsto
forthwithreleasetrucknumberGJ-07-UU-7250along
withgoodscontainedthereinseizedbythelearned
Respondentauthorities.Copyoftheimpugnednotice
dated1.3.2019isannexedherewithandmarkedas
AnnexureA.

2.Therelevantfactsgivingrisetothepresent
petitionarebrieflystatedhereinbelow:

The1stPetitionerisaPrivateLimitedCompanyhaving
placeofbusinessatSynergyHouse-2,Subhanpura,
Gorawa,Vadodara.The2ndPetitionerisDirectorand
AuthorizedSignatoryofthe1stPetitionerandhisrights
andinterestaredirectlyaffectedbytheimpugned
communicationofthelearnedOfficer.The1st
RespondentistheStateofGujarat.The2ndRespondent
isanofficeroftheStateofGujaratentrustedwiththe
taskofcollectingtaxundertheGSTActsandis
amenabletothewritjurisdictionofthisHon.Court.

Page4of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

3.ThePetitionersareinter-aliaengagedinimport
andsaleofceramicpigmentinkwhichisusedas
colouringsubstanceinthetilesmanufacturingindustry.
ThePetitionersareauthorizedagents/distributorsof
Esmalglass-Itacagroupwhichhasitsheadofficeat
PartidaRambleta,S/N12191,PoblaTornesa,
Castellon,Spain.ThePetitionersareoneofthetwo
distributorsthatthesaidcompanyhasforIndia.

4.ThePetitionershavebeenimportinggoodssince
manyyearsandtheimportedgoodsaresoldtomajor
tilemanufacturingunitsacrossthecountry.Thegoods
areimportedthroughMundraPortinKandlaandthe
AhmedabadAirport.ThePetitionershadapproximate
annualturnoverofRs.50croresintheprevious
financialyearanditdischargescroresofrupeesbyway
oftaxundertheGSTActs.

5.Insofarasimporttransactionsareconcerned,
importerssuchasthePetitionersarerequiredtopay
customsdutyaswellastheIGSTpayableonsuch
importsbeforeclearanceforhomeconsumption.Inother
wordsforimportstheIGSTispaidpriorto
commencementofmovementofgoodsfromthe
port/airport.

6.ThePetitionershadorderedforaconsignmentof
ceramicpigmentinkfromitsprincipalinSpain.The
importtookplacethroughtheAhmedabadAirport.The
Petitionersdulyfiledbillofentryforhomeconsumption
on13.2.2019andpaidtheapplicablecustomsdutyas
wellasIGSTwhichispayableonimportsbyimporters.
Copyofthebillofentryforhomeconsumptionfiledby
thePetitionersalongwiththeexportinvoice,packinglist
andairwaybillarecollectivelyannexedherewithand
markedasAnnexureB.

7.TheassessedvalueofgoodsisRs.39,43,272on
whichthePetitionerspaidcustomsdutyamountingto
Rs.3,00,526andIGSTattherateof18%totalingtoRs.
7,09,789.Copyofe-receiptshowingpaymentofsuch
dutyandtaxon13.2.2019isannexedherewithand
markedasAnnexureC.

8.Ceramicpigmentinkhasalimitedshelflifeandit

Page5of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

hastobepreservedattemperatureswhichare
preferablynottoexceed25degreescentigrade.Long
exposurestohightemperaturesandhumidityare
requiredtobeavoided.Copyoftheinformationnote
withregardtotheproductinquestionaspublishedby
theforeignmanufacturerisannexedherewithand
markedasAnnexureD.

9.Generalinstructionshadbeengivenbythe
Petitionerstotheirclearingandforwardingagents
explainingtothemurgencyoftransportingceramic
pigmentinkimmediatelyonimport.Consideringsuch
generalinstructions,sinceatransportvehiclewas
immediatelyavailable,theclearingandforwarding
agentofthePetitionersinitiatedtransportoftheceramic
inktothewarehouseofthePetitionersinVadodara
withoutevenwaitingforthee-waybillinrespectofthe
goods.Thiswasparticularlyconsideringthefactthat
theproofofpaymentofGSTonthetransactionitself
wasaccompanyingthegoodsintheformofbillofentry
forhomeconsumption.

10.Thetransporterhaddulypreparedtransport
receiptinrespectofthevehiclefortransportofgoods
fromAhmedabadAirporttothewarehouseofthe
PetitionersinVadodara.Copyoftransportreceiptin
relationtothegoodsisannexedherewithandmarked
asAnnexureE.

11.`Thetruckwiththegoodswerestoppedfor
verificationontheAhmedabad-Vadodaraexpressway
bythelearnedRespondentNo.2.Thetransporterduly
producedalldocumentsrelatingtogoodsincludingbill
ofentryforhomeconsumptionevidencingpaymentof
IGSTonthetransaction.Thetruckwiththegoodswere
howeverdetainedbythelearnedofficerontheground
ofabsenceofe-waybillinrespectofthegoods.Notices
inFormGSTMOV-1andGSTMOV-6wereservedtothe
transporterofthegoods.Copiesofsuchnoticesserved
tothetransporterareannexedherewithandmarkedas
AnnexureF.

12.Onbeinginformedaboutsuchdetentionthe
Petitionerspromptlygeneratedthee-waybillinrespect

Page6of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

ofthetransaction.Copyofthee-waybillgeneratedby
thePetitionersisannexedherewithandmarkedas
AnnexureG.

13.ThePetitionersthereafterimmediatelyapproached
thelearnedRespondentauthoritiesandgave
explanation.Itwassubmittedthatthegoodsbeing
perishableandduetourgencyoftransportinggoodsthe
clearingandforwardingagenthadinitiated
transportationofgoodsimmediatelyonclearancefrom
customsauthoritieswithoutwaitingfore-waybillfrom
thePetitioners.HoweverthefactisthatIGSThadbeen
paidonthetransactionevenbeforecommencementof
movementofgoods.Billofentryforhomeconsumption
hadbeendulyfiledinrespectofgoodswhichwas
admittedlypossessedbythetransporter.Thusthere
wasnoquestionofthegoodsbeingunaccountedor
therebeinganyintentionofevadingpaymentoftax.In
facttaxundertheGSTActshadalreadybeenpaidby
thePetitioners.

14.ThelearnedRespondentauthoritieshowever
refusedtoreleasethegoodsonthegroundofabsenceof
e-waybill.ThelearnedRespondentauthoritiesinfact
insistedforpaymentofnotonlytaxand100%penalty
underSection129oftheGSTActsbutalsofineinlieuof
confiscationequaltothevalueofgoodsunderSection
130oftheGSTActs.

15.ThePetitionersmadewrittenrepresentationbefore
thelearnedDeputyCommissioneraswellasthe
learnedJointCommissionerofCommercialTaxfor
interventioninthematterashugepaymentwasbeing
demandedforagenuinetransactiononthebasisof
technicalbreachofprovisionsoflaw.Copyofwritten
lettersdated26.2.2019submittedbeforethelearned
departmentalauthoritiesarecollectivelyannexed
herewithandmarkedasAnnexureH.

16.ThePetitionersmadesimilarrepresentationeven
beforethelearnedChiefCommissionerofStateTax.The
goodswiththevehiclearehowevernotbeingreleased
bythelearnedRespondentauthorities.Thelearned
Respondentauthoritiesareinsistingforpaymentoftax

Page7of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

and100%penaltyunderSection129oftheGSTActsas
wellasredemptionfineinlieuofconfiscationequalto
thevalueofgoodsunderSection130oftheGSTActsfor
securingreleaseofgoods.

17.Inotherwordsforgoodswhichareadmittedly
worthRs.39,43,272onwhichcustomsdutyofRs.
3,00,526andIGSTofRs.7,09,789havealreadybeen
paid,thelearnedRespondentauthoritiesare
demandinganamountofRs.60,72,639forreleaseof
goods.

18.ThePetitionersinquiredfromthelearned
Respondentauthoritiesthebasisforsuchhugedemand
sincetheyhadonlyreceiveddetentionnoticesinForms
GSTMOV-01andGSTMOV-06.Uponsuchinquirythe
learned2ndRespondentauthorityhasissuedthe
impugnedshowcausenoticedated1.3.2019(annexed
atAnnexureA)requiringpaymentofRs.60,72,639for
releaseofgoodsfailingwhichitisinformedthatthe
goodswiththevehiclewillbeconfiscatedand
auctioned.

19.IntherespectfulsubmissionofthePetitionersthe
impugnednoticedemandingpaymentofRs.60,72,639
forsecuringreleaseofgoodswhichareadmittedly
worthRs.39,43,272onwhichcustomsdutyofRs.
3,00,526andIGSTofRs.7,09,789havealreadybeen
paidismanifestlyarbitrary,withoutapplicationof
mind,illegalandviolatingSectionArticle14oftheConstitution
ofIndia.

20.AttheoutsettheprovisionsofSection130ofthe
GSTActsareex-facienotapplicabletothefactsofthe
presentcase.Section130oftheGSTActscanbe
invokedinthe5circumstancesasenvisagedunderthe
saidprovisionwhichareallpertainingtoevasionoftax.
Henceforinvokingthesaidprovisionithastobe
primarilyallegedandprovedthattherewasintentionto
evadepaymentoftaxinrespectofthegoodsin
question.Inthepresentcaseadmittedlythegoodswere
beingaccompaniedbythebillofentryforhome
consumptionwhichevidencedpaymentofIGSTonthe
transactionevenbeforecommencementofmovementof

Page8of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

thegoods.Thustherewasnoquestionoftheybeing
unaccountedgoodsortherebeingintentiontoevade
paymentoftax.InvokingtheprovisionsofSection130
oftheGSTActsinthefactsandcircumstancesofthe
casewithouttherebeinganyallegationofevasionoftax
anddemandingmaximumredemptionfineequaltothe
valueofgoodsiswhollywithoutjurisdiction,arbitrary
andillegal.

21.EveninsofarasSection129oftheGSTActsis
concernedthesaidprovisionallowsdetentionofgoods
andsubsequentreleasethereofonpaymentof
applicabletaxandpenaltyequalto100%oftaxpayable
onsuchgoodsifthereiscontraventionoftheprovisions
oftheGSTActsandtherulesmadethereunder.Thus
theprovisionisalsoassuchapplicablewhentaxis
payableonthetransaction.Howeverinthefactsofthe
presentcasewhentaxundertheGSTActsisalready
paidinadvanceatthetimeofclearanceofthegoodsfor
homeconsumption,thesaidprovisionisinapplicable
thefactsofthePetitioners.

22.Evenotherwiseitisrespectfullysubmittedthatthe
contraventionofprovisionsoftheGSTActsas
contemplatedunderSection129oftheGSTActsisa
substantialcontraventionwhichwouldhavetheresult
ofleakageoftaxrevenue.Henceitisprovidedthatin
caseofsuchcontraventionthegoodscanbereleased
onlyonpaymentoftaxand100%penalty.Thesaid
provisioncannotbeappliedtotechnicalcontraventions
wherethetaxablepersonisinapositiontoestablish
thatthebreachistechnicalinnaturewithnopossibility
oftaxevasion.

23.PurposiveinterpretationofSection129oftheGST
Actsrequiresitsapplicationonlytocaseswhereitis
establishedthattherewasintentionorinanycase
possibilityofevasionoftaxinrespectofthegoodsbeing
transported.Evenifsomedocumentsuchase-waybill
ismissingatthetimeofverification,thiswouldatthe
mostonlycreatearebuttablepresumptionthatthere
wasintentiontoevadepaymentoftax.Ifthetaxable
personisabletoestablishthattherewasnointentionof
evadingpaymentoftaxthentheprovisionsofSection

Page9of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

129oftheGSTActsisnotpermissible.

24.ThePetitionerspointoutthattheGovernmentitself
hasclarifiedbyCircularNo.64/38/2018-GSTdated
14.9.2018thatincaseoftechnicalerrorsinthe
documentsaccompanyingthegoods,provisionsof
Section129oftheGSTActsmaynotberesortedtobut
insteadgoodsmaybereleasedonpaymentofnominal
penaltyunderSection125oftheGSTActs.Copyof
circulardated14.9.2018issuedbytheGovernmentof
IndiaisannexedherewithandmarkedasAnnexureI.

25.ItisrespectfullysubmittedthatSection129and
Section130oftheGSTActsareprovisionsenactedto
curbevasionoftaxundertheGSTActs.Theyare
drasticmeasureswherebygoodscanbeseizeden-route
andtheywouldbereleasedonlyonpaymentoftax,
hugepenaltyandhugeredemptionfine.Applicationof
suchprovisionstotechnicalbreachesofstatutory
provisionswouldrenderthemvulnerableofviolating
SectionArticle14oftheConstitutionofIndiaaswellasSectionArticle
301oftheConstitutionofIndiawhichrequiresthereto
befreeflowoftradeandcommerceacrossthecountry.”

6.Thus,itappearsthatthewritapplicantNo.1isa
PrivateLimitedCompanyandthewritapplicantNo.2isits
DirectorandAuthorizedSignatory.TheCompanyis
engagedinthebusinessofimportandsaleofCeramic
PigmentInkwhichisusedasacolouringsubstanceinthe
manufacturingoftheceramictiles.Thewritapplicantshad
placedanorderforaconsignmentofCeramicPigmentInk
fromitsprincipaloperatinginSpain.Theimporttookplace
throughtheAhmedabadAirport.Thewritapplicantsduly
filedthebillofentryforhomeconsumptionandalsopaid
theapplicablecustomsdutyaswellastheIGSTpayableon
theimportsbytheimporters.Itappearsthatwhilethe
goodswerebeingtransportedfromtheAhmedabadAirport

Page10of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

tothewarehouseofthewritapplicantssituatedin
Vadodara,thevehiclewasdetainedbytheGSTAuthorities,
moreparticularly,therespondentNo.2.Infact,thetruck
withthegoodswasinterceptedattheAhmedabad-Vadodara
ExpressWay.Itisthecaseofthewritapplicantsthatthe
transporterproducedallthedocumentsrelatingtothe
goodsincludingthebillofentryforhomeconsumption
evidencingpaymentoftheIGSTonthetransaction.The
truck,however,cametobedetainedbytheofficer
concernedonthegroundofabsenceofthee-waybillin
respectofthegoods.

7.Theaforesaidledtoissueofnoticestothetransporter
ofthegoodsinFormGSTMOV-1andGSTMOV-6.

8.Itisthecaseofthewritapplicantsthathavingcometo
knowaboutthedetentionofthetruck,theypromptly
generatedthee-waybillinrespectofthetransaction.The
authorities,however,declinedtoreleasethegoodsonthe
groundthatwhilethegoodswerebeingtransported,the
driverofthevehiclewasnotcarryingthee-waybill.

9.Theauthoritiesnotonlyimposed100%penaltyunder
Section129oftheActbutalsoimposedfineinlieuof
confiscationequaltothevalueofthegoodsunderSection
130oftheAct.

10.Astheauthoritiesinsistedforpaymentoftaxand
100%penaltyunderSection129oftheActaswellas

Page11of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

redemptionfineinlieuoftheconfiscationequaltothevalue
ofgoodsunderSection130oftheAct,thewritapplicants
hadtocomebeforethisCourtwiththepresentwrit
application.

11.On6thMarch,2019,aCoordinateBenchofthisCourt
passedthefollowingorder;

“1.Mr.UchitSheth,learnedadvocateforthepetitioners
invitedtheattentionofthecourttotheprovisionsof
sections129and130oftheCentralGoodsandServices
TaxAct,2017,topointouttheprocedurewhichis
requiredtobefollowedbytherespondentauthoritiesin
casewhereanygoodsareintransitincontraventionof
theprovisionoftheActortherulesmadethereunder.It
waspointedoutthatfirstly,undersection129ofthe
Act,theofficerisrequiredtoissueanoticeas
contemplatedundersub-section(3)thereofand
thereafter,afteraffordinganopportunityofhearingto
thepersonconcerned,passanorderthereunder.Itwas
submittedthatitisonlyifthereisnocomplianceofthe
orderpassedundersection129oftheAct,thatthe
provisionsofsection130oftheIGSTActcanberesorted
to.Theattentionofthecourtwasinvitedtothe
impugnedshowcausenoticedated1.3.2019,tosubmit
thatthesameseekstoimposepenalty,redemptionfine
andconfiscationundersection130oftheActwithout
initiatinganyproceedingsundersection129oftheAct,
whichisnotpermissibleinlaw.Itwasfurther
submittedthattheintegratedgoodsandservicestax
hasalreadybeenpaidonthegoodsinquestionatthe
timeofimportthereofandthatthegoodsinquestionare
perishablegoodswithalimitedshelf-life.

2.Havingregardtothesubmissionsadvancedbythe
learnedcounselforthepetitioners,IssueNotice
returnableon8thMarch,2019.

DirectServiceispermittedtoday.”

Page12of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

12.Thereafter,on8thMarch,2019,thisCourtpassedthe
followingorder;

“1.On06.03.2019thisCourthadpassedanorderin
thefollowingterms;

“1.Mr.UchitSheth,learnedadvocateforthe
petitionersinvitedtheattentionofthecourt
totheprovisionsofsections129and130ofthe
CentralGoodsandServicesTaxAct,2017,to
pointouttheprocedurewhichisrequiredtobe
followedbytherespondentauthoritiesincase
whereanygoodsareintransitin
contraventionoftheprovisionoftheActorthe
rulesmadethereunder.Itwaspointedoutthat
firstly,underSectionsection129oftheAct,theofficeris
requiredtoissueanoticeascontemplated
undersubsection(3)thereofandthereafter,
afteraffordinganopportunityofhearingto
thepersonconcerned,passanorder
thereunder.Itwassubmittedthatitisonly
ifthereisnocomplianceoftheorderpassed
underSectionsection129oftheAct,thatthe
provisionsofsection130oftheIGSTActcanbe
resortedto.Theattentionofthecourtwasinvited
totheimpugnedshowcausenoticedated
1.3.2019,tosubmitthatthesameseeks
toimposepenalty,redemptionfineand
confiscationunderSectionsection130oftheAct
withoutinitiatinganyproceedingsunder
Sectionsection129oftheAct,whichisnot
permissibleinlaw.Itwasfurthersubmittedthat
theintegratedgoodsandservicestaxhas
alreadybeenpaidonthegoodsinquestion
atthetimeofimportthereofandthatthe
goodsinquestionareperishablegoodswitha
limitedshelf-life.

2.Havingregardtothesubmissionsadvancedby
thelearnedcounselforthepetitioners,Issue

Page13of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Noticereturnableon8thMarch,2019.Direct
Serviceispermittedtoday.”

2.Inresponsetothenotice,Mr.SohamJoshi,learned
AssistantGovernmentPleader,hasappearedon
behalfoftherespondents.

3.ThelearnedAssistantGovernmentPleaderhas
invitedtheattentionoftheCourttothe
detentionorderdated14.02.2019issuedbythe
properofficerundersubsection(1)ofsection129
oftheCentralGoodsandServicesTaxAct,
2017(hereinafterreferredtoas”theCGSTAct”)and
otherrelevantstatutes.Itwassubmittedthatthe
goodsinquestionwerenotaccompaniedbyanEway
billduringthecourseoftransitandtherefore,the
respondentsarefullyjustifiedinpassingthedetention
orderundersection129(1)oftheCGSTAct.

4.Subsection(3)ofsection129oftheCGSTAct
providesthattheproperofficerdetainingorseizingthe
goodsorconveyancesshallissueanotice
specifyingthetaxandpenaltypayableandthereafter,
passanorderforpaymentoftaxandpenaltyunder
clause(a)orclause(b)orclause(c).Subsection(4)
providesthatnotax,interestorpenaltyshall
bedeterminedundersubsection(3)withoutgiving
thepersonconcernedanopportunityofbeingheard.

5.Inthepresentcase,theshow-causenotice
dated01.03.2019hasbeenissuedunder
section130oftheCGSTActcallinguponthepetitioner
toshowcauseastowhythegoodsinquestionaswell
asthevehicleshouldnotbeconfiscatedfornonpayment
ofanamountofRs.60,72,639/,asdetailed
therein.OnaquerybytheCourt,thelearned
AssistantGovernmentPleaderisnotinapositionto
pointoutthattheprocedure,ascontemplated
undersubsections(3)and(4)ofsection129of
theCGSTAct,hasbeenfollowed.Thus,primafacie,it
appearsthattheshowcausenoticeundersection130of
theCGSTActhasbeenissuedwithoutcomplyingwith

Page14of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

therequirementsofsection129oftheCGSTAct.
Itisalsoanadmittedpositionthatthegoodsin
questionareperishableinnature.

6.Intheaforesaidpremises,intheopinionofthisCourt,
thepetitionerhasmadeoutastrongprimafaciecase
forthegrantofinterimrelief.Bywayofinterim
relief,therespondentsareherebydirectedto
forthwithreleasethegoodsinquestionandthe
Truckbearingregistrationno.GJ07UU7250
detained/seizedunderpurportedexerciseof
powersundersections129and130oftheCGSTAct.
However,thepetitionershallfileanundertaking
beforethisCourtwithinaweekfromtodayto
theeffectthatincasethepetitioner,ultimately,
doesnotsucceedinthepetition,heshallduly
cooperateinthefurtherproceedings.

7.Standoverto27.03.2019,soastoenablethe
respondentstofileaffidavitinreply,ifany,inthe
matter.

Directserviceispermittedtoday.”

13.Thegroundsofchallengetotheimpugnednoticedated
1stMarch,2019,Annexure-Atothiswritapplicationis
substantiallyonthefollowinggroundsasraisedinthe
memoofthewritapplication.

“A.TheimpugnednoticedemandingpaymentofRs.
60,72,639forsecuringreleaseofgoodswhichare
admittedlyworthRs.39,43,272onwhichcustomsduty
ofRs.3,00,526andIGSTofRs.7,09,789havealready
beenpaidismanifestlyarbitrary,withoutapplicationof
mind,illegalandviolatingSectionArticle14oftheConstitution
ofIndia.

B.TheprovisionsofSection130oftheGSTActsare
ex-facienotapplicabletothefactsofthepresentcase.

Section130oftheGSTActscanbeinvokedinthe5

Page15of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

circumstancesasenvisagedunderthesaidprovision
whichareallpertainingtoevasionoftax.Hencefor
invokingthesaidprovisionithastobeprimarilyalleged
andprovedthattherewasintentiontoevadepayment
oftaxinrespectofthegoodsinquestion.Inthepresent
caseadmittedlythegoodswerebeingaccompaniedby
thebillofentryforhomeconsumptionwhichevidenced
paymentofIGSTonthetransactionevenbefore
commencementofmovementofthegoods.Thusthere
wasnoquestionoftheybeingunaccountedgoodsor
therebeingintentiontoevadepaymentoftax.Invoking
theprovisionsofSection130oftheGSTActsinthefacts
andcircumstancesofthecasewithouttherebeingany
allegationofevasionoftaxanddemandingmaximum
redemptionfineequaltothevalueofgoodsiswholly
withoutjurisdiction,arbitraryandillegal.

C.EveninsofarasSection129oftheGSTActsis
concernedthesaidprovisionallowsdetentionofgoods
andsubsequentreleasethereofonpaymentof
applicabletaxandpenaltyequalto100%oftaxpayable
onsuchgoodsifthereiscontraventionoftheprovisions
oftheGSTActsandtherulesmadethereunder.Thus
theprovisionisalsoassuchapplicablewhentaxis
payableonthetransaction.Howeverinthefactsofthe
presentcasewhentaxundertheGSTActsisalready
paidinadvanceatthetimeofclearanceofthegoodsfor
homeconsumption,thesaidprovisionisinapplicable
thefactsofthePetitioners.Purposiveinterpretationof
Section129oftheGSTActsrequiresitsapplicationonly
tocaseswhereitisestablishedthattherewasintention
orinanycasepossibilityofevasionoftaxinrespectof
thegoodsbeingtransported.Evenifsomedocument
suchase-waybillismissingatthetimeofverification,
thiswouldatthemostonlycreatearebuttable
presumptionthattherewasintentiontoevadepayment
oftax.Ifthetaxablepersonisabletoestablishthat
therewasnointentionofevadingpaymentoftaxthen
theprovisionsofSection129oftheGSTActsisnot
permissible.

D.ThecontraventionofprovisionsoftheGSTActsas

Page16of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

contemplatedunderSection129oftheGSTActsisa
substantialcontraventionwhichwouldhavetheresult
ofleakageoftaxrevenue.Henceitisprovidedthatin
caseofsuchcontraventionthegoodscanbereleased
onlyonpaymentoftaxand100%penalty.Thesaid
provisioncannotbeappliedtotechnicalcontraventions
wherethetaxablepersonisinapositiontoestablish
thatthebreachistechnicalinnaturewithnopossibility
oftaxevasion.

E.Section129andSection130oftheGSTActsare
provisionsenactedtocurbevasionoftaxundertheGST
Acts.Theyaredrasticmeasureswherebygoodscanbe
seizeden-routeandtheywouldbereleasedonlyon
paymentoftax,hugepenaltyandhugeredemptionfine.
Applicationofsuchprovisionstotechnicalbreachesof
statutoryprovisionswouldrenderthemvulnerableof
violatingSectionArticle14oftheConstitutionofIndiaaswell
asSectionArticle301oftheConstitutionofIndiawhichrequires
theretobefreeflowoftradeandcommerceacrossthe
country.

F.ThePetitionerscraveleavetoadd,toalter,amend
and/ordeleteanyofthegroundsaforesaidatthetime
ofhearing.”

14.Thefactsofallotherconnectedwritapplicationsmay
notbethesamebut,ultimately,intheotherconnectedwrit
applicationsalso,theissueraisediswithregardtothe
poweroftheauthoritiestoinvokeSection130oftheActat
itsinception.

Submissionsonbehalfofthewritapplicants;

15.Mr.UchitSheth,thelearnedcounselappearingforthe
writapplicantshastenderedhissubmissionsinwriting.
Thesubmissionsareasunder;

Page17of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

“(1)Section129oftheGSTActsisaspecialprovision
providingfordetentionofgoodsintransit.Oncegoods
aredetainedunderthisprovision,mandateofthe
entireprovisiontobefollowed

Section129oftheCentral/GujaratGoodsandServicesTax
Act,2017(hereinafterreferredtoas”theGSTActs”)isa
specialprovisionprovidingfordetentionandseizureofgoods
intransit.WhileSection129(1)oftheGSTActsprovidesfor
detentionofgoodsbeingtransportedincontraventionofthe
provisionsoftheGSTActs,thelaterportionoftheverysame
provisionrequiresreleaseofthegoodsiftheownerofthe
goodscomesforwardandmakespaymentoftaxandpenalty
equalto100%ofthetaxpayableonsuchgoodsifthegoods
aretaxableandincaseofexemptedgodsonpaymentofan
amountequalto2%ofthevalueofgoodsorRs.25,000
whicheverisless.Eveniftheownerofthegoodsdoesnot
comeforwardtomakepaymentoftaxandpenaltythen
Section129(1)(b)oftheGSTActsprovidesforreleaseofthe
goodsonpaymentoftaxandpenaltyequalto50%ofthe
valueofthegoodsreducedbythetaxamountpaidthereonin
caseoftaxablegoodsandincaseofexemptedgoodson
paymentofanamountequalto5%ofthevalueofgoodsor
Rs.25,000whicheverisless.Section129(5)oftheGSTActs
specificallyprovidesthatonpaymentofamountreferredin
sub-section(1),allproceedingsinrespectofthenotice
specifiedinsub-section(3)shallbedeemedtobeconcluded.
ItisfurtherprovidedinSection129(6)oftheGSTActsthat
wherethepersontransportingthegoodsortheownerofthe
goodsfailstopaytheamountoftaxandpenaltyasprovided
insub-section(1)within14daysofsuchdetentionorseizure,
furtherproceedingsshallbeinitiatedinaccordancewiththe
provisionsofSection130.Consideringsuchprovisions,itis
incumbentuponthelearnedauthoritieswhohavedetained
thegoodsunderSection129oftheGSTActstogivenoticefor
paymentoftaxandpenaltyunderSection129(1)oftheGST
Actsanditisonlyiftheownerortransporterfailstopay
suchtaxandpenaltywithin14daysofthedetentionor
seizurethatthelearnedauthoritiescanbepermittedto
initiateconfiscationproceedingsunderSection130ofthe
GSTActs.DetentionofgoodsunderSection129oftheGST

Page18of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Actsandthereafternotfollowingfurtherprocedureas
stipulatedunderthesaidprovisionanddirectlyissuing
noticeforconfiscationunderSection130oftheGSTActsis
whollywithoutjurisdiction,badandillegal.

(2)Section129andSection130oftheGSTActsare
bothprovisionsmeantforcheckingevasionoftaxand
thereforeneedtobeharmoniouslyconstrued

ItisrespectfullysubmittedthatSection129aswellas
Section130oftheGSTActsarebothprovisionswhichare
meantforcheckingevasionoftax.Section9oftheGSTActs
providesforlevyoftaxonacompletedsupplytransaction.
Further,taxonasupplytransactionispayablealongwith
themonthlyreturninFormGSTR-3Btobefiledonorbefore
the20thofthenextmonth.However,inordertoensurethat
thesuppliersdonotevadepaymentoftax,Section68ofthe
GSTActsempowerstheGovernmenttoprescribedocuments
tobecarriedalongwiththegoods.Rule138Aofthe
Central/GujaratGoodsandServicesTaxRules(hereinafter
referredtoas”theGSTRules”)stipulatesinvoice/billof
entry/deliverychallanalongwithe-waybillasdocumentsto
accompanythegoods.Ifitisfoundthateitherofsuch
documentsismissingwhilegoodsareinspectedintransitor
ifitisfoundthatthereisanymajordiscrepancyinthe
documents,theneventhoughthetaxableeventi.e.supplyis
yettobecompleted,Section129oftheGSTActsallows
detentionofgoodssincethetransportationisin
contraventionoftheprovisionsoftheGSTActs.Further
Section129(1)oftheGSTActsmandatesreleaseofgoodson
paymentoftaxandpenaltyequalto100%oftaxwhere
ownercomesforwardtomakepaymentofsuchtaxand
penalty.Thuseventhoughsupplyisyettobecompletedand
eventhoughtimelimitforpaymentoftaxisyettolapse
paymentoftaxaswellaspenaltyisprovidedinsection129
oftheGSTActs.Itisfurthergermanetonotethattherateof
penaltyof100%oftaxistheratewhichisstipulatedunder
Section74oftheGSTActsforinstancesoffraudorevasion
vis-à-vis10%penaltyprovidedforroutinecasesnotinvolving
penaltyorevasionunderSection73(9)oftheGSTActs.
MoreoverasperSection17(5)(i)oftheGSTActsnoinputtax
creditisadmissibleinrespectofanytaxpaidinaccordance

Page19of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

withtheprovisionsofSection74,129and130oftheGST
Acts.ThusSection129oftheGSTActsisgroupedtogether
withSection74andSection130oftheGSTActswhichare
admittedlyinvocableincasesofevasion.Collectivereading
ofallsuchprovisionsshowsthatSection129oftheGSTActs
isenactedforcurbingevasionoftax.Thusthecontentionof
theRespondentsthatSection130oftheGSTActsisaspecial
provisionenactedforcheckingevasionoftaxiscontraryto
theschemeoftheprovisionsoftheGSTActs.Itisonlyifthe
taxandpenaltyunderSection129oftheGSTActsarenot
paidwithinthestipulatedperiodthatresortcanbemadeby
thelearnedauthoritiestoSection130oftheGSTActs.

3.AnyotherinterpretationwillrenderSection129
oftheGSTActsunconstitutional

AninterpretationofSection129oftheGSTActsthatitis
meantforpurposeotherthancheckingevasionwillrenderit
unconstitutional.ProvisionssimilartoSection129oftheGST
Actsexistedunderthesalestaxstatuteswhichwere
challengedbeforeCourtsonthegroundthattheyviolatedthe
freedomoftrade,commerceandinter-courseasguaranteed
underSectionArticle301oftheConstitution.Legislativecompetence
ofenactingsuchprovisionswasalsochallenged.Onallsuch
occasionstheconstitutionalvalidityoftheprovisions
regardingdetentionofgoodsintransithavebeenupheldby
Hon.SupremeCourtonthegroundthattheywereprovisions
meantforcheckingevasionandthereforeintra-vires.
Referencemaybemadeinthisregardtothefollowing
judgementsofHon.SupremeCourt:

(a).SodhiTransportCo.andAnotherv/sStateofUttar
Pradesh(1986)62STC381(SC)[1stCompilation-Page5,
Relevantobservationsonpage11,12]

(b).StateofRajasthanandAnotherv/sD.P.Metals(2001)
124STC611(SC)-1stCompilation-Page49,Relevant
observationsonPage72,para29]

(4)CircularoftheGovernmentshowsthatSection
129oftheGSTActsnotmeantforminordiscrepancies

Page20of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

InfactCircularNo.64/38/2018-GSTdated14.9.2018(2nd
Compilation-Page1)issuedbytheCentralBoardofIndirect
TaxesandCustomsclearlyshowsthatSection129ofthe
GSTActsismeantformajordiscrepanciessuchasabsence
ofe-waybillandnotminorerrorsinthedocuments
accompanyingthegoods.Incaseofsuchminorerrorsthe
authoritieshavebeendirectedtolevygeneralpenaltyunder
Section125oftheGSTActsforwhichmaximumstatutory
capisRs.25,000.

5.Section129oftheGSTActsprovidesasimple
methodofdeterminationoftaxandpenaltyand
ensuringquickrecovery

ThuswhilethepurposeofSection129oftheGSTActsis
clearlytocheckevasionoftax,itprovidesforsimple
calculationofamounttobepaidintime-boundmannerfor
securingreleaseofgoodsdetainedunderthesaidprovision.
Theauthoritiesneednotestablishintentiontoevade
paymentoftax.Ifthegoodsareinterceptedduringtransit
andifthedocumentsaccompanyingthegoodsarefoundto
bedefectiveorabsentthentheauthoritiescanstraightaway
detainthegoodsunderSection129oftheGSTActsand
demandpaymentoftaxand100%penalty.Iftheownerof
thegoodscomesforwardandmakessuchpaymentwithin
14daysofdetentionthentheprovisionmandatesimmediate
releaseofthegoods.Ifhowevertheassesseefailstomake
suchpaymentthenconfiscationproceedingscanbeinitiated
underSection130oftheGSTActswhichrequirethe
authoritiestoestablishintentiontoevadepaymentoftaxand
thereafteralsodeterminefineinlieuofconfiscation
dependingonfactsandcircumstancesofthecase.Thusthe
schemeofboththeprovisionsifreadinentiretyrevealsthat
Section129oftheGSTActsallowstheassesseetogetthe
goodsreleasedonimmediatepaymentoftaxandpenalty
failingwhichheisunderthreatofloosingthegoodsunder
Section130oftheGSTActs.Percontraundersection129of
theGSTActstheauthoritiesarealsosavedfromestablishing
intentiontoevadepaymentoftaxwhichisapre-requisitefor
Section130oftheGSTActs.Suchviewhasalreadybeen
takenbyHon.KeralaHighCourtinthecaseofNoushad

Page21of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Allakkatv/sStateTaxofficer(2019)61GSTR297
(Ker.)(1stCompilation-Page113,Relevantobservationon
page117).

6.Iffraud,evasion,etcnoticedtheneven
adjudicatingauthorityrequiredtogiveoptionto
immediatelypaytaxandconcessionalrateofpenalty
tosecureclosureofproceedings.Section129ofthe
GSTActstobereadinlightofsuchlegislativepolicy

ThePetitionermaypointoutthatinfactiffraud,evasion,etc
isallegedduringadjudicationproceedings,Section74ofthe
GSTActsprovidesformechanismforadjudicatingand
demandingtaxwithpenalty.Evenundersuchprovisionthe
assesseeisgivenanoptionbyvirtueofSection74(5)ofthe
GSTActstomakepaymentoftax,interestand15%penalty
beforeissuanceofnoticeandifsuchpaymentismadethen
nofurthernoticeistobegivenasperSection74(6)oftheGST
Acts.ItisfurtherprovidedinSection74(8)oftheGSTActs
thatevenifnoticeisissuedallegingfraud,evasion,etcand
theassesseepaystax,interestand25%penaltythenall
proceedingsinrespectofthesaidnoticeshallbedeemedto
beconcluded.Eveniftheassesseedoesnotavailsuchoption
andthelearnedadjudicatingauthorityproceedstopass
ordereventhenSection74(11)oftheGSTActsprovidesfor
closureofproceedingsiftaxwithinterestandpenaltyatthe
rateof50%arepaidwithin30daysofcommunicationofthe
order.Thusitcanbeseenthatthelegislativepolicyistogive
incentivetotheassesseeformakingimmediatepayment
evenincasesofallegedfraudandevasionandthesoonerhe
makesthepaymentthelessamountofpenaltyheisliableto
pay.Furtheronsuchpaymentbeingmadeallproceedings
againsttheassesseearedeemedtobeclosed.Itis
respectfullysubmittedthatSection129oftheGSTActsis
alsorequiredtobereadinlightofsuchpolicy.Itallowsthe
assesseetosecureclosureofproceedingsonpaymentoftax
alongwith100%penalty.Itcouldneverhavebeenlegislative
intentiontoprovideforopportunitiesofreducedpaymentof
penaltyincaseofadjudicationonpromptpaymentoftax
andpenaltywhileallowingdirectconfiscationproceedingsif
thegoodsaredetainedintransit.Suchinterpretationwillbe
contrarytothelegislativepolicyandschemeoftheGSTActs.

Page22of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Therationalandcontextualinterpretationwouldthereforebe
thatconfiscationproceedingscanbeinitiatedunderSection
130oftheGSTActsonlyiftheassesseefailstopaytaxand
penaltyasdemandedunderSection129oftheGSTActs
withinthestipulatedtimeperiod.

(7)Therecannotbeconfiscationwithdetentionand
seizure.HencebeforeproceedingunderSection130,
Section129hastobeinvokedandfollowedinentirety

Therecannotbeconfiscationofgoodswithoutdetentionand
seizure.SinceSection129oftheGSTActsistheonly
provisionprovidingfordetentionandseizureofgoodsin
transit,detention/seizurehastobemadeunderSection
129(1)oftheGSTActs.Ifthatbesothentheremainingpart
ofthesamesub-sectionaswellastheremaining
sub-sectionsofSection129needtobefollowedinentirety.
Refusalonthepartofthelearnedauthoritiestofollow
Section129oftheGSTActsinentiretyeventhough
detention/seizureismadeundersuchprovisioniswholly
withoutjurisdictionandillegal.

8.Section129(2)oftheGSTActswhichadopts
Section67(6)alsogivesaclueregardinginterpretation
oftheprovision

ItisfurtherpertinenttonotethatSection129(2)oftheGST
ActsprovidesthattheprovisionsofSection67(6)oftheGST
ActsshallmutatismutandisapplytoSection129oftheGST
Acts.AperusalofSection67(6)oftheGSTActsshowsthatit
providesforreleaseofgoodsincaseofseizureduringsearch
proceedings.ItisrespectfullysubmittedthatSection67(6)of
theGSTActsoperatesin2partsviz.thegoodscaneitherbe
releasedonprovisionalbasisonfurnishingbondand
providingsecurityasmaybeprescribedorthegoodscanbe
finallyreleasedonpaymentoftax,interestandpenalty.
Adaptationofsuchprovisionforthepurposeofinterpreting
Section129oftheGSTActsleadstotheconclusionthatif
tax,interestandpenaltyarepaidthenthegoodsaretobe
finallyreleasedwhileifonlysecurityalongwithbondis
providedthenthegoodsaretobereleasedprovisionally.

Page23of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

9.Section67(6)oftheGSTActscannotbe
interpretedasprovidingforprovisionalreleasein
entirety

ItisrespectfullysubmittedthatSection67(6)oftheGSTActs
cannotbeinterpretedasprovidingforprovisionalreleasein
entirety.Thephrase”onprovisionalbasis”isapplicableonly
incaseofreleaseofgoodsonfurnishingsecurityand
providingbond.Itisnotapplicabletothe2ndportionofthe
provisionwhichprovidesforreleaseofgoodsonpaymentof
tax,interestandpenalty.Suchinterpretationissupportedby
thefollowingreasons:

(1)Applicationofthephrase”onprovisionalbasis”evento
the2ndportionofSection67(6)willrenderthephrase”asthe
casemaybe”appearingattheendoftheprovision
redundant.

(2)”Provisionalrelease”necessarilymeansthatthe
assesseecontinuestobeaccountableforproductionofthe
goodsifrequired.ThusabondisprescribedinFormGST
INS-04therelevantextractofwhichreadsasunder:

“WhereasIundertaketoproducethesaidgoodsreleased
provisionallytomeasandwhenrequiredbytheproper
officerdulyauthorizedundertheAct.”

Suchbondisrequiredtobeproducedonlyifgoodsare
releasedonthebasisofsecurity.Nosuchbondisrequiredas
perSection67(6)ifgoodsarereleasedonpaymentoftax,
interestandpenaltywhichshowsthatinsuchcasethe
releaseofgoodsisfinal.

(3)Rule140oftheCentralGoodsandServicesTaxRules,
2017(hereinafterreferredtoas”theGSTRules”)which
providesforprovisionalreleaseofgoodsalsoreferstothe
eventualityofprovisionalreleaseonlyincaseoffurnishing
securityalongwithbondofthevalueofgoods.

(4)Incaseofperishablecommoditysinceitwouldnotbe
possiblefortheassesseetogiveundertakingthathewill

Page24of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

producethegoodsondemand,thereisnoconceptof
provisionalrelease.Rule141oftheGSTRulesprovidesfor
finalreleaseofperishablegoodsonpaymentoftax,interest
andpenaltyamountormarketvalueofthegoodswhichever
islower.Thusincaseofperishablecommoditythefinal
liabilityisrestrictedtotheamountoftax,interestand
penalty.Thisagainshowsthatiftax,interestandpenaltyis
paidforthwiththenthereisnoquestionofanyfurther
liabilityoftheassessee.Itcanneverbetheintentionofthe
legislaturethatwhileforperishablecommoditiestheyare
satisfiediftax,interestandpenaltyarepaid,insofaras
non-perishablecommoditiesareconcerned,eveniftax,
interestandpenaltyarepaidtherecanbefurther
proceedingsofconfiscation.

(ThusSection67(6)oftheGSTActsprovidesforfinalrelease
ofgoodsonpaymentoftax,interestandpenaltyandsince
thisprovisionhasbeenmutatismutandisappliedtoSection
129,iftax,interestandpenaltyarepaidinrespectofgoods
detainedintransitthenthegoodsarerequiredtobefinally
releasedandtherecanbenofurtherproceedingsof
confiscationunderSection130oftheGSTActs.

(10)Itiswellsettledthatpurposiveinterpretationto
beadoptedevenintaxingstatutes

Itisrespectfullysubmittedthatitisnowwellsettledthat
principleofpurposiveinterpretationisapplicableevento
taxingstatutesparticularlywhenliteralinterpretationleads
toincongruityoranomaly.Referencemaybemadeinthis
regardtothejudgementofHon.SupremeCourtinthecaseof
SectionStateofKeralaOrs.v.A.PMammikuttyAIR2015SC
3009whereinitwasreiteratedasunder:

“16.SectionInKeshavjiRavjiandCo.v.CIT(1990)2SCC231ithas
beenheldbythisCourtthatwheninataxationstatute
whereliteralinterpretationleadstoaresultthatdoesnot
sub-servetheobjectofthelegislationanotherconstructionin
consonancewiththeobjectcanbeadopted.”

(11)SincebothSection129and130oftheGSTActs

Page25of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

containnon-obstanteclauses,interpretationshouldbe
madebydecipheringschemeandintentionof
legislature

ItisrespectfullysubmittedthatsincebothSection129and
130oftheGSTActscontainnon-obstanteclauses,attempt
shouldbemadeouttointerprettheminaccordancewiththe
schemeoftheGSTActsandculloutthelegislativeintention.
Referencemaybemadeinthisregardtothejudgementof
Hon.SupremeCourtinthecaseofJ.K.CottonSpinning
andWeavingMillsCo.Ltd.v/sStateofUttarPradesh
andOthersAIR1961SC1170(1stCompilation-page93,
relevantobservationsonpage7to10).Insuch
circumstancesthemostreasonableinterpretationofboththe
provisionswillbetheirharmoniousconstructionas
suggestedhereinbefore.InfactSection129oftheGSTActs
canbesaidtobeaspecialprovisiondealingwithdetention
ofgoodsintransitandthusevenonsuchcountitshould
prevailoverSection130oftheGSTActs.

(12)Generalnon-obstanteclausehastobeinterpreted
contextually

Itisfurtherrespectfullysubmittedthatageneral
non-obstanteclausesuchasthatappearinginSection130of
theGSTActsneedstobeinterpretedcontextually.There
needstobedeterminationastowhichprovisionswould
standoverriddenbysuchnon-obstanteclauseandwhich
wouldnot.Theprovisioncannotbeinterpretedasstanding
allbyitself.Relianceisplacedinthisregardonthe
judgementofHon.SupremeCourtinthecaseofIndra
KumarPatodiaandAnotherv/sRelianceIndustries
Ltd.AIR2013SC426(2ndCompilation-Page41,
RelevantObservationsPage45para12).Similarviewhas
alsobeentakenbythisHon.CourtinthecaseofRaajratna
MetalIndustriesLtd.v/sStateofGujaratSpecialCivil
ApplicationNo.15093of2018decidedon20.6.2019.

(13)DirectinvocationofSection130oftheGSTActs
willrenderSection129(6)oftheGSTActsredundant

Page26of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Itisfurtherrespectfullysubmittedthatdirectinvocationof
Section130oftheGSTActswillrenderSection129(6)ofthe
GSTActsredundant.ThelegislaturewasawarethatSection
130oftheGSTActscontainsanon-obstanteclause.Even
thenitwasprovidedinSection129(6)oftheGSTActsthat
provisionsofSection130oftheGSTActswillbeinvokedonly
iftheownerortransporterfailstomakepaymentoftaxand
penaltywithin14daysofdetentionortseizure.Itiswell
settledthataninterpretationwhichwillrenderanypartof
thestatuteotioseistobeavoided.Relianceisplacedinthis
regardonthejudgementofHon.SupremeCourtinthecase
ofUnionofIndiaandAnotherv/sHansoliDeviAIR
2002SC3240(2ndCompilation-Page4).

(14)Section129(6)oftheGSTActscannotbe
interpretedasarecoveryprovision

Section129(6)oftheGSTActscannotbeinterpretedasa
provisionmeantforrecoveryofunpaidtaxandpenalty.The
Petitionersaysthatifatallthetaxandpenaltyarenotpaid
thenthelearnedauthoritiescanverywellattachthegoods
underSection79oftheGSTActsandthereaftersellthemoff
torecovertheamountdue.Insuchcasehowevertheexcess
saleproceedswillhavetobegiventotheassessee.Per
contraincaseofconfiscationthetitleofthegoodsitselfwill
vestwiththeGovernment.Thusforconfiscationthelearned
authoritieswillnecessarilyhavetoestablishintentionto
evadepaymentoftax.Itisthereforerespectfullysubmitted
thattheonlypossibleeffectofSection129(6)oftheGSTActs
istoactasathreattotheassesseethatifhefailsto
forthwithpaythetax,interestandpenaltythenhewillrisk
loosingthegoodsinitsentirety.Henceconfiscation
proceedingscanbeinitiatedonlyiftaxandpenaltyarenot
paidwithin14daysofdetentionandseizure.Anyother
interpretationwillnecessarilyrenderSection129(6)ofthe
GSTActsredundant.

(15)Inthealternativeinanycasethevehicleand
goodsarerequiredtobereleasedevenifindependently
Section130isinvoked

Page27of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Withoutprejudicetotheabovesubmissionsandinthe
alternativeitisrespectfullysubmittedthatevenifitis
presumedforthesakeofargumentthatpaymentoftaxand
penaltyunderSection129oftheGSTActsdoesnotpreclude
initiationofproceedingsunderSection130oftheGSTActs,
eventhenthegoodsandconveyancesarerequiredtobe
releasedatleastonprovisionalbasisonfurnishingof
securityoronpaymentofamountasdeterminedunder
Section129oftheGSTActs.Henceevenifthelearned
authoritiesareempoweredtosubsequentlyinvokeSection
130oftheGSTActsunderthebeliefthatthegoodsarebeing
suppliedwiththeintentiontoevadepaymentoftax,even
thenthegoodsoughttobereleasedonprovisionalbasison
furnishingofsecurityorpaymentoftheamountas
determinedunderSection129oftheGSTActs.Confiscation
proceedingsunderSection130oftheGSTActsrequirefull
fledgedadjudicationafterexamination/cross-examinationof
evidences.Thevehicleandthegoodscannotbekeptseized
pendingsuchlongdrawnadjudicationprocess.Thiswould
bethepositionevenifitispresumedforthesakeof
argumentthatSection67(6)oftheGSTActsrefersto
provisionalreleaseinitsentirety.Refusalonthepartofthe
learnedRespondentauthoritiestoevenprovisionallyrelease
thegoodsandconveyanceeventhoughtaxandpenaltyare
fullypaidiswithoutjurisdiction,arbitraryandillegal.

(16)Fromanyangleimpugnedactionofthelearned
Respondentauthoritiesuntenable

Thus,viewedfromanyangle,theimpugnedactionofthe
learnedRespondentauthoritiesinstraightawayresortingto
theprovisionsofSection130oftheGSTActswithout
completingprocedureasstipulatedunderSection129ofthe
GSTActsiswhollywithoutjurisdiction,arbitraryandillegal.
Inanycaserefusaltoreleasethegoodsandconveyance
eventhoughtaxandpenaltyasdeterminedunderSection
129oftheGSTActsisfullypaidiswhollywithout
jurisdictionandillegal.

(17)Authorityinterceptinggoodsintransitcannotgo
intotheissueofvaluationofgoods

Page28of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

InoneofthecasethelearnedRespondentauthoritieshave
disputedvaluationofthegoodsandthereforealsodetained
thegoodsunderSection129oftheGSTActsonthegroundof
under-valuation.Itisrespectfullysubmittedthatthelearned
authoritycheckinggoodsintransithasnojurisdictiontogo
intothevaluationofthegoods.Allthatheneedstoensureis
thatthegoodsareaccompaniedbyrequisitedocuments.This
istheonlyjurisdictionhehasbyvirtueofSection68(3)ofthe
GSTActs.Valuationisamatterofadjudication.Presuming
thatthelearnedauthoritysuspectsthatthegoodshavebeen
undervalued,eventhenhecanatbestforwardsuch
informationtotheconcernedadjudicatingauthorityofthe
supplierwhocanthereafteradjudicatetheissueafter
followingdueprocessoflaw.Detentionofgoodsonthe
groundofunder-valuationiswhollywithoutjurisdictionand
illegal.Relianceisplacedinthisregardonthejudgementof
Hon.GauhatiHighCourtinthecaseofShriKamalKumar
Sharmav/sStateofAssam(2006)144STC458(Gau.)
(2ndCompilation-Page11,RelevantObservations-Page
16,Para4).Referencemayalsobemadetothejudgementof
Hon.MadrasHighCourtinthecaseofJeyyamGlobal
Foods(P)Ltd.v/sUnionofIndia(2019)64GSTR129
(Mad.)(2ndCompilation-Page19)whereinitwasheldthat
theauthoritydidnothavepowertodetermineclassification
ofgoodsinexerciseofpowersunderSection129oftheGST
Acts.SimilardecisionwasrenderedbyHon.KeralaHigh
CourtinthecaseofN.V.K.MohammadSulthanRawther
andSonsv/sUnionofIndia(2019)61GSTR307(Ker.).

(18)GSTleviableonactualtransactionvalueandnot
marketvalue

ThisisparticularlybecausetaxundertheGSTActsis
leviableonactualtransactionvalueandnotonmarketvalue
ofthegoods.Section15oftheGSTActsprovidesfor
valuationofsuppliesanditisprincipallyleviableonprice
actuallypaidorpayableinrespectofthegoodsorservices.
Thusassuchitisnotevenopenfortheadjudicating
authoritytoimposetaxonmarketvalue.Hewouldhaveto
establishthattheassesseehasunrecordedreceiptsforthe
purposeofenhancingthevaluationofsuppliesmadebythe

Page29of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

assessee.InthecontextofsalestaxstatutesHon.Supreme
CourthasinfactheldinthecaseofStateofRajasthanv/s
RajasthanChemistAssociation(2006)147STC542
(SC)(2ndCompilation-Page55)thatimpositionoftaxon
maximumretailpriceofthegoodsisbeyondthelegislative
competenceoftheStatelegislature.Thuswheneventhe
adjudicatingauthoritycannotimposetaxonmarketvalueof
goodswithoutestablishingthatthiswasinfactthe
transactionvalue,thequestionofenhancementofvalueby
theauthorityinterceptingthegoodsintransitdoesnotarise.
Infactthiswouldleadtograntingextremelyarbitrary
powerstotheauthoritiesinasmuchasthousandsof
varietiesofgoodsaremovedacrossthecountryhaving
differentvalueswhichmayinfactvaryfromcommodityto
commodityandtransactiontotransactiondependingonthe
factsandcircumstances.Infactforthesamegoodsthevalue
wouldbedifferentdependingonthestageofsupplyofsuch
goods.Inotherwordswhilethevalueofgoodsmovingfrom
manufacturertowholesellerwillbelower,thevalueofthe
samegoodsmovingfromretailertoendconsumerwillbe
muchhigher.Adhocenhancementofvalueofthegoodsby
thelearnedauthorityinterceptingthegoodsistherefore
whollywithoutjurisdiction,arbitraryandillegal.

(19)InthealternativethelearnedRespondent
authoritiescanatthemostdemandtaxandpenaltyon
theenhancedvalue

Withoutprejudicetotheaboveandinthealternativeatthe
mostthelearnedauthorityinterceptingthevehiclecan
demandtaxandpenaltyunderSection129oftheGSTActs
ontheenhancedvaluewhichaccordingtohimisthecorrect
value.Inanycaseunder-valuationcannotbeusedaspretext
fordirectinvocationofSection130oftheGSTActs.

(20)Thereisnoquestionofinvokingprovisionsof
Section130oftheGSTActsincaseofimportedgoods.
Infactinsuchcasethereisnorequirementofpayment
oftaxorpenaltyunderSection129oftheGSTActsas
taxispaidinadvance

Page30of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

InSpecialCivilApplicationNo.4730of2019thegoodsin
transportationareimportedgoods.Thegoodswerebeing
transportedfromairporttothepremisesofthePetitioner.
Admittedlywhilee-waybillwasnottherethegoodswere
accompaniedbybillofentryforhomeconsumptionwhich
showedthatIGSThadalreadybeenpaidbythePetitioner
beforecommencementofmovementofgoods.Thusthere
cannotbeanyquestionofintentiontoevadepaymentoftax
sincetaxwasalreadypaidinadvanceontheimported
goodsatthetimeofclearanceforhomeconsumptionatthe
airport.Infactsincetheapplicabletaxhadalreadybeen
paidpriortocommencementofmovementofgoods,thereis
alsonoquestionofpaymentoftaxagainunderSection129
oftheGSTActswhichisapplicableonlyincaseswheretax
isyettobepaid.PenaltyisalsopayableunderSection129
oftheGSTActsontax”payable”.Sinceinsuchcasethetax
wasalreadypaidnotaxwas”payable”andhencethe
questionofpenaltyalsodoesnotarise.Demandoftaxand
penaltyunderSection129oftheGSTActsandredemption
fineequaltovalueofgoodsunderSection130oftheGST
Actsinsuchfactsandcircumstancesisinanycase
arbitrary,mechanical,badandillegal.

(21)Confiscationofgoodsonthegroundof
non-productionofdocumentsisinfact
unconstitutional

ItisinfactrespectfullysubmittedthatifSection130ofthe
GSTActsisallowedtobedirectlyinvokedonthegroundof
absenceofnecessarydocumentsduringtransportationthen
suchprovisionwillbeunconstitutionalasheldbyHon.
SupremeCourtwhileinterpretingsimilarprovisioninthecase
ofTheCheckpostOfficer,Coimbatorev/sK.P.Abdulla
andBros.(1971)27STC1(SC)(1stCompilation-Page1)

(22)Additionalgroundsraisedinaffidavitinreplynot
formingpartofthedetentionorders/confiscation
noticesrequiredtobeoutrightlyrejected

Itisfurtherrespectfullysubmittedthatsomeadditional
groundsraisedinsomeoftheaffidavitsinreplyinsupportof

Page31of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

detentionorders/confiscationnoticeswhicharenotforming
partofthenoticesarerequiredtobeoutrightlyrejected.Itis
wellsettledthatthelearnedRespondentscannotbeallowed
toimproveupontheimpugnedorders/noticesbywayof
affidavitsinreply.Relianceisplacedinthisregardonthe
judgementofHon.SupremeCourtinthecaseofMohinder
SinghGillv/sChiefElectionCommissionerAIR1978
SC851.”

16.WealsoheardMr.TusharHemani,thelearnedsenior
counselappearingforthewritapplicantsoftheSpecialCivil
ApplicationNo.10018of2019.Broadly,thesubmissionsof
Mr.Hemaniareasunder;

“Sections129130ofTheCentralGoodsandServices
TaxAct,2017(hereinafterreferredtoas’CGSTAct’for
thesakeofbrevity)aremateriallydifferentandoperate
indifferentsituations.Theycannotbeused
interchangeably,atthediscretionoftheauthorities.
InordertounderstandthedifferencesbetweenS..129
130oftheAct,itisbeneficialtounderstandthe
SectionSchemeoftheAct.

S.122ispenaltysectionforcertainoffences
enumeratedtherein,violationwhereofattractspenalty
ofRs.10,000oranamountequivalenttothetaxevaded
i.e.100%ofthetaxevaded,Whicheverishigher.Allthe
offencesenumeratedinS.122aretheexamplesof
contraventionsoftheprovisionsofthisActortheRules
madethereunder.

S.129talksaboutdetention,seizureandreleaseof
goodsandconveyancesintransit.Asperthesection
whichbeginsWithnon-obstanteclause,anyperson
transportsanygoodsorstoresanygoodswhilethey
areintransitincontraventionoftheprovisionsofthis
ActortheRulesmadethereunder,suchgoodsand
conveyanceshallbeliabletodetentionorseizureand
shallbereleaseduponpaymentofapplicabletaxand
100%penaltyonsuchtax.Theexamplesof

Page32of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

contraventionsoftheprovisionsofthisActortheRules
madethereunderareenumeratedinSectionS.122oftheAct.
S.130talksaboutconfiscationofgoodsorconveyances
andlevyoftax,penaltyandlinethereon.Thesection
alsobeginswithnon-obstanteclauseandstates
amongstotherthingsthatifanyperson”contravenes
anyoftheprovisionsofthisActortherulesmade
thereunderwithintenttoevadepaymentoftax”,then,
allsuchgoodsorconveyancesshallbeliableto
confiscationandthepersonshallbeliabletopenalty,
apartfromtaxandfine,u/s122.Therefore,evenSectionS.130
isalsoasub-setof8.122.

AClosecomparisonofthesethreeprovisionsviz.S.
122,129SectionS.130oftheActleavenodoubtthatS.122
isageneralpenaltysectionwhichcoverscertain
offencesenumeratedtherein.S.129talksaboutthe
verysamecontraventionsalbeit,whencommittedin
transit.Thereforeit’saspecificsectionoperatesonly
whengoodsareintransitasagainstgeneralpenaltyas
providedu/s122.Inotherwords,provisionsofS.129
aloneneedtobeinvokedwhencontraventionsofanyof
theprovisionsoftheActarecaughtwhengoodsarein
transit.Becausethesecontraventionsarecaughtwhen
thegoodsareintransit,afasttrackmechanismis
providedundertheSectionSchemeoftheActsoastohave
fasteradjudicationofthesameintermsofsubsection
(2)to(5)ofS.129oftheAct.Soifthepersonsocaught,
payspaymentofapplicabletaxand100%penaltyon
suchtax,goodsarereleasedimmediatelyand
proceedingsforsuchcontraventioncometoanend.
ThemajordistinctionbetweenS.129andS.130isthat
theprovisionsofS.129canonlybeinvokedwhengoods
areintransitwhereasS.130canbeinvokedatany
stage,muchafterthegoodshavereachedtheir
destinationorevenduringassessmentproceedings
subjecttoofcourse,fulfillingitsconditions.
ForanyviolationoftheprovisionsoftheActorrules
madethereunderwhilegoodsareintransit,
straightway,proceedingsu/s130cannotbeinitiatedas
hasbeendonebytheRevenue.Itisonlyafter

Page33of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

exhaustingthisremedyofS.129thatrecoursecanbe
hadtoS.130.ProvisionsofS.129(6)leavelittledoubt
aboutthislegislativeintent.AsperS.129(6)ifthe
amountdemandedu/s129(1)isnotpaidwithin14
days,furtherproceedingsshallbeinitiatedin
accordancewiththeprovisionsofS.130.Thus
Proceedingsaretobeinitiatedasperlawandin
accordancewithconditionsofS.130.

Here,proceedingsu/s130canonlybeinitiatedif
conditionsstatedunderthesaidsectionaresatisfied.It
cannotbeinterpretedinamannersoastoholdthat
oncetaxandpenaltyasdemandedu/s129isnotpaid
withinaperiodof14days,S.130automaticallygets
invokedwithouthavingtosatisfyanyofthe
preconditionsasstatedunderthesaidsection.These
conditionsaresinequanonforinvokingtheprovisions
ofS.130oftheAct.

CBECcirculardated13/04/2018clauses(k)supports
thisinterpretationinasmuchasthesaidclause
contemplatesissuanceofNoticeinFormGSTMOV-10
whichisaSCNtobeissueduponthepersonforgetting
hisresponse.Iftheproceedingsareautomaticand
compulsorynosuchnoticeisrequired
CBECcirculardated13/04/2018clause(1)also
supportsthisinterpretationasthesaidclausetalks
aboutopinionoftheproperofficeraboutthemovement
ofgoodsbeingeffectedtoevadepaymentoftax.Such
opinionhastobeobjectiveopinionbasedonhard
evidencesandnotmerelyonconjecture,surmisesand
presumptions.Iftheproceedingsareautomaticand
compulsorynosuchopinionisrequired.

S.130appliesto5kindsofoffencesenumeratedin
sub-section(1).Thefundamentaldifferencebetween
languageofS.129andS.130oftheActisthephrase
withintenttoevadepaymentoftax’.Thisphrase
inherentlycarrieswithittheelementof’mensrea’.Itis
implicitinthephrase’withintendtoevadepaymentof
tax’thattherehasbeenawillful,deliberateand
calculatedactonthepartofthepersontoevade
paymentoftax.Theactionisplannedandpremeditated

Page34of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

purelywithaclearintentiontoevadepaymentoftax.
Thusunless,suchintentionisprovedbeyonda
reasonabledoubt,provisionsofS.130cannotbe
invoked.UnlikeS.135whichappliestoprosecution
alone,presumptionofculpablementalstateisnot
availabletoRevenuedepartmentwhendealingwithS.

130.

Inthepresentcase,evenFormGSTMOV-10
categoricallystatesthat”Asthegoodsweretransported
withoutanyvaliddocuments,itispresumedthatthe
goodswerebeingtransportedforthepurposesof
evadingthetaxes.”Thisclearlyshowsthatthe
conclusionasto’intenttoevadetax’ispurelybasedon
presumptionwhichisnotpermissible.

S.129(5)statesthatonpaymentofamountreferredto
insub-section(1)i.e.taxand100%penaltyonsuchtax,
allproceedingsinrespectofthenoticespecifiedin
sub-section(3)shallbedeemedtobeconcluded.
Therefore,forthisdefaultorcontraventionorcauseof
action,revenuecannotonceagaininitiateproceedings
u/s130.Thisinterpretationissupportedbythe
Explanation1appendedtoS.74oftheActwhich
reads::

“Explanation1-ForthepurpseofSectionsection73andthis
section,-

iI)theexpression”allproceedingsinrespectofthe
saidnotice”shallnotincludeproceedingsunderSectionsection
132;

(ii)wherethenoticeunderthesameproceedingsis
issuedtothemainpersonliabletopaytaxandsome
otherpersons,andsuchproceedingsagainstthemain
personhavebeenconcludedunderSectionsection73orSectionsection
74,theproceedingsagainstallthepersonsliabletopay
penaltyunderSectionsections122,Section125,Section129andSection130are
deemedtobeconcluded.”

Abareperusaloftheexplanationrevealsthatoncea
personpaysthetaxandpenaltyascontemplatedu/s
73or74,allproceedingsexceptasprescribedu/s132

Page35of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

cometoanend.Evenifmainpersonspayssuchtax
andpenalty,proceedingsu/s129and130cometoan
endagainstotherpersons.Therefore,theintention
behindtheseprovisionsisclearthatsolongasaperson
paystax,interestandpenaltyofupto50%ofthetax
involved,noactionsarerequiredu/s129or130.In
otherwords,legislaturedoesnotwanttotakemultiple
actionsforthesamecontraventionordefaultorcauseof
action.

SectionUndertheSchemeoftheAct,thereisacleardistinction
betweenvariouscontraventionsoftheprovisionsofthis
ActortheRulesmadethereunderwhichareaccidental,
technicalorinadvertentasagainstcontraventions
whicharewillful,fraudulentorwithanintenttoevade
paymentoftax.Fortheformer,penaltyislightwhereas
forthelaterpenaltyisheavyandinagivencasemay
befollowedbyprosecution.ProvisionsofSectionS.73andSection74
areonesuchexample.S.129and130areanother
example.However,Actdoesnotcontemplate
consecutiveproceedingsunderboththesectionsforthe
verysamecontravention.Ifacontraventionispenalized
underS.129,thesamecontraventioncannotbeonce
againpenalizedu/s130.Withouttherebeinga
differentcauseofactionorsomethingmoretothe
contravention,proceedingsu/s129cannotbe
succeededbyS.130.

Asregardstheargumentthatifapersondoesnotpay
thenecessarytaxandpenaltyasdemandedu/s129(1)
r/wSectionS.129(3)oftheAct,revenuehasnooptionbutto
initiateproceedingsu/s130asprescribedu/s129(6)of
theActbecausethenrevenueisleftremedylessasno
furtherproceedingsareprescribedu/s129oftheAct,it
issubmittedthatoncegoodsintransitaresubjectedto
S.129oftheAct,thepersonhastopaynecessarytax
andpenalty.Ifhedoesn’t,allconsequencesasstatedin
S.79(1)(c)(iii)r/w.S.79(1)(b)shallfollow.These
provisionsempowertherevenuetosellgoodsseized
withoutthesamehavingtobeconfiscated.Confiscation
u/s130bringswithitthefineapartfromtax,interest
andpenalty.Therefore,thesamecanonlybeinvoked
whenconditionsstatedinthesaidsectionarefulfilled.

Page36of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Infactgoodsseizedu/s67oftheActalsoaretreated
andsold,ifneedbe,asprescribedu/s79oftheAct
withoutthesamehavingtobeconfiscatedfirst.”

17.WehavealsoheardMr.PareshM.Dave,thelearned
counselappearingforthewritapplicantsoftheSpecialCivil
ApplicationNo.9105of2019.AccordingtoMr.Dave,the
threebroadissuesinvolvedinthislitigationcouldbe
summarizedasunder;

“(I)Whetherproceedingsforconfiscationofgoodsor
conveyances(andalsolevyofpenalty)underSection
130oftheCGSTActcanbeinitiatedwithoutfirst
followingtheprocedurelaiddownunderSection129of
theCGSTAct?

(II)Whetherprocedureandproceedingsfor
confiscationofgoodsorconveyances(andalsolevyof
penalty)underSection130oftheCGSTActare
permissibleevenaftertheprocedureofSection129of
theActwasfollowedi.e.,amountreferredinsub-section
(1)waspaidbytheconcernedperson?

(III)Whetheritispermissibleinlawtoorder
confiscationofgoodsorconveyanceoncetheyare
releasedunderSection129oftheActonpaymentofthe
amountoftaxandpenalty?.Inotherwords,oncethe
goodsandtheconveyanceisreleased,thenthe
authoritycouldnotbesaidtobeinphysicalpossession
ofboth,andintheabsenceofthegoodsorconveyance,
therecannotbeanyconfiscationofthesame.Toputit
moresimply,thephysicalavailabilityofthegoodsand
theconveyancewillhavesignificanceforimpositionof
redemptionfineunderSection130oftheAct.”

18.Thus,thesumandsubstanceofthesubmissions
canvassedonbehalfofthewritapplicantsisthatthe
proceedingsforconfiscationofgoodsorconveyancecannot

Page37of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

beinitiatedunderSection130oftheActwithoutfirst
complyingwiththeprocedureasprescribedunderSection
129oftheActandthesecondlimbofthesubmissionisthat
oncethetaxandthepenaltyispaidunderSection129of
theAct,thentheauthorityhasnopowertoproceedfurther
underSection130oftheActforthepurposeofconfiscation
ofthegoodsandtheconveyance.Inotherwords,the
confiscationproceedingsunderSection130wouldbe
permissibleonlyifthedealerfailstopaytheapplicabletax
andpenaltyimposedbyanorderunderSection129(3)of
theAct.Confiscationisacoercivemeasuretoensure
paymentoftaxandpenaltyleviedonadealerwho,
otherwise,isatathreatofloosingthegoodsitself.The
vociferousargumentisthattheconfiscationisnotan
automaticconsequenceensuingfromthedetentionand
seizure.Itisonlywhentheapplicabletaxandpenaltythat
maybeleviedunderSection129isnotpaid,therecouldbe
proceedingsinitiatedunderSection130whichwouldleadto
confiscationofthegoodsitself.Theargumentisthatthe
provisionsofSection130areapplicableonlyintheeventof
failureonthepartofthedealertopaytheapplicabletax
andpenalty.Theprincipalargumentofallthelearned
counselappearingforthewritapplicantsisthatthe
concernedauthoritieshavenotbeenabletounderstandthe
truepurportandobjectofthetwosections,i.e.,Sections
129andSection130oftheActrespectively.Theargumentisthat
nosoonerthegoodsareseizedandthevehicleisdetained,
straightwaytheprovisionsofSection130oftheActare

Page38of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

beinginvoked.This,accordingtothelearnedcounsel,is
notpermissibleinlaw.Theargumentisthatboththe
provisionsareindependentofeachother.Confiscation
proceedingscanbeinitiatedatthethresholdonlyifthe
authorityisconvincedhavingregardtothematerialson
recordthatthepartyconcernedhadcontravenedthe
provisionsoftheActandtheruleswithanintenttoevade
thepaymentoftax.Itisarguedthatthereisanelementof
mensrea,i.e.,theculpablementalstateinSection130of
theAct.Ameretechnicalirregularityorlapseonthepartof
theownerofthegoodsorthedriverofthevehiclemaynot
besufficienttoimputemensreasoastocometothe
conclusionthattheintentionwastoevadepaymentoftax.
Insuchcircumstances,referredtoabove,itisprayedthat
appropriatedirectionsmaybeissuedtotheauthorities
concernedasregardsSections129andSection130respectivelyof
theAct.

SubmissionsonbehalfoftheState;

19.Allthewritapplicationshavebeenvehemently
opposedbyMr.KamalTrivedi,thelearnedAdvocateGeneral
appearingfortheState.

20.Broadly,thesubmissionsofthelearnedAdvocate
Generalmaybesummarizedasunder;

(I)Theprinciplesapplicableinthematterof
interpretationofthetaxingprovisionslikeSections129and

Page39of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

130oftheActaredifferentthanthosewhichareapplicable
inthecaseofinterpretationofanyordinaryprovisions
wherethestressisonthestrictletteroflawratherthanthe
substanceofphilosophyofthelaw.Inotherwords,
accordingtoMr.Trivedi,inataxingstatute,itistheliteral
interpretationratherthanthesupposedintendmentwhich
isakeytothetoolofinterpretation.

(II)Thenon-obstanteclauseusedinanylegalprovision
seekstoprovidethesame,asweepingoverridingeffectover
anyotherlegalprovisionsoperatinginthesameorsimilar
field.Sinceboththeprovisions,i.e.,Sections129andSection130
containanon-obstanteclause,theyarerequiredtobe
interpretedharmoniouslywhilekeepinginmindtheobject
andpurposebehindtheenactment.ItisarguedthatSection
129oftheActdealswiththedetention/seizureofthe
goods/conveyancewhileintransit.Section130deals
specificallywiththeconfiscationofsuchgoods/conveyance.

(III)AccordingtoMr.Trivedi,forinvocationofSection129
oftheActallthatisnecessaryis”contraventionofthe
provisionsoftheActortheRules”,whereasSection130of
theActprescribesspecificcircumstancesforthepurposeof
invokingtheprovisionsrelatingtoconfiscation.Itispointed
outthatSection130oftheActspecificallytalksaboutthe
intention,i.e.,mensrea.Boththesectionsareindependent
ofeachother.

(IV)Itisfurthersubmittedthatitispreposterousonthe

Page40of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

partofthewritapplicantstocontendthatSection130of
theActcanbemadeapplicableonlyifSection129(6)ofthe
Actisnotcompliedwith.Itissubmittedthattheprovisions
ofSection130areindependentoftheprovisionsofSection
129oftheActandthatthesamecanbeinvokedbythe
departmentatanystagei.e.(i)afterconcludingthe
proceedingsinitiatedunderSection129oftheAct,or(ii)
afterissuingnoticeunderSection129(3)oftheAct,or(iii)
directlyafterdetainingthegoodsunderSection129(1)of
theAct.Thus,therecannotbeanystraightjacketprocedure
tobeadopted,asthesamewouldentirelydependuponthe
factsandcircumstancesofeachcase.

(V)Mr.Trivedifurthersubmittedthatwhenabreachof
theprovisionsoftheActandtheRulesisfound,resultingin
detainingthegoodsand/orconveyanceunderSection
129(1)oftheAct,byissuingthedetentionorder(i.e.
MOV-06)followedbytheserviceofashowcausenotice
underSection129(3)oftheAct(i.e.MOV-O7),ifownerof
thegoodscomesforwardandmakesthepaymentoftaxand
penalty,suchgoodsarerequiredtobereleasedintermsof
Section129(1)oftheActandthattheproceedingswith
respecttoSection129(3)oftheActwillbedeemedtobe
concluded.However,aftersuchrelease,ifitisfoundout
thatthecontraventionoftheActortheRuleswas/iswith
anintentiontoevadepaymentoftaxorfallingunderanyof
theeventualitiesmentionedinSection130(1)oftheAct.
theninthatcase,oncethegoods/conveyancearereleased,

Page41of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

theexerciseunderSection130wouldbeafutileexercise,
becauseofnon-availabilityofgoodsandconveyance.

(VI)Itissubmittedthattherelianceplacedbythewrit
applicantsonExplanation1appendedtotheprovisionsof
Section74oftheAct,forcontendingthatSection130ofthe
Actcannotbeinvokedbythedepartmentforthetransaction
withrespecttowhich,assesseehasalreadypaidthe
amountoftaxandpenaltyintermsofSection129ofthe
Act.isalsonottenableintheeyesoflaw.Thisisinviewof
thefactthatthesaidExplanationneitherprovidesthatthe
confiscationproceedingsagainstthe’mainperson’wouldbe
deemedtobeconcluded,northattheconfiscation
proceedingsagainst’allotherpersons’wouldbedeemedto
beconcluded.Asagainstthis,itmerelystipulatesthatthe
proceedingsrelatedto’penalty’undertheprovisionsof
Sections122,Section125.129and130oftheActwouldbedeemed
tobeconcluded.Therefore,thesaidexplanationwouldnot
behelpfultothewritapplicantsandthus.asaforesaid,the
provisionsofSection130oftheActcanalsobeinvokedin
caseswheretheamountoftaxandpenaltyispaidinterms
oftheprovisionsofSection129oftheAct,incaseswhere
thesaidcaseisfallinginanyofthefiveeventualities
prescribedinSection130(1)oftheAct.

(VII)Itisfurthersubmittedthatitisnotnecessaryonthe
partofthedepartmenttoholdafull~fledgedinquirybefore
invokingtheprovisionsofSection130oftheActinasmuch

Page42of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

as,therecanbeasituationlikesupplyingthegoodswithout
gettingregisteredundertheAct,whichdirectlytriggers
Section130(1)(iii)oftheAct,forwhich,noinquiryis
required.Thus,insuchsimilarsituations,theremaynotbe
anyinquiry,anddirectlyonthatgroundalone.the
provisionsofSection130oftheActproposingconfiscation
ofgoods/conveyancecanbeinvokedbythedepartment.
Thisapart,intheabove-referredsituation,itmayalso
happenthatconsideringthesameascontraventionofthe
provisionsoftheAct,theconcernedofficermay
inadvertentlyissuenoticeunderSection129(3)oftheAct.
However,thereafteritmayberealisedbytheconcerned
officerthatthesaidcontraventiondirectlytriggersthe
provisionsofSection130(1)(iii)oftheActandthatthesaid
goodsareliableforconfiscation.Hence.undersuch
circumstances,theauthoritieswouldliketoproceedfurther
byissuinganoticeunderSection130(1)readwith130(4)of
theActfortheproposedconfiscation.Therefore.itis
incorrecttocontendthattherehastobe’anythingmore’
thanthatwasprevailingatthetimeofinvocationofSection
129oftheAct,forinvokingtheprovisionsofSection130of
theAct.

(VIII)Itissubmittedthatspecificinclusionofsub-section(2)in

Section129oftheActhasapurposewhichsuggeststhat
whileframingtheprovisionsofSections129andSection130ofthe
Act,thelegislaturewasconsciousofthefactthatthe
detention/seizureofthegoods/conveyanceunderthe

Page43of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

provisionsofSection129(1)oftheActcontinues,tillan
orderofreleaseispassedbytheconcernedauthorityunder
theprovisionsofSection129oftheActoranorderof
confiscationispassedundertheprovisionsofSection130of
theAct.However.inthemeanwhile,i.e.duringthe
continuationofdetention/seizure.tillthesameculminates
intothefinalorderofreleaseorconfiscation,thesaid
goods/conveyancecanbereleasedonprovisionalbasis
uponexecutionofbondandfurnishingofasecurityofsuch
quantum,asmaybeprescribed.However,theexerciseof
suchadiscretionbytheauthorityinthecaseofprovisional
releasewouldonceagaindependuponthegenuinenessof
thetransactionandnotinallcaseslikewheretheconsignor
ortheconsigneeisnotregisteredorthesameisnot
traceable.

(IX)`Itissubmittedthatconsideringtheobjectandpurpose
oftheAct,onehastoreadtheword’shall’,asusedin
Sub-Section(3)ofSection129oftheAct,as’directory’and
not’mandatory,asotherwise,theprovisionsrelatingto
confiscationcontainedunderSection130wouldbe
renderedotiose/meaningless.

(X)Itissubmittedthatitisincorrectonthepartofthe
writapplicantstocontendthattheprovisionsofSections
129andSection130oftheActaresub-setsofSection122ofthe
Act.Rather.thesaidSections129andSection130oftheActcanbe
invokedforeventualitieswhicharenotmentionedinSection

Page44of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

122oftheActandhence.thesamecannotbesaidtobe
relatedtotheprovisionsofSection122oftheAct,exceptfor
quantificationoftheamountofpenalty.Inadditiontothis,
itisalsonotcorrectonthepartofthewritapplicantsto
contendthattheprovisionsofSection122oftheActare
generalinnatureandtheprovisionsofSections129and
Section130arespecificinnatureandhence,non-obstanteclauses
ofthesaidsectionswouldoverridetheprovisionsofSection
122oftheAct.Thesaidargumentfallsflatonthebasic
groundthattheprovisionsofSections129andSection130ofthe
ActthemselvesrefertotheprovisionsofSection122ofthe
Act,soastodecide/computetheamountofpenaltytobe
imposedupontheAssessees.Thus.oncethereisnoconflict
betweentheprovisionsofSection122oftheActonone
handandSections129andSection130oftheActontheother,
therearisesnoquestionofinvocationof’non-obstante’
clauseinsuchasituation.

(XI)ItissubmittedthattheprovisionsofSectionsections73and
Section74oftheActdealwiththe’demandsandrecovery’tobe
madebytheassessingofficerbasedupontheassessment,
whereastheprovisionsofSection129oftheActdealwith
the’detention/seizure’.Whileassessingthereturns,ifthe
assessingofficerfindsthattheamountoftaxhasnotbeen
paidorshortpaidorerroneouslyrefunded,orwhereinput
taxcredithasbeenwronglyavailedorutilizedforany
reason,eitherwithmalafideintentionorwithoutthesame,
asthecasemaybe,theprovisionsofSection73/Section74ofthe

Page45of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Actwouldbeinvoked.However,theprovisionsofSection
129oftheActdealwithsituationwheretheevasionof
tax/contraventionoftheAct/Rulesisdetectedduring
transititself,requiringtheadoptionofsummarylike
proceedings.Therefore,thesaidprovisionsareoperatingin
differentsphere.

(XII)Itissubmittedthatthecomparisonoftheprovisionsof
SectionCustomsAct/SectionExciseActononehandandtheprovisionsof
theActontheother,assoughttobedrawnonbehalfofthe
writapplicants,isnotcorrect.Section110(1)ofthe
CustomsActisnotcomparabletoSection129(1)oftheAct
inasmuchas,theprovisionsofSection110oftheCustoms
Actcontemplatesthattheproperofficermayseizethegoods
whichareliableforconfiscation,whereastheprovisionsof
Section129contemplatethattheproperofficermaydetain/
seizethegoods/conveyanceintransitincontraventionof
theprovisionsoftheActortheRules.

(XIII)Itisfurthersubmittedthattheprovisionsof
Sections110(2)andSection124oftheCustomsActdonot
contemplatethatthegoodswhichareseizedaretobe
releasedinaspecifictimelimit,muchless,withinaperiod
ofsixmonths.Aproposthis,thesaidsectionsmerelycasta
dutyonthedepartmenttoissueashowcausenoticewithin
aperiodofsixmonthsfromthedateofseizureofgoods,but
thesamedoesnotcontemplateastoinhowmuchtime,the
samehastobeadjudicatedupon.Therefore,thecontention

Page46of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

raisedonbehalfofthewritapplicantsthatthegoodswhich
areseizedaretobereleasedwithinashortspanoftimeand
thatthelegislaturehasnotcontemplatedtoretainthegoods
pendingtheconfiscationproceedings.isnottenable.In
additiontotheabove,evenotherwise,theprovisionsof
Section110AoftheCustomsAct,whichdealwiththe
‘provisionalrelease’ofthegoods,donotcontemplatethe
releaseofthegoodsonlyonpaymentofpenaltyandinterest
buttheproposedamountoffineisalsotobeincludedfor
provisionalreleaseofthegoods.Inviewofthis,theamount
offineshouldbetakenintoaccountwhiledirectingthe
provisionalreleaseofthegoods/conveyanceasperSection129(2)read
withSection67(6)oftheActreadwithRule140oftheRules.

(XIV)Inthelast,Mr.Trivedisubmittedthatassuch
thereisnoseriouschallengetotheconstitutionalvalidityof
theprovisionsofSections129andSection130oftheActis
concerned.Hesubmittedthatitisasettledprincipleoflaw
thatthepowertolevytaxincludesalltheincidentalpowers
topreventtheevasionofsuchtax.Thepowertoseizeand
confiscatethegoodsintheeventofevasionoftaxandthe
powertolevypenaltyaremeanttochecktaxevasionandis
intendedtooperateasadeterrentagainstthetax-evaders
andare,therefore,ancillaryorincidentaltothepowerto
levytaxonthegoodsandthus,fallwithintheambitand
scopeofthelegislativepowers.Hesubmittedthatitisnot
correctonthepartofthewritapplicantstocontendthatthe
impositionofpenaltyisarbitraryandunconstitutional

Page47of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

inasmuchas,thesameisonlyleviedincasewherethe
ownerofthegoodsisnotcomingforthandthegoodsare
notbeingaccountedforbyanyoneandhence,withaview
tosafeguardtherevenue’sinterest,sucha
measure/yardstickisincorporatedintheprovisionsof
Section129(1)(b)oftheAct.forwhich,theaforesaidtwo
Sections129andSection130oftheActcannotbefaulted.

(XV)Mr.Trivedifurther,veryelaborately,explainedthe
differenteventualitiesforthepurposeoftakingrecourseof
Sections129andSection130respectivelyoftheCGSTActas
under;

1stEventuality2ndEventuality

1.Section129(1)-Detention/Seizure1.Section129(1)-Detention/Seizure
OrderinFormMOV-06OrderinFormMOV-06

2Section129(3)-IssuanceofShow2Section129(3)-IssuanceofShow
CauseNoticeinFormMOV-07CauseNoticeinFormMOV-07

3.Section129(3)-Renditionoforderon3.Section129(3)-Renditionoforderon
thesaidShowCauseNoticeinFormthesaidShowCauseNoticeinForm
MOV-09i.e.eitherconfirmingorMOV-09i.e.eitherconfirmingor
droppingthesaidnotice.droppingthesaidSCN.

4.Section129(5)-Ifconfirmed,then4.Section129(6)-Ifconfirmed,then
uponpaymentoftaxandpenalty,anduponnon/paymentoftaxandpenalty.
ifdropped,thendirectlyreleaseof
goodsandconveyanceinForm
MOV-05.

5.InitiationofSection130proceedings.

3rdEventuality4thEventuality
1.Section129(1)-Detention/Seizure1.Section129(1)-Detention/Seizure
OrderinFormMOV-06OrderinFormMOV-06

2.Section129(3)-IssuanceofShow2.Section130(1)r/wSection130(4)-
CauseNoticeinFormMOV-07IssuanceofShow-CauseNotice
3.Section129(3)-RenditionoforderonregardingconfiscationinForm
thesaidShowCauseNoticeinFormMOV-10,

Page48of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

MOV-09i.e.eitherconfirmingor
droppingthesaidSCN.

4.Section129(5)-Ifconfirmed,then
uponpaymentoftaxandpenalty,and
ifdropped,thendirectlyreleaseof
goodsandconveyanceinForm
MOV-05.

5.Section130(1)r/wSection130(4)-
IssuanceofShow-CauseNotice
regardingconfiscationinForm
MOV-10,inrespectofanyofthe
circumstancesnarratedinsub-clauses
(i)to(v)ofSection130(1)

21.Mr.Trivedi,insupportofhissubmissions,hasplacedrelianceon
thefollowingdecisions;

“(1)SectionInCommissionerofSalesTax,DelhiandOthersv.Shri
KrishnaEngg.CompanyandOthers,(2005)2SCC692;

(2)SectionInSanwarmalKejriwalvs.VishwaCooperativeHousing
SocietyLtd.Ors,1990(2)SCC288;

(3)InShriSwaranSinghAnr.v.ShriKasturiLal;(1977)
1SCC750;

(4)SectionInStateOfBiharOthersvsBiharRajya,(2005)9SCC
129;

(5)SectionInIolidaireIndiaLtd.v.FairgrowthFinancialServices
Ltd.andOthers,(2001)3SCC71;

(6)SectionInUnionofIndiaOrs.vs.A.K.Pandey,(2009)10SCC
552;

(7)SectionInSalesTaxOfficersOrs.vs.DuttaTraders,(2007)
14SCC215.;

Page49of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

22.Insuchcircumstances,referredtoabove,Mr.Trivedisubmits
thatthisCourtmayinterpretthetwoprovisionsbearinginmindthe
aforesaidsubmissions.

SubmissionsonbehalfoftheUnionofIndia;

23.Mr.P.Y.Divyeshvar,thelearnedstandingcounselappearingfor
theUnionofIndiainoneofthepetitionshastenderedhiswritten
submissions.Thewrittensubmissionsareasunder;

“THEPOWEROFCONFISCATIONISBEYONDTHEPOWERTO
LEVYGST.THEREFORESECTION130OFCGSTACT,2017IS
ULTRAVIRESPROVISIONSOFTHECONSTITUTIONisnotcorrect
asGSTActbroughtintheConstitutionbywayofTheConstitution
(OneHundredandFirstAmendment)Act,2016.Accordingto
whichtheParliamenthaspowertomakelawswithrespectto
GST.Further,thereisnophysicalcontrolonsuchsupplyofgoods
andservices.Thecontroliseffectedthroughdocuments.For
regulationoftheactivitiesofsupplycertaindocumentshavebeen
prescribed.TheschemeoflevyandcollectionofGSTenvisages
complianceofapplicablelawinteraliathroughthesedocuments.
Theentiremechanismismeanttoensurethatthereisnoleakage
ofrevenuebywayofsupply/movementofgoodsandaredevised
tothwartanyunscrupulousmoveofusingthesamee-waybill
twice.Thesystemisdevisedinsuchawaytoself-sufiiciently
proceedonthebasisofclaimedinformationfurnishedinthe
documents.Anyoffence(inthepresentschemeoftaxation)through
detectionduringinterceptionhastobedealtinaccordancewith
thefactsandcircumstancesoftheindividualcase.Absenceof
physicalcontrolmakesitincumbentuponthetaxpayertostrictly
followtheprescribedprocedure.Itisasettledlegalpositionthat
thelegislaturecanfreelychooseitsobjectsoftaxation,fixtherate
andclassifypersonsandpropertiesandmakemachinery
provisionsforthatpurpose.

Further,CGSTAct,2017isacompletecodeinitselfandaSpecial

Page50of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Act.Havingenvisagedtherelevantsituationsamechanismhas
beendevisedinlawandwherein,dependingupontheconcomitant
factors,penaltiesconfiscationcommensuratewiththeroleand
responsibilityhavebeenprescribed.Theprovisionsrelatingto
mandatoryrequirementofmovementofthegoodsunderthecover
ofvalide-waybillaredulyspecifiedintheRule138oftheCGST
Rules,2107.Noncomplianceofthelegalrequirementsofthelaw
rendersthegoods/vehicleliabletoconfiscationasenumeratedin
thelaw.Therequirementofproperdocumentsistobefulfilled
beforecommencementoftheactoftransportations.Thusit
appearsthatnounconstitutionalityisinvolvedinthemechanismof
provisionsrelatingtoconfiscationofgoodsascontainedinsection
130oftheCGSTAct,2017.

3.THEDEMANDOFTAXANDPENALTYUNDERSECTION129OF
THEGSTACTASACONDITIONTORELEASEOFGOODSIS
ILLEGAL,ARBITRARYANDUNWARRANTED;and(ii)SECTION
129(1)(B)OFGSTACTISVIOLA’I’IVEOFSectionARTICLE14ANDSection19(1)
(G)OFTHECONSTITUTIONOFINDIAisnotcorrectconsideringthe
factthatIntermsofrule129(1)oftheCGSTAct,2017whereany
goodsaretransportedincontraventionoftheprovisionofthe
CGSTAct,2017ortherulesmadethereunderallsuchgoodsand
conveyanceusedasameansoftransportforcarryingthesaid
goodsandconveyanceshallbeliabletoseizureandshallbe
releasedintermsofprovisionscontainedintherule.Theaverment
ofpetitionerthatitisonlyaminorinteractionanddoesnot
warrantactionintermsofsection129oftheCGSTActisnoton
thelinesofthesettledlegalposition.Therequirementof
transportationofgoodsunderthecoverofvalidspecified
documentsistobemandatorilyfollowed.Noncomplianceofthe
sameistobeprocessedasperlaw.Thereisnophysicalcontrolon
suchsupplyofgoodsandservices.Thecontroliseffectedthrough
documents.Forregulationoftheactivitiesofsupplycertain
documentshavebeenprescribed.Theschemeoflevyand
collectionofGSTenvisagescomplianceofapplicablelawinteralia
throughthesedocuments.Theremaybemajororminorviolations
relatingtothedocuments.BoardvideCircularNo.
64/38/2018GSTdated14.09.2018hasclarifiedthesituationsof
minorviolationspertainingtoinvoice/e-waybills/anyother
documentsaccompanyingtheconsignmentwhereproceedings
undersection129oftheCGSTAct,2017maynotbeinitiated.The

Page51of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

lapse/violationinvolvedintheinstantcasedoesnotappearminor
innatureaselaboratedintheBoardcircularNo64/38/2O18-GST
dated14.09.2018.Theentiremechanismismeanttoensurethat
thereisnoleakageofrevenuebywayofsupply/movementof
goods.Itappearsthatintheinstantcasetherewasanattemptto
violatetheprovisionoflaw,whichifundetected,couldhave
resultedindefraudinggovernmentrevenue.0ninterceptionofthe
vehicleandascertainingcommitmentofviolationsbythe
concernedpersons,mandatorypenalprovisionswereinvoked.

Essentially,theprocedureprescribedunderlawhasnotbeen
compliedwithandtheactiontakenthereafterhasbeen
challenged.ItistomentiontheHon’bleSupremeCourtinthe
matterofIndianAlluminiumCompanyLimitedVs.Thane
MunicipalCorporation,(1991)ELT454(SC)hasessentiallyruled
thatnon-observanceofevenaproceduralconditionnottobe
condonediflikelytofacilitatecommissionoffraudandintroduce
administrativeinconveniences.Thelineofdistinctionbetweenthe
bonafidemistakeandunscrupulousacthastobeconstruedinthe
lightofattendingcircumstancesandevaluatedonthebasisof
applicablelaw.Lawinthisregardisveryclearandhasspecific
provisionstodealwithsuchassituation.Theviolationsofthissort
arenotminorbreachesasclaimedbythepetitioner.Therulesare
amechanisminthemselvesandaredevisedtothwartany
unscrupulousmoveofusingthesamee-waybilltwice.Thesystem
isdevisedinsuchawaytoself-sufficientlyproceedonthebasisof
claimedinformationfurnishedinthedocuments.Anyoffence(in
thepresentschemeoftaxation)throughdetectionduring
interceptionhastobedealtinaccordancewiththefactsand
circumstancesoftheindividualcase.Absenceofphysicalcontrol
makesitincumbentuponthetaxpayertostrictlyfollowthe
prescribedprocedure.Itisasettledlegalpositionthatthe
legislaturecanfreelychooseitsobjectsoftaxation,fixtherateand
classifypersonsandpropertiesandmakemachineryprovisions
forthatpurpose.

Thustherequirementsofcomplianceofprocedurearenotaless
importantaspectbutaconditionsinequanonforthepurpose
involved.Thisratioofthecasecitedaboveappearstobe
analogouslyapplicableintheinstantcase.Further,CGSTAct,
2017isacompletecodeinitselfandaSectionSpecialAct.Having
envisagedtherelevantsituationsamechanismhasbeendevised
inlawandwherein,dependingupontheconcomitantfactors,

Page52of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

penaltiescommensuratewiththeroleandresponsibilityhavebeen
prescribed.Theprovisionsrelatingtomandatoryrequirementof
movementofthegoodsunderthecoverofvalide-waybillareduly
specifiedintheRule138oftheCGSTRules,2107.Noncompliance
ofthelegalrequirementsofthelawrendersthegoods/vehicle
liabletopenalactionasenumeratedinthelaw.Therequirementof
properdocumentsistobefulfilledbeforecommencementoftheact
oftransportations.Lawdoesnotprovideanyrelaxationasmaybe
claimedbythepetitioner.Itwasincumbentuponthepetitionerto
ensurethatalltherequirementsaredulymetwith.Hisclaims
appearafterthoughtandtherationaleputforthbyhimisnot
potentenoughtoalterthelegalposition.Theprovisionsregarding
quantumofmandatorypenaltyarelegalandinaccordancewith
thespiritandintentoftheAct.Thusitappearsthatno
unconstitutionalityisinvolvedinthemechanismofprovisions
relatingtoreleaseofgoodsascontainedinsection129ofthe
CGST.

IncaseofR.K.Gar:v.UnionofIndiaandOthersreportedin1981
4SCC675theConstitutionBenchoftheHon’bleSupremeCourt
heldthateverylegislationparticularlyineconomicmattersis
essentiallyempiricanditisbasedonexperimentation.Itwas
furtherheldandobservedasunder:-“7.Nowwhileconsidering
theconstitutionalvalidityofastatutesaidtobeviolativeofSectionArticle
14,itisnecessarytobearinmindcertainwellestablished
principleswhichhavebeenevolvedbythecourtsasrulesof
guidanceindischargeofitsconstitutionalfunctionofjudicial
review.Thefirstruleisthatthereisalwaysapresumptionin
favouroftheconstitutionalityofastatuteandtheburdenisupon
himwhoattacksittoshowthattherehasbeenaclear
transgressionoftheconstitutionalprinciples.Thisruleisbasedon
theassumption,judiciallyrecognisedandaccepted,thatthe
Legislatureunderstandsandcorrectlyappreciatestheneedsofits
ownpeople,itslawsaredirectedtoproblemsmademanifestby
experienceanditsdiscriminationarebasedonadequategrounds.
Thepresumptionofconstitutionalityisindeedsostrongthatin
ordertosustainit,thecourtmaytakeintoconsiderationmattersof
commonknowledge,mattersofcommonreport,thehistoryofthe
timesandmayassumeeverystateoffactswhichcanbe
conceivedexistingatthetimeoflegislation”.
IncaseofSectionGodrejBoyceMfg.CompanyPvt.Limitedvs.

Page53of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

CommissionerofSalesTaxors.reportedin19923SCC624,the
Hon’bleSupremeCourthadupheldarulewhichrestricted
availmentofModvatCredittosixmonthsfromthedateofthe
documentsspecifiedintheproviso.Thecontentionthatsuch
amendmentwouldtakeawayanexistingrightwasrejected.In
caseofSectionStateofGujaratv.RelianceIndustriesLimited,reportedin
(2017)16SCC28itwasheldandobservedthathowmuchtax
creditshouldbegivenandunderwhatcircumstances,isadomain
ofaLegislature.

FurtherinthecaseofRSPLLTD.VersusUnionofIndia{2018)(19)
GSTL430(Guj.)theHon’bleHighCourtofGujaratatAhmedabad
inthecaseofdisputetocertainprovisionsofCGSTActhasinter
aliaheldinpara25oftheorderthat”underthecircumstanceswe
donotfindthatthestatuteinanmannerviolatesSectionArticle14or19
1(g)oftheConstitution”(relevantpartmentionedand
emphasized).}

Furthermore,itistomentionthatpreviouslyalsocertainprovisions
ofGSTlawshavebeenchallenged.InarecentcaseofUnionof
IndiaVersusMohitMineralPvt.Ltd.{2018(17)GSTL(561)}Hon’ble
SupremeCourtwhiledecidingtheissuerelatedtolegislative
competenceofstatetoenactlawrelatingtocompensationtostates
hasinteraliaelaboratelydiscussedtherelevantprovisions
validatingtheenactment.Inviewoftheabovesettledlegal
position,clearviewemergesthatLegislationhastherighttolevy
taxesandpenaltiesunderCGSTAct,2017whichemanatesfrom
constitutionalpowersandnovalidgroundhasbeenmentionedby
thepetitionerholdingtheenactedlawasinvalid.Meregroundof
quantumoffineisnobasisforholdingittobeviolativeofthe
referredarticlesoftheConstitution.Thusitappearsthatno
unconstitutionalityisinvolvedinthemechanismofprovisions
relatingtoreleaseofgoodsascontainedinsection129ofthe
CGSTAct,2017.

Fromtheabove,itisclearthatpenaltyislesswheretheownerof
thegoodscomesforwardandpenaltyishigherwheretheownerof
thegoodsdoesn’tcomeforward.IntheGSTmatrixthesupplieris
thefulcrumforanysupplyandthereforethepenalprovisionsare
lessharshforanyviolationoftheprovisionsofthesaidAct
committedbythesupplier/ownerofthegoods.However,where
thesupplierofthegoodsisnon-traceableorobscure,there

Page54of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

appearstobemorestrongerapprehensionofintentionofevasion
andthereforethepenalprovisionsaremuchmoreonerous.As
statedabove,CGSTAct,2017isacompletecodeinitselfanda
SectionSpecialAct.Havingenvisagedtherelevantsituationsamechanism
hasbeendevisedinlawandwherein,dependinguponthe
concomitantfactors,penaltiesconfiscationcommensuratewith
theroleandresponsibilityhavebeenprescribed.Theprovisions
relatingtomandatoryrequirementofmovementofthegoodsunder
thecoverofvalide-waybillaredulyspecifiedintheRule138of
theCGSTRules,2107.Noncomplianceofthelegalrequirementsof
thelawrendersthegoods/vehicleliabletoconfiscationas
enumeratedinthelaw.Therequirementofproperdocumentsisto
befulfilledbeforecommencementoftheactoftransportations.
Lawdoesnotproviderelaxationasmaybeclaimedbythe
petitioner.Itwasincumbentuponthepetitionertoensurethatall
therequirementsaredulymetwith.Hisclaimsappearafter
thoughtandtherationaleputforthbyhimisnotpotentenoughto
alterthelegalposition.Theprovisionsregardingquantumof
mandatorypenaltyarelegalandinaccordancewiththespiritand
intentoftheAct.

InfactGSTActbroughtintheConstitutionbywayofThe
Constitution(OneHundredandFirstAmendment)Act,2016.
AccordingtowhichtheParliamenthaspowertomakelawswith
respecttoGST.Section164oftheCGSTAct,2017empowersthe
Governmenttomakerules.Further,videNotificationNo.
03/2017-CentralTaxdated19.06.2017(asamended)Central
GovernmenthadnotifiedCentralGoodsandServicesTaxRules,
2017.Furthermore,inChapterXVIoftheCGSTRules,2017
E-WayRuleshavebeennotified.Inviewoftheabove,the
provisions,relatingtomandatoryrequirementofmovementofthe
goodsunderthecoverofvalide-waybillasspecifiedintheRule
138oftheCGSTRules,2107,arelegalandinaccordancewiththe
spiritandintentoftheAct.Thustherequirementsofcomplianceof
procedureisnotalessimportantaspectbutaconditionsinequa
nonforthepurposeinvolved.Thisratioofthecasecitedabove
appearstobeanalogouslyapplicableintheinstantcase.”

DISCUSSION

24.Aswearelookingintotwoimportantprovisionsofanewtax

Page55of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

regime,wemustlookintothesalientfeaturesoftheGST.The
salientfeaturesoftheGSThavebeenveryexhaustivelylooked
intoanddiscussedbytheKeralaHighCourtinthecaseofSheen
GoldenJewels(India)Pvt.Ltd.vs.StateTaxOfficer,reported
in(2019)62GSTR207.

GST-Introduction:

25.Inafederalconstitutionalsetup,coordinationratherthan
subordinationastheguidingspirit,theStatesandtheUnionas
theconstituentshavedemarcatedspheresoflegislationand
governance.WithClearlydelineatedlegislativefields,neithercan
trespassupontheother’slegislativeterritory-theresiduary
powerslyingwiththeUnion,though.Thedivisionofpowersis
zealouslyguardedinnootherspherethanfiscal.Taxationasthe
backboneofawelfarenation,whichIndiais;thelegislativefields
areasdistinct,yetinterconnected,asthespinalsegmentsdo.

26.Thatsaid,101stConstitutionalAmendmentisthe
epoch-makingfederalfeatunparalleledinconstitutional
democracies-almost.Itis,Imaysay,aconstitutionalcoupde
gracedeliveredagainstthefiscalconfusioncompoundedby
conflictingtaxationregimes.Thisamendment,perhaps,marks
thecrestofcooperativefederalism.Ithascreatedevena
constitutionalinstitution-GSTCouncil.

27.Asconstitutionaldemocracieshavegainedexperience,
Utopianvisionofjusticehasgivenwaytoutilitarianview.
Materialcomfortorupliftmenthasbecomethehallmarkofgood
governance.Soeconomicanalysisoflawsubstitutesthenotionof

Page56of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

simplejusticewiththatofeconomicefficiencyandwealth
maximisation.True,nationslikeFrancesuccessfullyembraced
GSTregimesinthe1950s.EvenfederalpolitieslikeCanada
replacedMST(Manufacturer’sSalesTax)withGST(Goodsand
ServicesTax)inthe1980s.Indiajoinedthefiscalreform
bandwagonalittlelate.Tentativeitwastobeginwith,but
determineditisinthisnewfederalfiscalpath.

28.Toputtheconceptinperspective,GSTisasingletaxonthe
supplyofgoodsandservices,rightfromthemanufacturertothe
consumer.Creditsofinputtaxespaidateachstagewillbe
availableinthelaterstageofvalueaddition.Thisprocessmakes
GSTataxonvalueadditionateachstage.Theconsumerwill
thusbearonlytheGSTchargedbythelastdealerinthesupply
chain,withset-offbenefitsatallthepreviousstages.

29.Inotherwords,thefocuswasshiftedfromtaxableeventto
destination-basedtaxation.Itavoidstheevilofcascading
taxationortaxontaxtrouble.Sogoesthemotto:OneNation-One
Market-OneTax.

30.Anascentenactmentinanebulousfieldoftaxationwill
havemanyteethingtroubles.GSTisnoexception.Initspathto
perfection,GSThasmuchdusttosettle-legislativelyand
judicially.Thesearethedaysofconfusionandcacophony:many
views,manyinterpretations,andmanyjurisprudential
mumblings.

GST:TheOrigins:

Page57of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

31.Beforeitsadventasarevolutionaryindirecttaxregime,
GoodsandServicesTax(GST)hadbeenontheparliamentary
anvilformorethanadecade.Itsneedasaharmonisedindirect
tax,encompassingallgoodsandserviceswasdocumentedas
earlyasin2004.ThatyeartheTaskForceonImplementationof
theFiscalResponsibilityandBudgetManagementinitsReport
stressedtheneed.Thefirstofficialannouncementforatransition
toGST,though,wasmadebytheGovernmentofIndiain
2006-07(theBudgetSpeech).TheGovernment’scommitment
stoodreiteratedintheBudgetSpeechof2008-09,too.Butthe
GovernmentofIndiatookthefirststeptowardsthetransitionto
GSTwhenitannouncedcertainpolicychangesinthe2009-10
budget.

32.Thenextmajorlandmarkwasthe”FirstDiscussionPaper
onGoodsandServicesTaxinIndia”releasedbytheEmpowered
CommitteeinNovember2009.Thiswasthefirstofficial
documentpubliclydelineatingthecontoursoftheproposed
reformandnuancesoftheGSTModel.

33.TheFirstDiscussionPaper,infact,explainedtherationale
foraconstitutionalamendmenttointroduceGST.Itnotedthat
whiletheCentreisempoweredtotaxservicesandgoodsupto
theproductionstage,theStateshavethepowertotaxsaleof
goods.TheStatesdonothavethepowerstolevyataxonthe
supplyofserviceswhiletheCentredoesnothavethepowerto
levyataxonthesale.Thus,itsuggestedforaconstitutional
amendmentthatwouldcontainamechanismforaharmonious

Page58of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

structureofGSTthatwouldnotaffectthefederalfabric.

34.Then,withthedeliberationsbetweentheCentreandStates,
aidedbytheEmpoweredCommittee,theconstitutional
amendmentprocesstousherinGSTbegan.Itresultedinthe
“Constitution(OneHundredandFifteenthAmendment)Bill,
2011″Afterthatonegotlapsed,camethe2014AmendmentBill
(aspassedbyParliament).Passedon8September2016,thisBill
became”theConstitution(OneHundredandFirstAmendment)
Act,2016”.

35.TheGSTCouncil,constitutedinSeptember2016,isa
constitutionalinstitutioncomprisingasitsmemberstheFinance
MinistersoftheUnionandtheSMteS3includingUnion
TerritorieswithLegislatures.Ithastheauthority”torecommend
totheUnionandtheStatesonvariousfacetsofGST,including
ModelGSTlaws,principlestodeterminetheplaceofsupply,levy
ofthetax,designofGST,disputesettlement,specialprovisions
foraspecialcategoryofStates,andsoforth.”

36.AdoptingtherecommendationoftheGSTCouncil,
Parliamenthasenactedthesepiecesoflegislation:

(1)TheCentralGoodsandServicesTaxAct,2017:itleviesatax
onintra-Statesuppliesofgoodsandservicesinallsupplies
withinaState

(2)theIntegratedGoodsandGoodsandServicesTaxAct,2017:
itleviesataxoninter-Statesuppliesofgoodsandservices;

(3)theUnionTerritoryGoodsandServicesTaxAct,2017:it
leviesataxonintra-Statesuppliesofgoodsandservice.

Page59of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

37.TarunJain’sGoodsandServicesTax,alreadycopiously
quoted,observesthatintheconstitutionalterms,theGSTis
uniquebecauseoftheseaspectsofitsdesign:(1)Itprovides
fortheconcurrentexerciseoftaxingpowersbytheCentreand
theStatesonthesamesubject-auniqueandunprecedented
measure.(2)BoththeCentreandtheStatesaretoactintandem
basedontheGSTCouncil’srecommendations.

SalientfeaturesoftheGST:

38.ThesalientfeaturesofGSTarethese:

(i)GSTapplieson’supply/ofgoodsorservicesasagainstthe
presentconceptonthemanufactureofgoods,oronthesaleof
goods,orontheprovisionofservices.

(ii)GSTisbasedontheprincipleofdestination-based
consumptiontaxationasagainstthepresentprincipleof
origin-basedtaxation.

(iii)ItisadualGSTwiththeCentreandtheStates
simultaneouslylevyingataxonacommonbase.GSTtobelevied
bytheCentreiscalledCentralGST(CGST)andthattobelevied
bytheStatescalledStateGST(SGST).

(iv)AnIntegratedGST(IGST)isleviedoninter-statesupply
(includingstocktransfers)ofgoodsorservices.Thisshallbe
leviedandcollectedbytheGovernmentofIndia,andsuchtax
shallbeapportionedbetweentheUnionandtheStatesinthe
mannerasmaybeprovidedbyParliamentbyLawonthe
recommendationoftheGSTCouncil.

Page60of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

(v)Importofgoodsorservicesistreatedasinter-statesupplies
andissubjecttoIGST,besidestheapplicablecustomsduties.

(vi)CGST,SGSTIGSTareleviedatratestobemutuallyagreed
uponbytheCentreandtheStates.Therateswouldbenotified
ontherecommendationoftheGSTCouncil.Tobeginwith,the
GSTCouncilhasdecidedthatGSTwouldbeleviedatfourrates
viz.5%,12%,18%and28%.Thescheduleorlistofitemsthat
wouldfallundereachslabhasbeenworkedout.Besidesthese
rates,acesswouldbeimposedon”demerit”goodstoraise
resourcesforcompensatingStatesasStatesmayloserevenue
owingtoimplementingGST.

(vii)GSTwillapplytoallgoodsandservicesexceptAlcoholfor
humanconsumption.

(viii)GSTonfivespecifiedpetroleumproducts(Crude,Petrol,
Diesel,ATFNaturalGas)beapplicablefromadatetobe
recommendedbytheGSTC.

(ix)TobaccoandtobaccoproductswouldbesubjecttoGST.
Besides,theCentrewillhavethepowertolevyCentralExcise
dutyontheseproducts.

(x)AcommonthresholdexemptionwouldapplytobothCGST
andSGST.Taxpayerswithanannualturnovernotexceeding
Rs.20lakh(Rs.10LakhforspecialcategoryStates)wouldbe
exemptedfromGST.Forsmalltaxpayerswithanaggregate
turnoverinafinancialyearupto50lakhs,acompositionscheme
isavailable.Underthescheme,ataxpayershallpaytaxasa
percentageofhisturnoverinaStateduringtheyearwithoutthe
benefitofInputTaxCredit.Thisschemewillbeoptional.

Page61of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

(xi)Thelistofexemptedgoodsandserviceswouldbekepttoa
minimum,anditwouldbeharmonizedfortheCentreandthe
StatesandacrossStatesasfaraspossible.

(xii)Exportswouldbezero-ratedsupplies.Thus,goodsor
servicesthatareexportedwouldnotsufferinputtaxesortaxes
onfinishedproducts.

(xiii)ThecreditofCGSTpaidoninputsmaybeusedonlyfor
payingCGSTontheoutput,andthecreditofSGSTpaidon
inputsmaybeusedonlyforpayingSGST.InputTaxCredit(ITC)
ofCGSTcannotbeusedforpaymentofSGSTandviceversa.In
otherwords,thetwostreamsofInputTaxCredit(ITC)cannotbe
cross-utilised,exceptinspecifiedcircumstancesofinter-state
suppliesforpaymentofIGST.

(xiv)AccountswouldbesettledperiodicallybetweentheCentre
andtheStatestoensurethatthecreditofSGSTusedfor
paymentofIGSTistransferredbytheExportingStatetothe
Centre.Similarly,IGSTusedforpaymentofSGSTwouldbe
transferredbytheCentretotheImportingState.Further,the
SGSTportionofIGSTcollectedonB2Csupplieswouldalsobe
transferredbytheCentretothedestinationState.Thetransferof
fundswouldbecarriedoutbasedoninformationcontainedinthe
returnsfiledbythetaxpayers.

(xv)Thelaws,regulations,andproceduresforlevyandcollection
ofCGSTandSGSTwouldbeharmonizedtotheextentpossible.

39.GSTreplacesthesetaxescurrentlyleviedandcollectedby
theCentre:

(a)CentralExciseDuty,

Page62of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

(b)DutiesofExcise(MedicinalandToiletPreparations),

(c)AdditionalDutiesofExcise(GoodsofSpecialImportance),

(d)AdditionalDutiesofExcise(TextilesandTextileProducts),

(e)AdditionalDutiesofCustoms(commonlyknownasCVD),

(f)SpecialAdditionalDutyofCustoms(SAD),

(g)ServiceTax,

(h)Cessesandsurcharges,insofarastheyrelatetothesupply
ofgoodsandservices.

40.StatetaxesthatgetsubsumedwithintheGSTare:

(a)StateVAT,

(b)CentralSalesTax,

(c)PurchaseTax,

(d)LuxuryTax,

(e)EntryTax(Allforms),

(f)EntertainmentTaxandAmusementTax(exceptthoseleviedby
thelocalbodies),

(g)Taxonadvertisements,

(h)Taxonlotteries,bettingandgambling,

(i)Statecessesandsurchargesinsofarastheyrelatetothe
supplyofgoodsandservices,

41.TohavethewholeGSTsystembackedbyarobustIT
system,ParliamenthassetuptheGoodsandServicesTax
Network(GSTN).Itwillprovidefrontendservicesandwillalso
developbackendITmodulesforStateswhochosethesame.

Page63of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

ConstitutionalAmendmentAct,AnOverview:

42.Asweshallsee,theCAActinserts,repeals,andamends
certainpartsoftheConstitution.InsertedaretheArticles246A,
269A,and279A;repealedistheSectionArticle268A;amendedare
Articles248,249,250,268,269,270,271,286,366,and279A.
BesidesthattheSixthandtheSeventhSchedules,too,havebeen
amended.

43.SectionArticle246A,insertedthroughSection2oftheAmendment
Act,isamarvelofthefederalfiscalmechanism.BythisArticle,
theStateLegislaturesnowhavethepowertomakelaws
regardingGSTtaximposedbytheUnionorbythatStateandto
implementtheminintra-statetrade.TheCentre,ofcourse,
continuestohaveexclusivepowertomakeGSTlawsregarding
inter-statetrade.BoththeUnionandStatesinIndianowhave
simultaneouspowerstomakelawonthegoodsandservices.

44.SectionArticle269A,insertedthroughSection9oftheAct,deals
withlevyandcollectionofgoodsandservicestaxinthecourseof
inter-Statetradeorcommerce.Thatis,incaseofinter-state
trade,theamountcollectedbytheCentreistobeapportioned
betweentheCentreandtheStatesaspertheGSTCouncil’s
recommendations.UndertheGST,iftheCentrecollectsthetax,
itassignsState’ssharetotheStateconcerned;ontheother
hand,iftheStatecollectsthetax,itassignstheCentre’sshareto
theCentre.Thoseproceedswillnotformapartofthe
ConsolidatedFundofIndia,soitavoidshavinganAppropriation

Page64of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

Billpassedeverytimeadepositismade.

45.AndSectionArticle279AprovidesfortheconstitutionofaGST
Council,besidesprescribingitspowersandpositions.Earlier,
SectionArticle268AdealtwiththeservicetaxleviedbyUnionand
collectedandappropriatedbytheUnionandStates.Now,this
Articlestandsrepealed.Astotheamendedconstitutional
provisions,SectionArticle248confersresiduarylegislativepowerson
Parliament.NowthisprovisionissubjecttoSectionArticle246Aofthe
Constitution.SectionArticle249,amendedthroughSection4oftheAct,
nowstandschangedsothatifRajyaSabhaapprovesthe
resolutionwith2/3rdmajority,Parliamentwillhavepowersto
makenecessarylawsregardingGST,inthenationalinterest.So
hasSectionArticle250beenamended;Parliamentwillhavepowersto
makelawsonGSTduringtheemergencyperiod.

46.Atadifferentplanearetheotheramendments.SectionArticle268
hasbeenamendedsothatexcisedutyonmedicinalandtoilet
preparationareomittedfromtheStateListandaresubsumedin
GST.AndSectionArticle269wouldempowertheParliamenttomake
GSTrelatedlawsforinter-statetradeorcommerce.SectionArticle270
nowprovidesforcollectionanddistributionoftaxtobedone
accordingtoSectionArticle246A.Then,underSectionArticle271,GSThasbeen
exemptedfrombeingpartoftheConsolidatedFundofIndia.The
amendedSectionArticle286includesthesupplyofgoodsandservices
underitsambit,ratherthanjustsaleorpurchaseofgoods;
SectionArticle366nowincludesthedefinitionsofGoodsandService
Tax,ServicesandState.Andfinally,SectionArticle279Ahasalsobeen
broughtundertheambitofSectionArticle368.

Page65of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

47.AswiththeSchedules,theSixthSchedulehasbeen
amendedtogivepowertotheDistrictCouncilstolevyandcollect
taxesonentertainmentandamusements.AndtheSeventh
Schedulehasalsobeenamended.IntheUnionList,petroleum
crude,high-speeddiesel,motorspirit(petrol),naturalgas,and
aviationturbinefuel,tobaccoandtobaccoproductshavebeen
removedfromtheambitofGSTandhavebeensubjectedtoUnion
jurisdiction.Newspapersadvertisements,andServiceTaxhave
beenbroughtunderGST(entries84,92,92C).Similarly,inthe
StateList,petroleumcrude,high-speeddiesel,motorspirit
(commonlyknownaspetrol),naturalgas,aviationturbinefuel,
andalcoholicliquorforthehumanconsumptionhavebeen
included,unlessthesaleisinthecourseofinter-Stateor
Internationaltradeandcommerce.EntrytaxandAdvertisement
taxeshavebeenremoved.Taxesonentertainmentareonlytobe
includedtotheextentofthatimposedbylocalbodies.(entries
52,54,55,62).

48.Tobeexplicit,inSectionArticle366oftheConstitution,afterclause
(12),clause(12A)Wasinserted:”goodsandservicestax”means
anytaxonsupplyofgoods,orservicesorbothexcepttaxeson
thesupplyofthealcoholicliquorforhumanconsumption.After
clause(26),clauses(26A)and(26B)wereinserted:”Services”
meansanythingotherthangoods;”Statenwithreferenceto
Articles246A,268,269,269AandSectionArticle279AincludesaUnion
territorywithLegislature.

49.Section18oftheAmendmentActprovidesforcompensation

Page66of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

toStatesforlossofrevenuebecauseoftheintroductionofgoods
andservicestax.Parliamentshall,bylaw,onthe
recommendationoftheGSTCouncil,provideforcompensationto
theStatesforlossofrevenuearisingonaccountof
implementationofthegoodsandservicestaxforfiveyears.

50.TheoverarchingprovisionforourdiscussionisSection19of
theAmendmentAct.Itreadsthus;

“Section19-Transitionalprovisions:

NotwithstandinganythinginthisAct,anyprovisionofanylaw
relatingtotaxongoodsorservicesoronbothinforceinanyState
immediatelybeforethecommencementofthisAct,whichis
inconsistentwiththeprovisionsoftheConstitutionasamendedby
thisActshallcontinuetobeinforceuntilamendedorrepealedby
acompetentLegislatureorothercompetentauthorityoruntil
expirationofoneyearfromsuchcommencement,whicheveris
earlier.”

51.UntiltheConstitutionSufferedits101stAmendment-thatis,
TheConstitution(OneHundredFirstAmendment)Act,2016-
theUnionandtheStateGovernmentshavebeencollecting,asis
relevanthere,theindirecttaxesunderdearlydemarcated
legislativefieldsasshownintheSeventhSchedule.Then,there
were97EntriesinList-I,66inList-II,and47inList-III,notall
thosedealingswiththeLegislature’staxingpowerthough.InList
I,principalamongtheEntriesconcerningtaxesareArticles41,
42,83,84,87to92,92A,92B,92C,97;andinListIIareEntries
26,45,47to61and63.

52.TheCAActhasbroughtdrasticchangesinthefederal
taxingpowersoftheState;ithasintroducedacoupleofArticles,

Page67of177

Downloadedon:TueDec2420:31:29IST2019
C/SCA/4730/2019CAVJUDGMENT

amendedafew,anddoneawaywithafewmore.Ataglancewe
canappreciatethechanges:

AfterImpact

BeforeAmendmentAmendmen

t

246ANotexistingIntroducedSpecialprovisionon

goodsandservicestax

conferring

simultaneous

legislativepowerson

boththeUnionandthe

States.

248ResiduaryAmendedTheUnion'sresiduary

powerlegislativepoweris

subjectedtoSectionArticle

246A.

249PowerofAmendedItgivespowertothe

ParliamenttoParliamenttoenact

legislateanylawapplicableto

regardingastatesonthematters

matterinthementionedevenin

StateListinthestateslist.GST,no

nationalmentionedinStates

interestlist,nowexplicitly

mentioned.

250PowerofAmendedIthasasimilarimpact

Parliamenttoasdoestheamended

legislateSectionArticle249.

regardingany

matterinthe

StateListifa

Proclamationof

Emergencyis

inoperation

268DutiesleviedbyAmendedAdditionalDutiesof

theUnionbutExcise(Medicinaland

collectedandtoiletpreparations)

appropriatedbyStandsubsumedinto

theStatesGST.

Page68of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
268AServicetaxOmittedServicetaxhasbeen

leviedbyUnionsubsumedintoGST.

andCollectedSoEntryNo.92Cof

andList-Itoostands

appropriatedbyomitted.

theUnionand

theStates:

269TaxesleviedAmendedThearrangement

andcollectedunderSectionArticle269is

bytheUnionsubjectedtoArticle

butassignedto269A,anewprovision.

theStates

269ANotexistingInsertedLevyandcollectionof

goodsandservicestax

duringinter-State

tradeorcommerce.
Thepowertolevyand

collectGSTduring

inter-Statetradeor

commerceisvested

withtheGovernment

ofIndia.Thetaxesso

collectedwillbe

apportionedbetween

theUniontheStates

inmannerprescribed.
270TaxesleviedAmendedNowSectionArticle268Aan

anddistributedEntryNo.92CofList-I

betweenthestandomitted;so

Unionandtheservicetaxis

States.subsumedunderGST.

SoinSectionArticle270,a

referencetoSectionArticle

268Ahasbeen

omitted,andanew

referencetoSectionArticle

269AforlevyofGST

forInter-state

transactionshasbeen
Page69of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
introduced.

271SurchargeonAmendedParliament'spowersto

certaindutieslevyanadditional

andtaxesforsurchargeonUnion

purposesofthetaxesunderSectionArticle271

Unionnowstandsamended:

Parliamentcanlevyno

additionalsurcharge

onGST.

279ANotexistingInsertedProvisionforcreating

theGSTCouncil,a

constitutionalbody.

286RestrictionsonAmendedFirst,theword"sales"

theimpositionisreplacedwith

oftaxonthe"supply"andtheword

saleor"goods"isreplaced

purchaseofwith"goodsorservices

goodsorboth".
Statescannotlegislate

onthesupplyofgoods

orservicesifsuch

supplyisoutsidetheir

stateorisinthe

courseofimportor

export.
Originally,Statescould

notlevyandcollecttax

onspecificInter-state

transactions.With

omittingClause(3),

noweveninter-state

transactionsofthat

naturewouldattract

GST.
366.DefinitionInsertedThedefinitionshave

beenaddedtothe

Constitution:(12A)

GoodsandServices
Page70of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
Tax;(26A)Services;

and(26B)State.

368PowerofAmendedAsregardsprovisions

Parliamenttoandlawsregarding

amendtheGSTCouncil,

ConstitutionParliamenthasbeen

andprocedurevestedwiththepower

thereforetoamendthe

Constitution.

SixthProvisionsonAmendedItconcernspowersto

Schetheassessandcollectland

duleAdministrationrevenueandtoimpose

ofTribalAreastaxesintheTribal

intheStatesofAreasofafewStates.

Assam,

Meghalaya,

Tripura,and

Mizoram
8.Powersto

assessand

collectland

revenueandto

imposetaxes.
SeventhSchedule

ListBarringthoseAmendedNowexcisedutyis

I:excluded,theleviedonlyonthe

EntryUnioncouldenumerateditems:

84levyexciseduty

onallother(a)petroleumcrude;

goods,

including(b)high-speeddiesel;

tobacco,

manufactured(c)motorspirit

orproducedin(commonlyknownas

India.Thepetrol);

excludedones

(d)naturalgas;

arethese:

(e)aviationturbine

(a)alcoholic
Page71of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
liquorsforfuel;and

human

consumption;f)tobaccoandtobacco

products"

(b)opium,

Indianhemp,

andother

narcoticdrugs

andnarcotics,

butincluding

medicinaland

toilet

preparations

containing

alcoholorany

substancein

sub-paragraph

(b).
EntryTaxesontheOmittedNow,taxesonthesale

92saleororpurchaseof

purchaseofnewspapersandon

newspapersadvertisements

andonpublishedthereinhave

advertisementsbeensubsumedinto

published.GST.

EntryTaxesonOmittedServicetaxhasalso

92Cservicesbeensubsumedinto

GST.

ListIITaxesontheOmittedPurchasetax,too,has

Entryentryofgoodsbeensubsumedinto

52intoalocalGST.

areafor

consumption,

useorsale

therein.

EntryTaxesontheAmendedNowthetaxesare

54saleorconfinedtothesaleof

purchaseofpetroleumcrude,high

goodsotherspeeddiesel,motor

thanspirit(petrol),natural
Page72of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
newspapers,gas,aviationturbine

subjecttothefuel,andalcoholic

provisionsofliquorforhuman

entry92Aofconsumption.But

ListI.(Entryexcludedisthesalein

92AofListIthecourseof

concerninter-Statetradeor

inter-Statecommerce.

tradeor

commerce.)(Nowthesaleor

purchaseofgoods

standssubsumeby

GST)
EntryTaxesonOmittedTaxeson

55advertisementsadvertisementsother

otherthanthanadvertisements

advertisementsbroadcastbyradioor

publishedintelevisionhasalso

thenewspapersbeensubsumedinto

andGST.

advertisements

broadcastby

radioor

television.

EntryTaxesonAmended(a)TaxesonLuxury

62luxuries,betting,andgambling

includingtaxeshavebeensubsumed

onintoGST.

entertainments,

amusements,(b)RighttolevyTaxon

betting,andentertainmentsand

gambling.amusementshasbeen

restrictedto

Panchayats,

municipalities,

RegionalCouncils,and

DistrictCouncils.
TheStateEnactments:
Page73of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
53.Intheabovebackground,theStateshaveenactedthe

respectiveStateGoodsandServicesTaxActs.Theselaws,among

Otherthings,(i)CarryoutthetransitiontoGST;(ii)providefor

thelevyofGSTonintrastatewithintheState;andalso(iii)

modify/repealtheearlierStateenactmentswhichhavetobe

modified/repealedbecauseoftransitiontoGST.Notableisthe

repealoftheVAT/EntryTax/LuxuryTax,andsoon,which

earlierprovidedforlevyofthesetaxeswithintheStates.

GujaratEnactment
54.TheGujaratGoodsServicesTaxAct,2017(ActNo.25of

2017)receivedtheGovernor'sassentonthe16thDayof

September,2017.Itprovidesfor,asthepreamblesuggests,levy

andcollectionoftaxonIntra-Statesupplyofgoodsorservices,or

bothbytheStateofGujarat.Asitisinparimateriawiththe

CentralGoodsandServicesTaxAct,itneedsnomuch

elaboration.

55.Tosumitup,theGSTisadiscretionbasedtaxon

consumptionofgoodsandservices.Thetaxableeventunderthe

GSTregimeisthesupplyofgoodsorservicesorboth.Section

2(107)oftheCGSTandSGSTActs,whichareidentical,defines

"taxableperson"asapersonwhoisregisteredorliabletobe

registeredunderthesaidstatutes.Section2(108)oftheCGST

andSGSTActs,whichareidentical,defines"taxablesupply"asa

supplyofgoodsorservices,orbothwhichischargeabletogoods

andservicestaxunderthesaidstatutes.

Page74of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
ChapterXIXoftheGST:-

56.ChapterXIXofthestatutescontainingSections122toSection138

dealswiththeoffencesandpenalties.Amongthesaidprovisions,

Sections122toSection128dealwiththeimpositionofpenalties.Section

129dealswithdetention,seizureandreleaseofgoodsand

conveyancesintransit.Sections130andSection131dealwith

confiscationofgoodsorconveyancesandlevyofpenaltyand

Sections132toSection138dealwiththevariousoffencesundertheAct.

Amongthesaidprovisions,Section129dealingwithdetention,

seizureandreleaseofgoodsandconveyancesintransit,reads

thus:

"129.Detention,seizureandreleaseofgoodsand

conveyancesintransit.

(1)NotwithstandinganythingcontainedinthisAct,where

anypersontransportsanygoodsorstoresanygoodswhile

theyareintransitincontraventionoftheprovisionsofthis

Actortherulesmadethereunder,allsuchgoodsand

conveyanceusedasameansoftransportforcarryingthe

saidgoodsanddocumentsrelatingtosuchgoodsand

conveyanceshallbeliabletodetentionorseizureandafter

detentionorseizure,shallbereleased,--

(a)onpaymentoftheapplicabletaxandpenaltyequaltoone

hundredpercent.ofthetaxpayableonsuchgoodsand,in

caseofexemptedgoods,onpaymentofanamountequalto

twopercent.ofthevalueofgoodsortwenty-fivethousand

rupees,whicheverisless,wheretheownerofthegoods

comesforwardforpaymentofsuchtaxandpenalty;

(b)onpaymentoftheapplicabletaxandpenaltyequaltothe

fiftypercent.ofthevalueofthegoodsreducedbythetax

amountpaidthereonand,incaseofexemptedgoods,on

paymentofanamountequaltofivepercent.ofthevalueof

goodsortwenty-fivethousandrupees,whicheverisless,

wheretheownerofthegoodsdoesnotcomeforwardfor
Page75of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
paymentofsuchtaxandpenalty;

(c)uponfurnishingasecurityequivalenttotheamount

payableunderclause(a)orclause(b)insuchformand

mannerasmaybeprescribed:Providedthatnosuchgoods

orconveyanceshallbedetainedorseizedwithoutservingan

orderofdetentionorseizureonthepersontransportingthe

goods.

(2)Theprovisionsofsub-section(6)ofSectionsection67shall,

mutatismutandis,applyfordetentionandseizureofgoods

andconveyances.

(3)Theproperofficerdetainingorseizinggoodsor

conveyancesshallissueanoticespecifyingthetaxand

penaltypayableandthereafter,passanorderforpaymentof

taxandpenaltyunderclause(a)orclause(b)orclause(c).

(4)Notax,interestorpenaltyshallbedeterminedunder

sub-section(3)withoutgivingthepersonconcernedan

opportunityofbeingheard.

(5)Onpaymentofamountreferredinsub-section(1),all

proceedingsinrespectofthenoticespecifiedinsub-section

(3)shallbedeemedtobeconcluded.

(6)Wherethepersontransportinganygoodsortheownerof

thegoodsfailstopaytheamountoftaxandpenaltyas

providedinsub-section(1)withinsevendaysofsuch

detentionorseizure,furtherproceedingsshallbeinitiatedin

accordancewiththeprovisionsofSectionsection130:

Providedthatwherethedetainedorseizedgoodsare

perishableorhazardousinnatureorarelikelytodepreciate

invaluewithpassageoftime,thesaidperiodofsevendays

maybereducedbytheproperofficer."

57.Section130ofthestatute,dealingwiththeconfiscationof

goodsorconveyances,readsthus:

"130.(1)NotwithstandinganythingcontainedinthisAct,if

anyperson--
(i)suppliesorreceivesanygoodsincontraventionofanyof

theprovisionsofthisActortherulesmadethereunderwith

intenttoevadepaymentoftax;or(ii)doesnotaccountfor
Page76of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
anygoodsonwhichheisliabletopaytaxunderthisAct;or

(iii)suppliesanygoodsliabletotaxunderthisActwithout

havingappliedforregistration;or

(iv)contravenesanyoftheprovisionsofthisActortherules

madethereunderwithintenttoevadepaymentoftax;or

(v)usesanyconveyanceasameansoftransportforcarriage

ofgoodsincontraventionoftheprovisionsofthisActorthe

rulesmadethereunderunlesstheowneroftheconveyance

provesthatitwassousedwithouttheknowledgeor

connivanceoftheownerhimself,hisagent,ifany,andthe

personinchargeoftheconveyance,then,allsuchgoodsor

conveyancesshallbeliabletoconfiscationandtheperson

shallbeliabletopenaltyunderSectionsection122.

(2)Wheneverconfiscationofanygoodsorconveyanceis

authorisedbythisAct,theofficeradjudgingitshallgiveto

theownerofthegoodsanoptiontopayinlieuof

confiscation,suchfineasthesaidofficerthinksfit:

Providedthatsuchfineleviableshallnotexceedthemarket

valueofthegoodsconfiscated,lessthetaxchargeable

thereon:

Providedfurtherthattheaggregateofsuchfineandpenalty

leviableshallnotbelessthantheamountofpenaltyleviable

undersub-section(1)ofSectionsection129:

Providedalsothatwhereanysuchconveyanceisusedfor

thecarriageofthegoodsorpassengersforhire,theownerof

theconveyanceshallbegivenanoptiontopayinlieuofthe

confiscationoftheconveyanceafineequaltothetaxpayable

onthegoodsbeingtransportedthereon.

(3)Whereanyfineinlieuofconfiscationofgoodsor

conveyanceisimposedundersub-section(2),theownerof

suchgoodsorconveyanceorthepersonreferredtoin

sub-section

(1),shall,inaddition,beliabletoanytax,penaltyand

chargespayableinrespectofsuchgoodsorconveyance.

(4)Noorderforconfiscationofgoodsorconveyanceorfor

impositionofpenaltyshallbeissuedwithoutgivingthe

personanopportunityofbeingheard.

(5)Whereanygoodsorconveyanceareconfiscatedunder
Page77of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
thisAct,thetitleofsuchgoodsorconveyanceshallthereupon

vestintheGovernment.

(6)Theproperofficeradjudgingconfiscationshalltakeand

holdpossessionofthethingsconfiscatedandeveryofficerof

Police,ontherequisitionofsuchproperofficer,shallassist

himintakingandholdingsuchpossession.

(7)Theproperofficermay,aftersatisfyinghimselfthatthe

confiscatedgoodsorconveyancearenotrequiredinany

otherproceedingsunderthisActandaftergivingreasonable

timenotexceedingthreemonthstopayfineinlieuof

confiscation,disposeofsuchgoodsorconveyanceand

depositthesaleproceedsthereofwiththeGovernment."

58.Wetakenoticeofthefactthatboththesections,i.e.,

Sections129andSection130respectivelyoftheActstartwitha

non-obstanteclause.Thefirstquestionweneedtoconsideris

whetherboththesectionsareindependentofeachotherorthey

canbeusedinterchangeablyatthediscretionoftheauthorities.

Inotherwords,isSection130oftheAct,whichprovidesfor

confiscationofgoodsorconveyancesandlevyofpenalty,subject

toSection129oftheAct.Asnotedabove,thetwoprovisions

underthesameenactmenthaveanon-obstanteclause"not

withstandinganythingcontainedinthisAct."

59.Asregardthenon-obstanteclause,thisCourt

deemsitfittoconsiderfewdecisions:

60.SectionInStateofWestBengalv.UnionofIndia,AIR1963SC

1241,itisobservedasunder;

"TheCourtmustascertaintheintentionofthe

legislaturebydirectingitsattentionnotmerelytothe

clausestobeconstruedbuttotheentirestatute;itmust
Page78of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
comparetheclausewiththeotherpartsofthelawand

thesettinginwhichtheclausetobeinterpretedoccurs."

61.SectionInUnionofIndiav.MajI.C.Lala,AIR1973

SC2204,theSupremeCourtheldthatthenonobstanteclause

doesnotmeanthatthewholeofthesaidprovisionoflaw

hastobemadeapplicableorthewholeoftheotherlaw

hastobemadeinapplicable.ItisthedutyoftheCourttoavoid

theconflictandconstruetheprovisionstothattheyare

harmonious.

62.SectionInUnionofIndiav.G.M.Kokil,AIR1984SC

1022,theSupremeCourt,atParagraph10,heldasfollows:

"Itiswell-knownthatanon-obstanteclauseis

alegislativedevicewhichisusuallyemployedtogive

overridingeffecttocertainprovisionoversomecontrary

provisionthatmaybefoundeitherinthesame

enactmentorsomeotherenactment,thatisto

say,toavoidtheoperationandeffectofallcontrary

provisions."

63.SectionInChandavarkarSitaRatnaRaov.AshalataS.Guram,

[1986]4SCC447,atParagraph67,theSupremeCourtheldas

follows:

"67.Aclausebeginningwiththeexpression

"notwithstandinganythingcontainedinthisActorin

someparticularprovisionintheActorinsomeparticular

Actorinanylawforthetimebeinginforce,orinany

contract"ismoreoftenthannotappendedtoasectionin

thebeginningwithaviewtogivetheenactingpartofthe

sectionincaseofconflictanoverridingeffectover

theprovisionoftheActorthecontractmentioned

inthenonobstanteclause.Itisequivalentto

sayingthatinspiteoftheprovisionoftheAct
Page79of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
oranyotherActmentionedinthenonobstante

clauseoranycontractordocumentmentionedthe

enactmentfollowingitwillhaveitsfulloperationorthatthe

provisionsembracedinthenonobstanteclausewouldnot

beanimpedimentforanoperationofthe

enactment.Seeinthisconnectiontheobservations

ofthisCourtinTheSouthIndiaCorporation(P.)

SectionLtd.,v.TheSecretary,BoardofRevenue,Trivandrum

Anr.,AIR1964SC207at215[1964]4SCR280."

64.SectionInVishinN.Kanchandaniv.VidyaLachmandas

Khanchandani,AIR2000SC2747,atParagraph11,the

SupremeCourtheldthat,
"ThereisnodoubtthatbynonobstanteclausetheLegislature

devicesmeanswhichareusuallyappliedtogiveoverriding

effecttocertainprovisionsoversomecontraryprovisions

thatmaybefoundeitherinthesameenactmentor

someotherstatute.Inotherwordssuchaclauseis

usedtoavoidtheoperationandeffectofall

contraryprovisions.Thephraseisequivalenttoshowingthat

theActshallbenoimpedimenttomeasureintended.To

attracttheapplicabilityofthephrase,thewholeofthe

section,theschemeoftheActandtheobjectsandreasons

forwhichsuchanenactmentismadehastobekeptin

mind."

65.SectionInICICIBankLtd.v.SIDCOLeathersLtd.,[2006]67SCL

383(SC),theSupremeCourt,atParagraphs34,36and37,held

asfollows:

"34.Section529AoftheCompaniesActnodoubtcontainsa

nonobstanteclausebutinconstruingtheprovisionsthereof,

itisnecessarytodeterminethepurportandobjectforwhich

thesamewasenacted....

36.Thenonobstantenatureofaprovisionalthoughmaybeof

wideamplitude,theinterpretativeprocessthereofmustbe

keptconfinedtothelegislativepolicy....

Page80of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
37.Anonobstanteclausemustbegiveneffectto,tothe

extenttheParliamentintendedandnotbeyondthesame."

66.TheSupremeCourt,inthecaseofSectionCentralBankofIndia

v.StateofKerala,[2009]4SCC94,heldasfollows;

"103.Anon-obstanteclauseisgenerallyincorporatedina

statutetogiveoverridingeffecttoaparticularsectionorthe

statuteasawhole.Whileinterpretingnon-obstanteclause,

theCourtisrequiredtofindouttheextenttowhichthe

legislatureintendedtodosoandthecontextin

whichthenon-obstanteclauseisused.Thisrule

ofinterpretationhasbeenappliedinseveraldecisions."

67.SectionInStateBankofWestBengalv.UnionofIndia,[(1964)1

SCR371],itwasobservedthat:

"68...theCourtmustascertaintheintentionofthe

legislaturebydirectingitsattentionnotmerelytothe

clausestobeconstruedbuttotheentirestatute;itmust

comparetheclausewiththeotherpartsofthelawandthe

settinginwhichtheclausetobeinterpretedoccurs."

68.SectionInMadhavRaoJivajiRaoScindiav.Unionof

Indiaandanother[(1971)1SCC85],Hidayatullah,C.J.

observedthat-

"..thenonobstanteclauseisnodoubtavery

potentclauseintendedtoexcludeeveryconsideration

arisingfromotherprovisionsofthesamestatuteor

otherstatutebut"forthatreasonalonewemust

determinethescope"ofthatprovisionstrictly.

Whenthesectioncontainingthesaidclausedoes

notrefertoanyparticularprovisionswhichitintendsto

overridebutreferstotheprovisionsofthestatute

generally,itisnotpermissibletoholdthatitexcludes

thewholeActandstandsallalonebyitself.Asearchhas,

therefore,tobemadewithaviewtodeterminingwhich

provisionanswersthedescriptionandwhichdoesnot."

Page81of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
69.SectionInR.S.Raghunathv.StateofKarnatakaandanother,

[(1992)1SCC335],athreeJudgeBenchreferredtotheearlier

judgmentsinSectionAswiniKumarGhosev.ArabindaBose[AIR1952

SC369],SectionDominionofIndiav.ShrinbaiA.Irani[AIR1954SC

596],SectionUnionofIndiav.G.MKokil[1984(Supp.)SCC196],

SectionChandravarkarSitaRatnaRaov.AshalataS.Guram[(1986)

4SCC447]andobserved:

"...Thenonobstanteclauseisappendedtoaprovisionwitha

viewtogivetheenactingpartoftheprovisionanoverriding

effectincaseofaconflict.Butthenonobstante

clauseneednotnecessarilyandalwaysbecoextensive

withtheoperativepartsoastohavetheeffectof

cuttingdownthecleartermsofanenactmentandif

thewordsoftheenactmentareclearandarecapableofa

clearinterpretationonaplainandgrammatical

constructionofthewordsthenonobstanteclause

cannotcutdowntheconstructionandrestrictthescopeof

itsoperation.Insuchcasesthenonobstanteclausehastobe

readasclarifyingthewholepositionandmustbe

understoodtohavebeenincorporatedinthe

enactmentbythelegislaturebywayofabundant

cautionandnotbywayoflimitingtheambitand

scopeoftheSpecialRules."

70.SectionInA.G.Varadarajuluv.StateofTamilNadu

[(1998)4SCC231],theSupremeCourtreliedonAswini

KumarGhose'scase.TheCourtwhileinterpretingthenon-

obstanteclausecontainedinSection21AofTamilNaduLand

Reforms(FixationofCeilingonSectionLand)Act,1961held:

"Itiswellsettledthatwhiledealingwithanonobstante

clauseunderwhichthelegislaturewantstogiveoverriding

effecttoasection,thecourtmusttrytofindouttheextentto

whichthelegislaturehadintendedtogiveoneprovision
Page82of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
overridingeffectoveranotherprovision.Suchintentionofthe

legislatureinthisbehalfistobegatheredfromtheenacting

partofthesection.SectionInAswiniKumarGhosev.Arabinda

Bose[AIR1952SC369],PatanjaliSastri,J.observed:

"Theenactingpartofastatutemust,whereitisclear,be

takentocontrolthenonobstanteclausewhereboth

cannotbereadharmoniously;"

71.Anon-obstanteclauseisgenerallyappendedtoasection

withaviewtogivetheenactingpartofthesection,in

caseofconflict,anoverridingeffectovertheprovisioninthe

sameorotherActmentionedinthenonobstanteclause.Itis

equivalenttosayingthatinspiteoftheprovisionsorAct

mentionedinthenonobstanteclause,theprovisionfollowingit

willhaveitsfulloperationortheprovisionsembracedinthenon-

obstanteclausewillnotbeanimpedimentfortheoperationof

theenactmentortheprovisioninwhichthenonobstante

clauseoccurs.[See:'PrinciplesofStatutoryInterpretation',9th

EditionbyJusticeG.P.SinghChapterV,SynopsisIVatpages

318319]
72.Whentwoormorelawsorprovisionsoperateinthesame

fieldandeachcontainsanon-obstanteclausestatingthatits

provisionwilloverridethoseofanyotherprovisionsorlaw,

stimulatingandintricateproblemsofinterpretationarise.In

resolvingsuchproblemsofinterpretation,nosettled

principlescanbeappliedexcepttorefertotheobjectand

purposeofeachofthetwoprovisions,containinga

nonobstanteclause.TwoprovisionsinsameActeach
Page83of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
containinganonobstanteclause,requiresaharmonious

interpretationofthetwoseeminglyconflictingprovisions

inthesameAct.Inthisdifficultexercise,thereare

involvedproperconsiderationofgivingeffecttotheobjectand

purposeoftwoprovisionsandthelanguageemployed

ineach.[See:forrelevantdiscussioninpara20inShriSwaran

SinghAnr.v.ShriKasturiLal;(1977)1SCC750]
73.NormallytheuseofthephrasebytheLegislatureina

statutoryprovisionlike'notwithstandinganythingtothecontrary

containedinthisAct'isequivalenttosayingthattheActshallbe

noimpedimenttothemeasure[See:LawLexiconwords

'notwithstandinganythinginthisActtothecontrary'].Useof

suchexpressionisanotherwayofsayingthattheprovisionin

whichthenonobstanteclauseoccursusuallywouldprevailover

theotherprovisionsintheAct.Thus,thenonobstanteclauses

arenotalwaystoberegardedasrepealingclausesnor

asclauseswhichexpresslyorcompletelysupersedeanyother

provisionofthelaw,butmerelyasclauseswhichremoveall

obstructionswhichmightariseoutoftheprovisionsofany

otherlawinthewayoftheoperationoftheprinciple

enactingprovisiontowhichthenonobstanteclauseis

attached.[See:SectionBipathummaOrs.v.MariamBibi;1966(1)

MysoreLawJournalpage162,atpage165]
Constructionoftheprovisionsofataxingstatute:_
74.Aswearelookingintotheprovisionsofataxingstatute,the
Page84of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
constructionoftheprovisionsmustbestrictandinfavourofthe

enforcementoftheprovision.Intheaforesaidcontext,wemay

refertoandrelyuponadecisionoftheSupremeCourtinthe

caseofSectionCommissionerofSalesTax,DelhiAnr.vs.Shri

KrishnaEngg.Co.Ors.,(2005)2SCC692.Wequotethe

relevantparas;

"21.TheundisputedobjectiveoftheActistolevyandcollect

taxonthesaleofgoodsintheNationalCapitalTerritoryof

Delhi.Levytotaxismeaninglessifthetaxisnotcollected.It

canneverbetheintentionofthelawmakerstokeepon

levyingtaxwithoutanyefforttocollectthetaxsolevied.This

CourtinSectionIndoInternationalIndustriesvs.Commissionerof

SalesTax,UttarPradesh[1981]47STC359heldthat

"Itiswellsettledthatininterpretingitemsinstatuteslikethe

ExciseTaxActsorSectionSalesTaxActs,whoseprimarystipulated

objectistoraiserevenue."

Needlesstostressthattheobjectofeverytaxingstatuteisto

raiserevenue.

22.SectionInTheStateofTamilNaduvs.M.K.Kandaswamiand

Others,[1975]36STC191,thisCourtheldthatwherethe

objectofaprovisionistoplugleakageandpreventevasionof

tax.Ininterpretingsuchprovision,aconstructionwhich

woulddefeatitspurposeand,ineffect,obliterateitfromthe

statutebookshouldbeeschewed.Ifmorethanone

constructionispossible,thatwhichpreservesitsworkability

andefficacyistobepreferredtotheonewhichwouldrender

itotioseorsterile.

23.FurtheraDivisionBenchoftheKarnatakaHighCourtin

SectionN.V.Bagivs.CommissionerofCommercialTaxesin

Karnataka,[1991]83STC449hasheld

"inmatterswhichdealwithprovisionstopreventevasionof

taxwhichisduetotheStatetheconstructionoftheprovision

mustbestrictandinfavouroftheenforcementofthe

provision".

34.TheschemeoftheActisthateitherST-1Formshould

beavailableortaxshouldbecollected.Ifadealershows
Page85of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
suchindulgenceastodeliveryofST-1Formsforaparticular

period,hetakestherisk.Itwouldhavebeenfurtherthebest

advisedtoinsistontheirsupplyevenforthetransaction

intendedtobecompletedbythem.

35.ThisCourtinSectionA.V.Fernandezvs.TheStateofKerala,

AIR1957SC657opinedthat,howevergreatthehardship

mayappeartothejudicialmind,

"Inconstruingfiscalstatutesandindeterminingtheliability

ofasubjecttotaxonemusthaveregardtothestrictletterof

thelawandnotmerelytothespiritofthestatuteorthe

substancesofthelaw.IftherevenuesatisfiestheCourtthat

thecasefallsstrictlywithinthelaw,thesubjectcanbe

Taxed."

AfewyearslateranotherConstitutionBenchinthecaseof

SectionCommissionerofSalesTax,U.P.vs.ModiSugarMillsLtd.,

AIR1961SC1047observedthus

"Ininterpretingataxingstatute,equitableconsiderationare

entirelyoutofplace.Norcantaxingstatutesbeinterpretedon

anypresumptionsorassumptions.Thecourtmustlook

squarelyatthewordsofthestatuteandinterpretthem.It

mustinterpretataxingstatuteinthelightofwhichisclearly

expressed;itcannotimplyanythingwhichisnotexpressedit

cannotimportprovisionsinthestatutesoastosupplyany

assumeddeficiency."

75.SectionInRBIv.PeerlessGeneralFinanceandInvestmentCo.

Ltd.,[(1987)1SCC424],itwasobserved,"thatinterpretationis

bestwhichmakesthetextualinterpretationmatchthe

contextual."SpeakingfortheCourt,ChinappaReddy,J.noted

theimportanceofruleofcontextualinterpretationandheld:-

"Interpretationmustdependonthetextandthecontext.They

arethebasesofinterpretation.Onemaywellsayifthetext

isthetexture,contextiswhatgivesthecolour.Neithercanbe

ignored.Bothareimportant.Thatinterpretationisbestwhich

makesthetextualinterpretationmatchthecontextual.A

statuteisbestinterpretedwhenweknowwhyitwas

enacted.Withthisknowledge,thestatutemustberead,first
Page86of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
asawholeandthensectionbysection,clausebyclause,

phrasebyphraseandwordbyword.Ifastatuteislooked

at,inthecontextofitsenactment,withtheglassesofthe

statute-maker,providedbysuchcontext,itsscheme,the

sections,clauses,phrasesandwordsmaytakecolourand

appeardifferentthanwhenthestatuteislookedatwithout

theglassesprovidedbythecontext.Withtheseglasseswe

mustlookattheActasawholeanddiscoverwhateach

section,eachclause,eachphraseandeachwordismeant

anddesignedtosayastofitintotheschemeoftheentire

Act.Nopartofastatuteandnowordofastatutecanbe

construedinisolation.Statuteshavetobeconstruedsothat

everywordhasaplaceandeverythingisinitsplace.Itisby

lookingatthedefinitionasawholeinthesettingoftheentire

Actandbyreferencetowhatprecededtheenactmentand

thereasonsforitthattheCourtconstruedtheexpression

`prizechit'inSrinivasa[(1980)4SCC507]andwefindno

reasontodepartfromtheCourt'sconstruction."

76.InR.V.NationalAsylumSupportServices[(2002)4All

ER654],LORDSTEYNobserved"thestartingpointisthat

languageinalllegaltextsconveysmeaningaccordingtothe

circumstancesinwhichitwasused.Itfollowsthatcontextmust

alwaysbeidentifiedandconsideredbeforetheprocessof

constructionorduringit.Itis,therefore,wrongtosaythatthe

courtmayonlyresorttotheevidenceofcontextualscenewhen

anambiguityhasarisen."

77.SectionInV.L.S.FinanceLtd.,v.UnionofIndia,reportedin2013

(6)SCC278,atParagraph18,theHon'bleSupremeCourt,held

asfollows:

"Asiswellsettled,whileinterpretingtheprovisionsofa

statute,thecourtavoidsrejectionoradditionofwordsand

resorttothatonlyinexceptionalcircumstancestoachievethe

purposeofActorgivepurposefulmeaning.Itisalsoa
Page87of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
cardinalruleofinterpretationthatwords,phrasesand

sentencesaretobegiventheirnatural,plainandclear

meaning.Whenthelanguageisclearandunambiguous,it

mustbeinterpretedinanordinarysenseandnoadditionor

alterationofthewordsorexpressionsusedispermissible.As

observedearlier,theaforesaidenactmentwasbroughtin

viewoftheneedofleniencyintheadministrationoftheAct

becausealargenumberofdefaultsareoftechnicalnature

andmanydefaultsoccurredbecauseofthecomplexnatureof

theprovision."

78.SectionInHardeepSinghv.StateofPunjab,reportedin2014(3)

SCC92,atParagraphs43and44,theHon'bleSupremeCourt

heldasfollows:

"43.Thecourtcannotproceedwithanassumptionthatthe

legislatureenactingthestatutehascommittedamistakeand

wherethelanguageofthestatuteisplainandunambiguous,

thecourtcannotgobehindthelanguageofthestatutesoas

toaddorsubtractawordplayingtheroleofapolitical

reformerorofawisecounseltothelegislature.Thecourthas

toproceedonthefootingthatthelegislatureintendedwhatit

hassaidandevenifthereissomedefectinthephraseology

etc.,itisforothersthanthecourttorectifythatdefect.The

statuterequirestobeinterpretedwithoutdoinganyviolence

tothelanguageusedtherein.Thecourtcannotre-write,

recastorreframethelegislationforthereasonthatithasno

powertolegislate.

44.Nowordinastatutehastobeconstruedassurplusage.

Nowordcanberenderedineffectiveorpurposeless.Courts

arerequiredtocarryoutthelegislativeintentfullyand

completely.Whileconstruingaprovision,fulleffectistobe

giventothelanguageusedtherein,givingreferencetothe

contextandotherprovisionsoftheStatute.Byconstruction,a

provisionshouldnotbereducedtoadeadletteroruseless

lumber.Aninterpretationwhichrendersaprovisionanotiose

shouldbeavoidedotherwiseitwouldmeanthatinenacting

suchaprovision,thelegislaturewasinvolvedinanexercise

infutilityandtheproductcameasapurposelesspieceof
Page88of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
legislationandthattheprovisionhadbeenenactedwithout

anypurposeandtheentireexercisetoenactsuchaprovision

wasmostunwarrantedbesidesbeinguncharitable.(Vide:

PatelChunibhaiDajibhaetc.v.NarayanraoKhanderao

JambekarAnr.,AIR1965SC1457;SectionTheMartinBurnLtd.,

v.TheCorporationofCalcutta,AIR1966SC529;

SectionM.V.ElisabethOrs.,v.HarwanInvestmentTradingPvt.

Ltd.,HanoekarHouse,Swatontapeth,VAsco-de-Gama,Goa,

AIR1993SC101;SectionSultanaBegumv.PremChandJain,AIR

1997SC1006;StateofBiharOrs.etc.v.BiharDistillery

Ltd.etc.etc.,AIR1997SC1511;SectionInstituteofChartered

AccountantsofIndiav.M/s.PriceWaterhosueAnr.,AIR

1998SC74;andSectionTheSouthCentralRailwayEmployees

Co-operativeCreditSocietyEmployeesUnion,Secundrabad

v.TheRegistrarofCo-operativeSocieties,AIR1998SC703)."

79.AtParagraph45,theHon'bleSupremeCourtconsideredthe

decisionmadeinSectionRohitashKumarv.OmPrakashSharma

reportedin2013(11)SCC451,wherein,theHon'bleSupreme

Court,atParagraphs27to29,heldasfollows:

"27.TheCourthastokeepinmindthefactthat,while

interpretingtheprovisionsofaStatute,itcanneitheradd,

norsubtractevenasinglewordAsectionistobeinterpreted

byreadingallofitspartstogether,anditisnotpermissible,

toomitanypartthereof.TheCourtcannotproceedwiththe

assumptionthatthelegislature,whileenactingtheStatute

hascommittedamistake;itmustproceedonthefootingthat

thelegislatureintendedwhatithassaid;evenifthereis

somedefectinthephraseologyusedbyitinframingthe

statute,anditisnotopentothecourttoaddandamend,or

byconstruction,makeupforthedeficiencies,whichhave

beenleftintheAct

28.TheStatuteisnottobeconstruedinlightofcertain

notionsthatthelegislaturemighthavehadinmind,orwhat

thelegislatureisexpectedtohavesaid,orwhatthe

legislaturemighthavedone,orwhatthedutyofthe

legislaturetohavesaidordonewas.TheCourtshaveto

administerthelawastheyfindit,anditisnotpermissible
Page89of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
fortheCourttotwisttheclearlanguageoftheenactment,in

ordertoavoidanyreal,orimaginaryhardshipwhichsuch

literalinterpretationmaycause.....

29.Underthegarbofinterpretingtheprovision,theCourt

doesnothavethepowertoaddorsubtractevenasingle

word,asitwouldnotamounttointerpretation,but

legislation."

80.Intheaforesaidcontext,weshouldalsoremindourselvesof

thefinedistinctionexplainedbytheSupremeCourtinthecaseof

SectionAssociatedCementCo.Ltd.vs.CommercialTaxOfficer,

KotaOrs.,reportedinAIR1981SC1887asregardsthe

chargingprovisionsofataxingstatuteandthemachinery

provisionswhichprovidethemachineryforthequantificationof

thetaxandthelevyingandcollectionofthetaxsoimposed.We

quotetherelevantobservations;

"Itissettledlawthatadistinctionhastobemadebycourt

whileinterpretingtheprovisionsofataxingstatutebetween

chargingprovisionswhichimposethechargetotaxand

machineryprovisionswhichprovidethemachineryforthe

quantificationofthetaxandthelevyingandcollectionofthe

taxsoimposed.Whilechargingprovisionsareconstrued

strictly,machinerysectionsarenotgenerallysubjecttoa

rigorousconstruction.Thecourtsareexpectedtoconstrue

themachinerysectionsinsuchamannerthatachargetotax

isnotdefeated.Theaboveruleofconstructionofataxing

statutehasbeenadoptedbythisCourtinSectionIndiaUnitedMills

Ltd.v.CommissionerofExcessProfitsTax,Bombayinwhich

section15oftheExcessProfitsTaxActcameupfor

consideration.TheCourtobservedinthatcasethus:

"Thatsectionis,itshouldbeemphasised,notacharging

section,butamachinerysection.Andamachinerysection

shouldbesoconstruedastoeffectuatethechargingsection."
TheaboveprinciplewasfollowedbythisCourtinSectionGursahai

Saigalv.CommissionerofIncome-tax,Punjabinwhichis
Page90of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
wasobservedthus:

"Nowitiswellrecognisedthattheruleofconstructionon

whichtheassesseereliesappliesonlytoataxingprovision

andhasnoapplicationtoallprovisionsinataxingstatute.It

doesnot,forexample,applytoaprovisionnotcreatinga

chargeforthetaxbutlayingdownthemachineryforits

calculationorprocedureforitscollection.Theprovisionsina

taxingstatutedealingwithmachineryforassessmenthaveto

beconstruedbytheordinaryrulesofconstruction,thatisto

say,inaccordancewiththeclearintentionofthelegislature

whichistomakeachargeleviedeffective."

IndecidingGursahaiSaigal'scase(supra)theCourtfollowed

theobservationsmadebythePrivyCouncilinSectionCommissioner

ofIncome-taxv.MahaliramRamjidasandbytheHouseof

LordsinWhitneyv.CommissionersafInlandRevenue.Inthe

caseofMahaliramRamjidas(supra)thePrivyCouncil

observed:

"Thesection,althoughitisapartofataxingAct,imposesno

chargeonthesubject,anddealsmerelywiththemachinery

ofassessment.Ininterpretingprovisionsofthiskindtherule

isthatconstructionshouldbepreferredwhichmakesthe

machineryworkableutresvaleatpotiusquamPereat."

InWhitney'scase(supra),LordDunedinmadethefollowing

observations:

"MyLords,Ishallnowpermitmyselfageneralobservation.

Oncethatitisfixedthatthereisliability,itisantecedently

highlyimprobablethatthestatuteshouldnotgoontomake

thatliabilityeffective.Astatuteisdesignedtobeworkable,

andtheinterpretationthereofbyaCourtshouldbetosecure

thatobject,unlesscrucialomissionorcleardirectionmakes

thatendunattainable.Now,therearethreestagesinthe

impositionofatax:thereisthedeclarationofliability,thatis

thepartofthestatutewhichdetermineswhatpersonsin

respectofwhatpropertyareliable.Next,thereisthe

assessment.Liabilitydoesnotdependonassessment.That,

exhypothesi,hasalreadybeenfixed.Butassessment

particularizestheexactsumwhichapersonliablehastopay.

Lastly,comethemethodsofrecovery,ifthepersontaxed

doesnotvoluntarilypay,"

Page91of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
Sections129andSection130oftheAct:-

81.TheplainreadingofSection129oftheActwouldindicate

thatthesametalksaboutdetention,seizureandreleaseofgoods

andconveyancesintransit.Ontheotherhand,Section130

talksaboutconfiscationofgoodsorconveyancesandlevyoftax,

penaltyandfinethereon.Boththesections,therefore,shouldbe

interpretedharmoniouslykeepinginmindtheobjectand

purposebehindtheenactmentthereof.Forthepurposeof

invokingSection129oftheAct,allthatisrequiredis

"contraventionoftheprovisionsoftheActortheRules",whereas

specificcircumstancesaresetoutinsub-section(1)ofSection

130forinvokingtheprovisionsrelatingtoconfiscationwhichare

basicallyrelatedto"intenttoevadepaymentoftax".Thus,weare

clearaboutonethinginourmindthatboththesesectionsare

independentofeachother.

82.Section130oftheActprovidesforspecificsituationsor

causesleadingtotheconfiscationofgoods/conveyances.There

arefiveprecisecausesforconfiscationofgoodsand/or

conveyancesspecifiedinthissectionandtheyare:

ActionConsequence

SupplyorreceivegoodsinResultinginactualevasionof

contraventionoftheActor

tax

rulesmadethereunder

NotaccountingforgoodsCarryingaliabilityto

paymentoftax

SupplyofgoodsliabletotaxWithoutapplyingregistration

ContraventionoftheWithintenttoevadepayment
Page92of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
provisionsofActorrulesoftax

madethereunder

UseofconveyanceasaIncontraventionoftheActor

meansoftransport/forrulesmadethereunder

carriageoftaxablegoods
83.Inalltheaforesaideventualities,thegoodsorconveyance

shallbeliableforconfiscation.Howevertheconveyanceshallnot

beconfiscatedwheretheowneroftheconveyanceprovesthatit

iswithouttheconnivanceofownerhimself,hisagentorperson

inchargeoftheconveyance.Further,thepersonshallbeliableto

paypenaltyunderSectionsection122oftheAct.

84.Ifthegoodsorconveyanceareliabletobeconfiscatedunder

theprovisionsofthisAct,theproperofficershallgivetheowner

ofthegoodsanoptiontopayfineinlieuofconfiscation.

85.Theamountoffineshallnotexceedthemarketvalueof

goodsasreducedbytheamountoftaxpayablethereon.However,

atthesametime,theaggregateoffineandpenaltyleviableshall

notbelessthantheamountofpenaltyasleviableundersection

129(1)WhileSectionsection129isapplicableontransporters,Sectionsection

130primarilycoverstheowner.

86.Wheretheconveyanceisusedfortransportationofgoodsor

passengeronhire,theowneroftheconveyanceshallbegivenan

optiontopayinlieuofconfiscationoftheconveyanceafineequal

toamountoftaxpayableonthegoodstransportedonhis

conveyance.Itisworthwhiletonotethattheamountoffine
Page93of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
payableisinadditiontoanytax,penaltyandothercharges

payableonconfiscatedgoodsorconveyance.

87.Theorderforconfiscationcannotbeissuedwithoutgiving

thepersonanopportunityofbeingheard.

88.Thetitleoftheconfiscatedgoodsorconveyanceshall

bevestedupontheGovernment.

89.Theproperofficeradjudgingconfiscationshalltake

andholdpossessionofthethingsconfiscatedonbehalfof

theGovernmentandeveryofficerofpoliceshallassistin

takingsuchholdandpossession.

90.Iftheproperofficerissatisfiedthattheconfiscated

goods/conveyancearenotrequiredforanyproceedings

undertheAct,thenheshallaftergivingreasonabletimenot

exceeding3monthstopayfineinlieuofconfiscation,

disposethegoodsanddepositthesaleproceedswiththe

Government.

91.Ourattentionhasalsobeendrawntotheprovisionsof

Section122,thatprescribespenaltiesforcertainoffences,

Section125,thatprovidesforlevyofgeneralpenaltyandSection

126oftheAct,whichsetsoutcertaingeneraldisciplinesrelating

totheimpositionofpenalties.

92.TheprovisionsofSection122oftheActenvisagevarious

offencesforwhichpenaltyisleviableandintermsofSection122

(2)oftheAct,themaximumpenaltywouldbeasumof
Page94of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
Rs.10,000/-or10%ofthetaxduefromsuchperson,whichever

ishigher.Inthecaseofwilfulmis-statementorsuppressionof

factstoevadetax,suchpenaltywouldbeequaltoRs.10,000/-or

thetaxdue,whicheverishigher.IntermsofSection125ofthe

Act,extractedbelow,themaximumpenaltyshallnotexceedto

Rs.25,000/-:-

'Generalpenalty

125.Anyperson,whocontravenesanyoftheprovisionsof

thisActoranyrulesmadethereunderforwhichnopenaltyis

separatelyprovidedforinthisAct,shallbeliabletoapenalty

whichmayextendtotwenty-fivethousandrupees.'

93.Thegeneraldisciplinesalsoprovidesforimpositionoftaxfor

minorbreachesofregulationsorproceduralrequirements,

definedintheExplanationtotheprovision.Section126ofthe

Actisextractedbelow:-

"Generaldisciplinesrelatedtopenalty.

126.(1)NoofficerunderthisActshallimposeanypenaltyfor

minorbreachesoftaxregulationsorproceduralrequirements

andinparticular,anyomissionormistakeindocumentation

whichiseasilyrectifiableandmadewithoutfraudulent

intentorgrossnegligence.

Explanation.--Forthepurposeofthissub-section,--

(a)abreachshallbeconsidereda'minorbreach'ifthe

amountofhttp://www.judis.nic.intaxinvolvedislessthan

fivethousandrupees;

(b)anomissionormistakeindocumentationshallbe

consideredtobeeasilyrectifiableifthesameisanerror

apparentonthefaceofrecord.

(2)ThepenaltyimposedunderthisActshalldependonthe

factsandcircumstancesofeachcaseandshallbe
Page95of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
commensuratewiththedegreeandseverityofthebreach.

(3)Nopenaltyshallbeimposedonanypersonwithoutgiving

himanopportunityofbeingheard.

(4)TheofficerunderthisActshallwhileimposingpenaltyin

anorderforabreachofanylaw,regulationorprocedural

requirement,specifythenatureofthebreachandthe

applicablelaw,regulationorprocedureunderwhichthe

amountofpenaltyforthebreachhasbeenspecified.

(5)Whenapersonvoluntarilydisclosestoanofficerunder

thisActthecircumstancesofabreachofthetaxlaw,

regulationorproceduralrequirementpriortothediscoveryof

thebreachbytheofficerunderthisAct,theproperofficer

mayconsiderthisfactasamitigatingfactorwhen

quantifyingapenaltyforthatperson.

(6)Theprovisionsofthissectionshallnotapplyinsuchcases

wherethepenaltyspecifiedunderthisActiseitherafixed

sumorexpressedasafixedpercentage.'"

94.TheCentralBoardofIndirectTaxesandCustoms,New

Delhi,hasissuedaCircularinF.No.CBEC/20/16/03/2017-GST,

dated14.09.2018,inregardtotheproceduretobefollowedin

the'Interceptionofconveyancesforinspectionofgoodsin

movementanddetention,releaseandconfiscationofsuchgoods

andconveyances'.

95.Ourattentionisdrawntoparagraphs3,4,5and6ofthe

saidCircular,extractedbelow:-

"....3.Section68oftheCGSTActreadwithrule138A

oftheCentralGoodsandServicesTaxRules,2017

(hereinafterreferredtoas'theCGSTRules')requires

thatthepersoninchargeofaconveyancecarryingany

consignmentofgoodsofvalueexceeding

http://www.judis.nic.inRs50,000/-shouldcarrya
Page96of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
copyofdocumentsviz.,invoice/billofsupply/delivery

challan/billofentryandavalide-waybillinphysical

orelectronicformforverification.Incasesuchperson

doesnotcarrythementioneddocuments,thereisno

doubtthatacontraventionoftheprovisionsofthelaw

takesplaceandtheprovisionsofSectionsection129and

section130oftheCGSTActareinvocable.Further,it

maybenotedthatthenon-furnishingofinformationin

PartBofFORMGSTEWB-01amountstothee-waybill

becomingnotavaliddocumentforthemovementof

goodsbyroadasperExplanation(2)torule138(3)of

theCGSTRules,exceptinthecasewherethegoodsare

transportedforadistanceofuptofiftykilometreswithin

theStateorUnionterritorytoorfromtheplaceof

businessofthetransportertotheplaceofbusinessof

theconsignorortheconsignee,asthecasemaybe.

4.Whereas,section129oftheCGSTActprovidesfor

detentionandseizureofgoodsandconveyancesand

theirreleaseonthepaymentofrequisitetaxand

penaltyincaseswheresuchgoodsaretransportedin

contraventionoftheprovisionsoftheCGSTActorthe

rulesmadethereunder.Ithasbeeninformedthat

proceedingsundersection129oftheCGSTActare

beinginitiatedforeverymistakeinthedocuments

mentionedinpara3above.Itisclarifiedthatincasea

consignmentofgoodsisaccompaniedbyaninvoiceor

anyotherspecifieddocumentandnotane-waybill,

proceedingsundersection129oftheCGSTActmaybe

initiated.

5.Further,incaseaconsignmentofgoodsis

accompaniedwithaninvoiceoranyotherspecified

documentandalsoane-waybill,proceedingsunder

section129oftheCGSTActmaynotbeinitiated,inter

alia,inthefollowingsituations:

a)Spellingmistakesinthenameoftheconsignororthe

consigneebuttheGSTIN,whereverapplicable,is

correct;

b)Errorinthepin-codebuttheaddressoftheconsignor
Page97of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
andtheconsigneementionediscorrect,subjecttothe

conditionthattheerrorinthePINcodeshouldnothave

theeffectofincreasingthevalidityperiodofthee-way

bill;

c)Errorintheaddressoftheconsigneetotheextent

thatthelocalityandotherdetailsoftheconsigneeare

correct;

d)Errorinoneortwodigitsofthedocumentnumber

mentionedinthee-waybill;

e)Errorin4or6digitlevelofHSNwherethefirst2

digitsofHSNarecorrectandtherateoftaxmentioned

iscorrect;

f)Errorinoneortwodigits/charactersofthevehicle

number.

6.Incaseoftheabovesituations,penaltytothetuneof

Rs.500/-eachundersection125oftheCGSTActand

therespectiveStateGSTActshouldbeimposed

(Rs.1000/-undertheIGSTAct)inFORMGSTDRC-07

foreveryconsignment.Arecordofallsuch

consignmentswhereproceedingsundersection129of

theCGSTActhavenotbeeninvokedinviewofthe

situationslistedinparagraph5aboveshallbesentby

theproperofficertohiscontrollingofficeronaweekly

basis......'hequestionstobedeterminedinthesecases

relatetothereleaseofconsignmentandthequantumof

penalty,ifany,tobeleviedatthisstage,andpending

adjudication."

96.Asfarasthedeterminationofpenaltyisconcerned,itisthe

AssessingOfficer/StateTaxOfficerwhoisthecompetentand

properpersonforsuchdetermination/quantification.However,a

holisticreadingofthestatutoryprovisionsandtheCircularnoted

above,indicatestomethattheDepartmentdoesnotpaintall

violations/transgressionswiththesamebrushandmakesa
Page98of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
distinctionbetweenseriousandsubstantiveviolationsandthose

thatareminor/proceduralinnature.

97.Thequestionswhetherthemovementoftheconsignments

sansvalidE-waybillsconstitutesasubstantiveerrororamere

technicalbreacharetobeconsideredbytheAssessingOfficer,

havingregardtotheprovisionsofSections122,Section125andSection126of

theActaswellallrelevantInstructionsandCircularsissuedby

theBoard,includingtheCircularextractedabove.

98.ADivisionBenchoftheKeralaHighCourtinthecaseof

AssistantStateTaxOfficerAnr.vs.M/s.IndusTowers

Limited,2018(3)KLTSN53,hadanoccasiontoconsidera

questionofreleaseofgoodsorderedasprovidedunder

sub-section(1)ororderpassedundersub-section(3)ofSection

129oftheAct.Itwasheldthus;

"Thefindingthatthetransactionwouldnotfallwithinthe

scopeoftaxablesupplyunderthestatute,cannotbe

sustainedforreasonoftherebeingnodeclarationmade

underR.138.Theresultantfindingthatmereinfractionofthe

proceduralrulescannotresultindetentionofgoodsthough

theymayresultinimpositionofpenaltycannotalsobe

sustained.IftheconditionsundertheActandRulesarenot

compliedwith,definitelyS.129operatesandconfiscation

wouldbeattracted."

99.Itispracticallyimpossibletoenvisagevarioustypesof

contraventionoftheprovisionsoftheActortheRulesforthe

purposeofdetentionandseizureofthegoodsandconveyancesin
Page99of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
transit.Thecontraventioncouldbetrivialoritmaybequite

serioussufficientenoughtojustifythedetentionandseizure.

Thislitigationisnothingbutanoutburstonthepartofthe

dealersthatpracticallyinallcasesofdetentionandseizureof

goodsandconveyance,theauthoritieswouldstraightwayinvoke

Section130oftheActandtherebywouldstraightwayissue

noticecallingupontheownerofthegoodsortheownerofthe

conveyancetoshow-causeastowhythegoodsorthe

conveyance,asthecasemaybe,shouldnotbeconfiscated.Once

suchanoticeunderSection130oftheActisissuedrightatthe

inception,i.e,rightatthetimeofdetentionandseizure,thenthe

provisionsofSection129oftheActpaleintoinsignificance.The

reasonwhywearesayingsoisthatforthepurposeofreleaseof

thegoodsandconveyancedetainedwhileintransitforthe

contraventionoftheprovisionsoftheActortherules,thesection

providesforreleaseofsuchgoodsandconveyanceonpaymentof

theapplicabletaxandpenaltyoruponfurnishingasecurity

equivalenttotheamountpayableunderclause(a)orclause(b)to

Clause(1)ofSection129.Section129(2)alsoprovidesthatthe

provisionsofsub-section(6)ofSection67shallmutatismutandis

applyfordetentionandseizureofgoodsandconveyances.We

quoteSection67(6)asunder;

"67(6)Thegoodssoseizedundersub-section(2)shallbe

released,onaprovisionalbasis,uponexecutionofabond

andfurnishingofasecurity,insuchmannerandofsuch

quantum,respectively,asmaybeprescribedoronpayment

ofapplicabletax,interestandpenaltypayable,asthecase

maybe."

100.Section129furtherprovidesthattheproperofficer,
Page100of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
detainingorseizingthegoodsorconveyances,isobligedtoissue

anotice,specifyingthetaxandpenaltypayableand,thereafter,

passanorderforpaymentofsuchtaxandpenalty.Clause(4)

providesthatnotax,interestorpenaltyshallbedetermined

undersub-section(3)withoutgivingthepersonconcernedan

opportunityofbeingheard.Clause(5)providesthatonpayment

oftheamount,referredtoinsub-section(1)oftheproceedings

inrespectofthenotice,specifiedinsub-section(3)aredeemedto

beconcluded,andinthelast,clause(6)providesthatifthetax

andpenaltyisnotpaidwithin14daysofdetentionorseizure,

thenfurtherproceedingswouldbeinitiatedinaccordancewith

theprovisionsofSection130.

101.Weareoftheviewthatatthetimeofdetentionandseizure

ofgoodsorconveyance,thefirstthingtheauthoritiesneedto

lookintocloselyisthenatureofthecontraventionofthe

provisionsoftheActortheRules.Thesecondstepinthe

processfortheauthoritiestoexaminecloselyiswhethersuch

contraventionoftheprovisionsoftheActortheRuleswaswith

anintenttoevadethepaymentoftax.Section135oftheAct

providesforpresumptionofculpablementalstatebutsuch

presumptionisavailabletothedepartmentonlyinthecasesof

prosecutionandnotforthepurposeofSection130oftheAct.

Whatwearetryingtoconveyisthatinagivencase,the

contraventionmaybequitetrivialormaynotbeofsucha

magnitudewhichbyitselfwouldbesufficienttotaketheview

thatthecontraventionwaswiththenecessaryintenttoevade

paymentoftax.

Page101of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
102.Insuchcircumstances,referredtoabove,weproposeto

taketheviewthatinallcases,withoutanyapplicationofmind

andwithoutanyjustifiablegroundsorreasonstobelieve,the

authoritiesmaynotbejustifiedtostraightwayissueanoticeof

confiscationunderSection130oftheAct.Forthepurposeof

issuinganoticeofconfiscationunderSection130oftheActat

thethreshold,i.e,.atthestageofSection129oftheActitself,the

casehastobeofsuchanaturethatonthefaceoftheentire

transaction,theauthorityconcernedisconvincedthatthe

contraventionwaswithadefiniteintenttoevadepaymentoftax.

Wemaygiveonesimpleexample.Thedriverofthevehicleisina

positiontoproducealltherelevantdocumentstothesatisfaction

oftheauthorityconcernedasregardspaymentoftaxetc.,but

unfortunately,heisnotabletoproducethee-waybill,whichis

alsooneoftheimportantdocumentssofarastheAct,2017is

concerned.Theauthenticityofthedeliverychallanisalsonot

doubted.Insuchasituation,itwouldbetoomuchforthe

authoritiestostraightwayjumptotheconclusionthatthecaseis

oneofconfiscation,i.e,thecaseisofintenttoevadepaymentof

tax.

103.Wetakenoticeofthefactthatpracticallyinallcases,after

thedetentionandseizureofthegoodsandtheconveyance,

straightwaynoticeisissuedunderSection130,andinthesaid

notice,onewouldfindaparrotlikechantation"asthegoods

werebeingtransportedwithoutanyvaliddocuments,itis

presumedthatthegoodswerebeingtransportedforthepurposes
Page102of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
ofevadingthetax".Wehavealsocomeacrossnoticesof

confiscation,whereinithasbeenstatedthatthethedriverofthe

conveyanceispresumedtohavecontravenedtheprovisionsof

theActortheRuleswithanintenttoevadepaymentoftax.This,

inouropinion,isnotjustified.Theresultanteffectofsuchissue

ofconfiscationnoticeattheverythreshold,withoutany

applicationofmindorwithouttherebeinganyfoundationforthe

same,rendersSection129oftheActpracticallyotiose.Wetake

cognizanceofthefactthatoncethenoticeunderSection130of

theActisissued,thenthevehicleisnotreleasedevenifthe

ownerofthegoodsisreadyandwillingtopaythetaxandthe

penaltythatmaybedeterminedunderSection129oftheAct.

Suchapproachleadstounnecessarydetentionofthegoodsand

theconveyanceforanindefiniteperiodoftime.Therefore,what

wearetryingtoconveyisthatallcasesofcontraventionofthe

provisionsoftheActortheRules,byitself,maynotattractthe

consequencesofsuchgoodsortheconveyanceconfiscatedunder

Section130oftheAct.Section130oftheActisaltogetheran

independentprovisionwhichprovidesforconfiscationincases

whereitisfoundthattheintentionwastoevadepaymentoftax.

Confiscationofgoodsorvehicleisalmostpenalincharacter.In

otherwords,itisanaggravatedformofaction,andtheobjectof

suchaggravatedformofactionistodeterthedealersfrom

evadingtax.

104.Intheaforesaidcontext,wewouldliketoclarifythatwedo

notproposetolaydown,asapropositionoflaw,orweshouldnot

beunderstoodtohavetakentheviewthat,inanycircumstances,
Page103of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
theauthoritiesconcernedcannotinvokeSection130oftheActat

thethreshold,i.e.,atthestageofdetentionandseizure.Whatwe

aretryingtoconveyisthatforthepurposeofinvokingSection

130oftheActattheverythreshold,theauthoritiesneedtomake

outaverystrongcase.Merelyonsuspicion,theauthoritiesmay

notbejustifiedininvokingSection130oftheActstraightway.If

theauthoritiesareoftheviewthatthecaseisoneofinvoking

Section130oftheActattheverythreshold,thentheyneedto

recordtheirreasonsforsuchbeliefinwriting,andsuchreasons

recordedinwritingshould,thereafter,belookedintobythe

superiorauthoritysothatthesuperiorauthoritycantakean

appropriatedecisionwhetherthecaseisoneofstraightway

invokingSection130oftheAct.Anyopinionoftheauthorityto

beformedisnotsubjecttoobjectivetest.ThelanguageofSection

130oftheActleavesnoroomfortherelevanceofanofficial

examinationastothesufficiencyofthegroundonwhichthe

authoritymayactorproceedforthepurposeofconfiscationat

theverythreshold.But,atthesametime,theremustbematerial

basedonwhichalonetheauthoritycouldformitsopinionin

goodfaiththatithasbecomenecessarytocallupontheownerof

thegoodsaswellastheowneroftheconveyancetoshow-cause

astowhythegoodsandtheconveyanceshouldnotbe

confiscatedunderSection130oftheAct.Thenoticeforthe

purposeofconfiscationmustdisclosethematerials,uponwhich,

thebeliefisformed.Itcouldbearguedthatitisnotnecessaryfor

theauthorityundertheActtostatereasonsforitsbelief.Forthe

timebeing,weproceedonthebasisofsuchargument.But,ifit

ischallengedthatthenoticeisbereftofthenecessarydetailsor
Page104of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
thesatisfactionoftheauthorityisimaginaryorbasedonmere

suspicion,thentheauthoritymustdisclosethematerials,upon

which,hisbeliefwasformedasithasbeenheldbytheSupreme

CourtinSheonathSingh'scase[AIR1971SC2451].In

SheonathSingh(supra),theSupremeCourtheldthattheCourt

canexaminethematerialstofindoutwhetheranhonestand

reasonablepersoncanbasehisreasonablebeliefuponsuch

materialsalthoughthesufficiencyofthereasonsforthebelief

cannotbeinvestigatedbytheCourt.Theformationofthe

opinionbytheauthoritythatthegoodsandtheconveyanceare

liabletobeconfiscatedshouldreflectintenseapplicationofmind.

Wearesayingsobecauseitisnotanyoreverycontraventionof

theprovisionsoftheActortheRuleswhichmaybesufficientto

arriveattheconclusionthatthecaseisoneofanintentionto

evadepaymentoftax.Inshort,theactionmustbeheldingood

faithandshouldnotbeamerepretence.

105.WewouldliketoremindtheRevenueoftheobservations

madebythisCourtinthecaseofSitaramRoadwaysvs.State

ofGujarat,SpecialCivilApplicationNo.15107of2019,decided

on10thOctober,2019.Wequotetheobservations;

"8.Section130oftheCGSTActprovidesforconfiscationof

goodsorconveyancesandlevyofpenalty.Sub-section(4)

thereofprovidesthatnoorderforconfiscationofgoodsor

conveyanceorforimpositionofpenaltyshallbeissued

withoutgivingthepersonanopportunityofbeingheard.In

thepresentcase,onaperusalofthedocumentsannexed

alongwiththepetitionitappearsthatpursuanttothenotice

dated21.8.2019issuedbytherespondent,thepetitioner

appearedbeforetherespondenton24.8.2019andshowed

willingnesstopaytheamountoftaxandpenaltyforthe
Page105of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
purposeofsecuringreleaseofthevehicleinquestion.

Thereafter,thesecondrespondent,withoutaffordingany

opportunityofhearingtothepetitionerascontemplated

undersub-section(4)ofsection130oftheCGSTAct,has

proceededtopasstheimpugnedorderon24.8.2019.It

appearsthatmerelybecausethepetitionerappearedbefore

therespondentandshowedwillingnesstopaythetaxand

penaltyforthepurposeofsecuringreleaseofthevehiclein

question,thesecondrespondenthasproceededtopassthe

impugnedorderwithouthearingthepetitioneronthe

questionofconfiscationofthegoodsandconveyance.

9.Ascanbeseenfromtheimpugnedorder,itisintheformat

providedtherefor,viz.inFORMGSTMOV-11.Inparagraph1

oftheimpugnedorderalltheblankshavebeenfilledup

whichindicatetheregistrationnumberoftheconveyanceand

thetime,placeanddateandbywhomtheconveyancecame

tobeintercepted.Paragraphs3and4thereofdonotcontain

anydetailsintheblankspacesmeanttobefilledin.Oneof

thesignificantparagraphsinthestatutoryformisparagraph

5,whichreadsthus:

"Thepersoninchargehasnotfiledanyobjections/the

objectionsfiledwerenotacceptableforthereasonsstated

below:

a)...

b)....

Thus,intermsofthestatutoryformatprovidedforpassing

anorderundersection130oftheCGSTAct,theofficer

adjudgingisrequiredtoprovidethereasonsforconfiscating

thegoodsandconveyance.Referencemayalsobemadeto

paragraph6ofthestatutoryform,whichreadsthus:

"6.Inviewoftheabove,thefollowinggoodsandconveyance

areconfiscatedbytheundersignedbyexercisingpowers

vestedundersection130oftheCentralGoodsandServices

TaxAct"

Onaconjointreadingofparagraphs5and6,itisclearthat

theofficeradjudgingthecasepassedtheorderconfiscating

thegoodsandconveyancedescribedinparagraph6,forthe

reasonssetoutinparagraph5.

10.Inthisregardaperusaloftheimpugnedorderof
Page106of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
confiscation,showsthatcolumn5whereintheofficer

adjudgingitisrequiredtosetoutthereasonsforconcluding

thatthegoodsandconveyancearerequiredtobe

confiscated,istotallyblank.Asanecessarycorollaryit

followsthatthegoodsandconveyancehavebeenorderedto

beconfiscatedwithoutdisclosingthereasonstherefor.The

impugnedorderis,therefore,anon-speakingorder,whichis

totallybereftofanyreasonswhatsoever.

11.Atthisstage,itmaybeappositetorefertothelegislative

schemecontainedinsection130oftheCGSTAct.Sub-section

(1)ofSectionsection130thereof,readsthus:

130.Confiscationofgoodsorconveyancesandlevyof

penalty.--(1)NotwithstandinganythingcontainedinthisAct,

ifanyperson--

(i)suppliesorreceivesanygoodsincontraventionofanyof

theprovisionsofthisActortherulesmadethereunderwith

intenttoevadepaymentoftax;or

(ii)doesnotaccountforanygoodsonwhichheisliableto

paytaxunderthisAct;or

(iii)suppliesanygoodsliabletotaxunderthisActwithout

havingappliedforregistration;or

(iv)contravenesanyoftheprovisionsofthisActortherules

madethereunderwithintenttoevadepaymentoftax;or

(v)usesanyconveyanceasameansoftransportforcarriage

ofgoodsincontraventionoftheprovisionsofthisActorthe

rulesmadethereunderunlesstheowneroftheconveyance

provesthatitwassousedwithouttheknowledgeor

connivanceoftheownerhimself,hisagent,ifany,andthe

personinchargeoftheconveyance,

then,allsuchgoodsorconveyancesshallbeliableto

confiscationandthepersonshallbeliabletopenaltyunder

Sectionsection122.

12.Thus,intermsofclauses(i)and(iv)ofsub-section(1)

section130oftheCGSTAct,thegoodscanbeconfiscated

providedthatthepersonsuppliesorreceivesgoodsin

contraventionoftheprovisionsoftheActortherulesmade

thereunderwiththeintenttoevadepaymentoftax;or

contravenesanyprovisionsoftheActandtherulesmade

thereunderwiththeintenttoevadepaymentoftax
Page107of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
respectively.Insofarasclauses(ii)and(iii)areconcerned,the

veryfactthatthepersondoesnotaccountforthegoodson

whichheisliabletopaytaxundertheAct;orsuppliesany

goodswhichareliabletotaxundertheActwithouthaving

appliedforregistration,wouldbesufficientforordering

confiscationofthegoods.Therefore,whilemakinganorderof

confiscationundersection130oftheCGSTAct,theofficer

adjudgingitwillhavetostateastowhichclauseof

sub-section(1)ofsection130oftheCGSTActisattractedin

thefactsofthesaidcase.Ifitisthecaseoftheofficer

adjudgingitthatthecasefallsunderclauses(i)or(iv)of

sub-section(1)ofsection130oftheCGSTAct,thenforthe

purposeofmakinganorderofconfiscation,hewillhaveto

cometotheconclusionthatthegoodsweresuppliedor

receivedincontraventionoftheprovisionsoftheActorthe

rulesmadethereunderwiththeintenttoevadepaymentof

tax.Inotherwords,theofficeradjudgingthecase,while

makinganorderofconfiscationunderclauses(i)or(iv)of

sub-section(1)ofsection130oftheCGSTAct,hastorecord

twinsatisfaction:firstlythatthereisacontraventionofthe

provisionsoftheActortherulesmadethereunder,with

specificreferencetotheprovisionoftheActortherulesthat

hasbeencontravened;andsecondly,thatsuch

contraventioniswiththeintenttoevadepaymentoftax.

Therefore,inacasefallingunderclauses(i)and(iv)of

sub-section(1)ofsection130oftheCGSTAct,theproper

officerisrequiredtorecordaspecificfindingastowhyhe

hascometotheconclusionthatthecontraventioniswiththe

intenttoevadepaymentoftax.Incasesfallingunderclause

(ii)ofsub-section(1)ofsection130oftheCGSTAct,the

properofficerwillberequiredtorecordafindingthatthe

personconcernedhasnotaccountedforthegoodsinrespect

ofwhichisheliabletopaytax;andincasesfallingunder

clause(iii)thereof,hewouldberequiredtorecordafinding

thatthepersonconcernedhassuppliedgoodswhichare

liabletotaxundertheActwithouthavingappliedfor

registration.

13.Inthepresentcase,theimpugnedorderistotallysilent

asregardswhichprovisionoftheActortheruleshasbeen

contravened;whichclauseofsub-section(1)ofsection130of

theCGSTActisattractedinthepresentcase;andastowhy

theofficeradjudgingithascometotheconclusionthatthere
Page108of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
iscontraventionoftheprovisionsoftheActandtherules

madethereunderwiththeintenttoevadepaymentof

14.Moreover,aperusaloftheimpugnedorderrevealsthat

finedeterminedinlieuofconfiscationofgoodsisequaltothe

marketvalueofthegoodsviz.Rs.6,81,556/-.Referencemay

thereforebemadetosub-section(2)ofsection130ofthe

CGSTAct,whichreadsthus:

"(2)Wheneverconfiscationofanygoodsorconveyanceis

authorisedbytheAct,theofficeradjudgingitshallgivetothe

ownerofthegoodsanoptiontopayinlieuofconfiscation,

suchfineasthesaidofficerthinksfit:

PROVIDEDthatsuchfineleviableshallnotexceedthemarket

valueofthegoodsconfiscated,lessthetaxchargeable

thereon.

PROVIDEDFURTHERthattheaggregateofsuchfineand

penaltyleviableshallnotbelessthantheamountofpenalty

leviableundersub-section(1)ofSectionsection129.

PROVIDEDALSOthatwhereanysuchconveyanceisused

forthecarriageofthegoodsorpassengersforhire,theowner

oftheconveyanceshallbegivenanoptiontopayinlieuof

theconfiscationoftheconveyanceafineequaltothetax

payableonthegoodsbeingtransportedthereon."

Thus,sub-section(2)ofsection130oftheCGSTAct

providesthatthefineleviableshallnotexceedthemarket

valueofthegoods,lessthetaxchargeablethereon.Itis,

therefore,clearthatthefineprovidedunderthefirstproviso

tosub-section(2)ofsection130oftheCGSTActisthe

maximumfineleviable.Consequently,theproperofficer

adjudgingthecaseisrequiredtoexaminetheseriousnessof

thecontraventionandimposefineaccordingly.Itisnotasif

ineverycasetheproperofficershouldlevythemaximum

fine.Theorderofconfiscationshould,therefore,reflectdue

applicationofmindonthepartoftheproperofficertothe

quantumoffineimposedbyhim.

15.Aperusaloftheimpugnedorderrevealsthattheproper

officerhasleviedmorethanthemaximumfineleviablein

termsofthefirstprovisotosub-section(2)ofsection130of

theCGSTAct,inasmuchas,hehasleviedfineequaltothe

marketvalueofthegoodswithoutdeductingthetax
Page109of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
chargeablethereon.Moreover,thereisnothingintheorderto

reflectapplicationofmindtothequantumoffine.

16.Atthisjuncturereferencemaybemadetothedecisionof

theSupremeCourtinSectionKrantiAssociates(P)Ltd.v.Masood

AhmedKhan,(2010)9SCC496,whereinthecourtinthe

contextofnecessitytogivereasons,hasheldthus:

"47.Summarisingtheabovediscussion,thisCourtholds:

(a)InIndiathejudicialtrendhasalwaysbeentorecord

reasons,eveninadministrativedecisions,ifsuchdecisions

affectanyoneprejudicially.

(b)Aquasi-judicialauthoritymustrecordreasonsinsupport

ofitsconclusions.

(c)Insistenceonrecordingofreasonsismeanttoservethe

widerprincipleofjusticethatjusticemustnotonlybedoneit

mustalsoappeartobedoneaswell.

(d)Recordingofreasonsalsooperatesasavalidrestrainton

anypossiblearbitraryexerciseofjudicialandquasi-judicial

orevenadministrativepower.

(e)Reasonsreassurethatdiscretionhasbeenexercisedby

thedecision-makeronrelevantgroundsandbydisregarding

extraneousconsiderations.

(f)Reasonshavevirtuallybecomeasindispensablea

componentofadecision-makingprocessasobserving

principlesofnaturaljusticebyjudicial,quasi-judicialand

evenbyadministrativebodies.

(g)Reasonsfacilitatetheprocessofjudicialreviewby

superiorcourts.

(h)Theongoingjudicialtrendinallcountriescommittedto

ruleoflawandconstitutionalgovernanceisinfavourof

reasoneddecisionsbasedonrelevantfacts.Thisisvirtually

thelifebloodofjudicialdecision-makingjustifyingthe

principlethatreasonisthesoulofjustice.

(i)Judicialorevenquasi-judicialopinionsthesedayscanbe

asdifferentasthejudgesandauthoritieswhodeliverthem.

Allthesedecisionsserveonecommonpurposewhichisto

demonstratebyreasonthattherelevantfactorshavebeen

objectivelyconsidered.Thisisimportantforsustainingthe

litigants'faithinthejusticedelivery
Page110of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
(j)Insistenceonreasonisarequirementforbothjudicial

accountabilityand

(k)Ifajudgeoraquasi-judicialauthorityisnotcandid

enoughabouthis/herdecision-makingprocessthenitis

impossibletoknowwhetherthepersondecidingisfaithfulto

thedoctrineofprecedentortoprinciplesofincrementalism.

(l)Reasonsinsupportofdecisionsmustbecogent,clearand

succinct.Apretenceofreasonsor"rubber-stampreasons"is

nottobeequatedwithavaliddecision-making

(m)Itcannotbedoubtedthattransparencyisthesinequa

nonofrestraintonabuseofjudicialpowers.Transparencyin

decision-makingnotonlymakesthejudgesand

decision-makerslesspronetoerrorsbutalsomakesthem

subjecttobroaderscrutiny.(SeeDavidShapiroinDefenceof

JudicialCandor.)

(n)Sincetherequirementtorecordreasonsemanatesfrom

thebroaddoctrineoffairnessindecision-making,thesaid

requirementisnowvirtuallyacomponentofhumanrights

andwasconsideredpartofStrasbourgSeeRuizTorijav.

Spain,(1994)19EHRR553andAnyav.Universityof

Oxford,2001EWCACiv405(CA),whereintheCourtreferred

toSectionArticle6oftheEuropeanConventionofHumanRights

whichrequires,"adequateandintelligentreasonsmustbe

givenforjudicialdecisions".

(o)Inallcommonlawjurisdictionsjudgmentsplayavital

roleinsettingupprecedentsforthefuture.Therefore,for

developmentoflaw,requirementofgivingreasonsforthe

decisionisoftheessenceandisvirtuallyapartof"due

process"."

17.InCCTv.ShuklaBros.,(2010)4SCC785,theSupreme

Courtheldthus:

"14.Theprincipleofnaturaljusticehastwiningredients;

firstly,thepersonwhoislikelytobeadverselyaffectedby

theactionoftheauthoritiesshouldbegivennoticetoshow

causethereofandgrantedanopportunityofhearingand

secondly,theorderssopassedbytheauthoritiesshouldgive

reasonforarrivingatanyconclusionshowingproper

applicationofmind.Violationofeitherofthemcouldinthe

givenfactsandcircumstancesofthecase,vitiatetheorder
Page111of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
itself.Suchrulebeingapplicabletotheadministrative

authoritiescertainlyrequiresthatthejudgmentofthecourt

shouldmeetwiththisrequirementwithhigherdegreeof

satisfaction.Theorderofanadministrativeauthoritymaynot

providereasonslikeajudgmentbuttheordermustbe

supportedbythereasonsofrationality.Thedistinction

betweenpassingofanorderbyanadministrativeor

quasi-judicialauthorityhaspracticallyextinguishedandboth

arerequiredtopassreasonedorders."

18.SectionInTataEngineeringLocomotiveCo.Ltd.v.

CollectorofCentralExcise,Pune,2006(203)ELT360(SC),

theSupremeCourtwasdealingwithacasewherebya

crypticandnon-speakingorder,theTribunalhadupheldthe

orderpassedbyCommissionerbyapplyingtheratioofthe

decisionoftheLargerBenchinTISCOLtd.,withoutrecording

anyfindingsoffact.Thecourtheldthatitisnotsufficientina

judgmenttogiveconclusionsalonebutitisnecessarytogive

reasonsinsupportoftheconclusionsarrivedat.Thecourt,

setasidetheorderoftheTribunalasthefindingsrecorded

bytheTribunalwerecrypticandnon-speaking,andremitted

thematterbacktotheTribunalfortakingafreshdecisionby

aspeakingorderinaccordancewithlawafteraffordingdue

opportunitytoboththe

19.SectionInStateofPunjabv.BhagSingh,2004(164)ELT137

(SC),theSupremeCourtwasconsideringacasewherethe

HighCourthaddismissedtheappealwithoutgivingany

reasons.Thecourtheldthatreasonsintroduceclarityinan

order.Onplainestconsiderationofjustice,theHighCourt

oughttohavesetforthitsreasons,howsoeverbrief,inits

orderindicativeofanapplicationofmind,allthemorewhen

itsorderisamenabletofurtheravenueofchallenge.The

absenceofreasonshasrenderedtheHighCourtordernot

sustainable.Thecourtfurtherheldthatrighttoreasonisan

indispensablepartofasoundjudicialsystem,reasonsat

leastsufficienttoindicateanapplicationofmindtothe

matterbeforethecourt.Anotherrationaleisthattheaffected

partycanknowwhythedecisionhasgoneagainsthim.One

ofthesalutaryrequirementsofnaturaljusticeisspellingout

reasonsfortheordermade,inotherwords,aspeakingout.

20.Thus,theSupremeCourthasconsistentlyheldthata

quasi-judicialauthoritymustrecordreasonsinsupportofits
Page112of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
conclusionsandthatreasonsareanindispensable

componentofadecisionmakingprocess.InCCTv.Shukla

Bros(supra)theSupremeCourthasheldthatgivingreasons

insupportoftheconclusionsarrivedatisaningredientofthe

principlesofnaturaljustice.

21.Viewedinthelightoftheprinciplesenunciatedinthe

decisionsreferredtohereinabove,theimpugnedorderisin

breachoftheprinciplesofnaturaljusticeontwocounts:

firstly,thatthoughthematterwaskeptforhearingon

28.08.2019,thesecondrespondentpassedtheimpugned

orderon24.08.2019withoutaffordinganyopportunityof

hearingtothepetitioner;andsecondly,becausethe

impugnedorderisatotallynon-speakingorderwhichdoes

notreflectthereasonastowhytheproperofficerhascometo

theconclusionthatthegoodsandtheconveyanceareliable

tobeconfiscated,whichrenderstheorderunsustainable.

Theimpugnedorder,therefore,deservestobesetasideand

thematterisrequiredtoberemittedtotheproperofficerto

decidethematterafreshinaccordancewithlaw,keepingin

mindtheprinciplesdiscussedhereinabove,afteraffording

reasonableopportunityofhearingtothepetitioner."

Thephrase"withintenttoevadepaymentoftax",theword

"penalty"andtheelementofmensreainSection130ofthe

Act:-

106.Whenthestatutetalksaboutintenttoevadepaymentof

tax,thesamecouldbeco-relatedwiththeterm"willfulattempt".

Forthepurposeofevadingtax,andthattoo,withthenecessary

intention,thereisalwaysawillfulattempt.Inotherwords,the

attempttoevadeshouldbe"willful".Theterm"willful"hasnot

beendefinedundertheAct.Underthecommonlegalcolumns,

theword"willful"suggeststheguiltymindoftheassessee.In

otherwords,theassesseehasconsciouslyorknowingly

attemptedtothwartthechargeabilityorpaymentoftax.Further,
Page113of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
suchwillfulattemptshouldbeto"evade"thechargeabilityor

impositionorpaymentoftaxetc.Theword"evade"hasalsonot

beendefinedintheAct.AspertheCambridgeDictionary,the

word"evade"means"toavoidorescapefromsomeoneor

something".Further,aspertheK.J.Ayar'sJudicialDictionary,

theword"evade"iscapableofbeingusedintwosenses,one

whichsuggestunderhanddealingandanotherwhichmeans

nothingmorethantheintentionalavoidanceofsomething

disagreeable.Weshouldbeconsciousofthefactthatthe

legislaturehasusedthewords"withintenttoevadepaymentof

tax"inSection130oftheAct.Whenthelawrequiresan

intentiontoevadepaymentofduty,thenitisnotmerefailureto

payduty.Itmustbesomethingmore.Thatis,theassesseemust

beawarethatthedutywasleviableanditmustdeliberatelyavoid

payingit.Theword"evade"inthecontextmeansdefeatingthe

provisionsoflawofpayingduty.Itismademorestringentbyuse

oftheword"intent".Inotherwords,theassesseemust

deliberatelyavoidthepaymentofdutywhichispayablein

accordancewithlaw.

107.Thelearnedcounselappearingforthepetitionerswould

arguethatasSection130talksaboutanintenttoevadepayment

oftaxandalsotalksaboutpenaltyunderSection122oftheAct,

theorderforconfiscationandpenaltycannotbeimposed

withoutrecordingthefindingoffactthatthepersonconcerned

intendedtoavoidtaxasmensreawassuggestedtobean

essentialingredientforimposingpenalty.Inotherwords,penalty

beingpenalinnature,cannotbeimposedunlessmensreais
Page114of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
establishedbyadducingnecessaryevidence.Ontheotherhand,

thelearnedAdvocateGeneralwouldsubmitthatmensrea

cannotbereadintoSection130oftheAct.

108.SectionIntheDivisionalPersonnelOfficer,SouthernRailway

andAnr.v.T.R.Challappan,AIR1975SC2216,theHon'ble

SupremeCourtconsideredthemeaningof"penalty"in

departmentalproceedingsagainsttheemployees.Asthe

argumenthadbeenadvancedthattheexpression"penalty"

referredtoinRule14oftheRailwayServants(Disciplineand

Appeal)Rules1968,whichprovidedforimpositionofpenaltyof

dismissalorremovalinrespectofarailwayservant,stood

confirmedbytheCourtholdingasunder:-

"Theword'penalty'imposedonarailwayservant,inour

opinion,doesnotrefertoasentenceawardedbytheCourtto

theaccusedonhisconviction,butthoughnothappilyworded

itmerelyindicatesthenatureofthepenaltyimposablebythe

disciplinaryauthorityifthedelinquentemployeehasbeen

foundguiltyofconductwhichhasledtohisconvictionona

criminalcharge......Thewords"whereanypenaltyis

imposed'inRule14(i)shouldactuallybereadas'whereany

penaltyisimposable'becausesofarasthedisciplinary

authorityisconcerneditcannotimposeapenaltyonthe

basisoftheconvictionandsentencepassedagainstthe

delinquentemployeebyacompetentcourt.Furthermore,the

ruleempoweringthedisciplinaryauthoritytoconsider

circumstancesofthecaseandmakesuchordersasitdeems

fitclearlyindicatesthatitisopentothedisciplinaryauthority

toimposeanypenaltyasitlikes.Inthissense,therefore,the

word'penalty'usedinRule14(i)oftheRulesof1968is

relatabletothepenaltiestobeimposedundertheRules

ratherthanapenaltygivenbyacriminalcourt."

109.SectionInN.K.JainandOrs.v.C.K.ShawandOrs.,AIR1991
Page115of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
SC1289,theSupremeCourtconsideredthenatureofexpression

"penalty"usedinSection14(2A)oftheProvidentFundand

SectionMiscellaneousProvisionsAct,1952,whereinitconsideredthe

definitionoftheWord"penalty"indifferentdictionaries,as

under:-

"InButterworths"WordsandPhrases,.......themeaningof

word'penalty'islargeenoughtomean,isintendedtomean

anddoesmean,isintendedtomean,anddoesmean,any

punishmentwhetherbyimprisonmentorotherwise....Penalty

inabroadsensemaybedefinedasanysufferinginperson

orpropertybywayofforfeiture,deprivationordisability,

imposedasapunishmentbylaworjudicialauthorityin

respectof...anactprohibitedbystatute.TheOxford

Dictionaryechoesthesamewideconceptionbyreferringto'a

loss,disabilityordisadvantageofsomekind....fixedbylaw

forsomeoffence.'Themeaningoftheword'penalty'asgiven

intheCollinsEnglishDictionarysuchasatermof

imprisonment,someotherformofpunishment,suchasafine

orforfeitfornotfulfillingacontract,loss,suffering,orother

unfortunateresultofone'sownaction,erroretc.,Sport,

gamesetc.ahandicapawardedagainstaplayerortermfor

illegalplay,suchasafreeshotatgoalbytheopposingteam,

lossofpoint,etc.

........Apenaltymayrefertobothcriminalandcivilliability,

beingdeniedaspenalretribution,punishmentforcrimeof

offence,thesufferinginperson,rightsorpropertywhichis

annexedbylawofjudicialdecisiontocommissionofacrime

orpublicoffence.Theterm'penalty'embracesall

consequencesvisitedbylawonheadsofthosewhoviolate

policeregulationsandextendstoallpenaltieswhether

eligiblebyStateininterestofcommunityorbyprivate

personsintheirwoninterest,evenwhenstatuteisremedial

aswellaspenal.

Theword'penalty'isnotconfinedtopunishmentorcrime;it

hasabroadermeaninginlawofcontracts;itisusedas

contradistinguishedfromliquidateddamages.Itisalsoused

toindicatethesumtobeforfeitedonbreachofabond,and
Page116of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
incommonparlanceitexpressesanydisadvantageresulting

fromanact."

110.Andheldthatinviewofthedefinitionitwasnotpossibleto

holdthatthesaidprovisionswerenotapplicableincaseof

exemptedestablishmentsforthereasonthatsomemore

provisions,legalorpenal,werealsomadeapplicabletoexempted

establishmentswithaviewtomaketopenalprovisionsmore

stringentwithaviewtocheckthegrowthofarrears.

111.SectionInDirectorofEnforcementv.MCTMCorporationPvt.

Ltd.andOrs.,AIR1996SC1100,theHon'bleSupremeCourt

consideredasissueastowhetheringredientsofmensreawas

necessaryincaseofapersonwhoisfoundviolatingthe

provisionsoftheSectionForeignExchangeRegulationsAct,1947.The

Courtobservedasunder:-

"Mensrea'isastateofmind.Underthecriminallaw,mens

reaisconsideredasthe'guiltyintention'andunlessitis

foundthatthe'accused'hadtheguiltyintentiontocommitthe

'crime',hecannotbeheld'guilty'ofcommittingthecrime.An

'offence'underSectionCriminalProcedureCodeandtheSectionGeneral

ClausesAct,1897isdefinedas'anyactoromission'made

punishablebyanylawforthetimebeinginforce.'The

proceedingsunderSection23(1)(a)FERA,1947are

'adjudicatory'innatureandcharacterandarenot'criminal

proceedings.'TheofficersoftheEnforcementDirectorateand

otheradministrativeauthoritiesareexpresslyempoweredby

theActto'adjudicate'only.Indeedtheyhavetoact'judicially'

andfollowtherulesofnaturaljusticetotheextentapplicable

but,theyarenot'Judges'ofthe'CriminalCourts'tryingan

'accused'forcommissionofaanoffence,asunderstoodin

thegeneralcontext.Theyperformquasi-judicialfunctions

anddonotacta'Courts'butonlyas'administrators'and

'adjudicators.'Intheproceedingsbeforethem,theydonottry
Page117of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
'anaccused'forcommissionof'anycrime'(notmerelyan

offence)butdeterminetheliabilityoftheconlravenorforthe

breachofhis'obligations'imposedundertheAct.They

imposed'penalty'forthebreachofthe'Civilobligations'laid

downundertheActandnotimposeany'sentence'forthe

commissionofanoffence.Theexpression'penalty'isaword

ofwidesignificance.Sometime,itmeansrecoveryofan

amountasapenalmeasureevenincivilproceedings.An

exactionwhichisnotcompensatorincharacterisalsotermed

as'penalty'.Whenpenaltyisimposedbyanadjudicating

officer,itisdonesoin'adjudicatoryproceedings;'andnotby

wayoffineasaresultof'prosecution'ofan'accused'for

commissionofan'accused'forcommissionofan'offence'ina

criminalCourt.Therefore,merelybecausepenaltyclause

existsinSection23(1)(a),thenatureoftheproceedings

undertheSectionisnotchangedfrom'adjudicator'to

'criminal'prosecution.Anordermadebyanadjudicating

authorityundertheActisnotthatofconvictionbutof

determinationofthebreachofthecivilobligationbythe

offender........Apenaltyimposedforataxdelinquencyisa

civilobligation,remedialandcoerciveinitsnature,andisfor

differentfromthepenaltyforacrimeorafineofforfeiture

providedaspunishmentfortheviolationofcriminallaws.We

areinagreementwiththeaforesaidviewandinouropinion,

whatappliesto'taxdelinquency'equallyholdsgoodforthe

'blameworthy'conductforcontraventionoftheprovisionsof

FERA,1947.We,therefore,holdthatmens-rea(as

understoodincriminallaw)isnotanessentialingredientfor

holdingadelinquentliabletopaypenaltyunderSection23(1)

ofFERA1947forcontraventionoftheprovisionsofSection

10ofFERA,1947andthatpenaltyisattractedunderSection

23(1)(a)assoonascontraventionofthestatutoryobligation

contemplatedbySection10(1)(a)isestablished.TheHigh

Courtapparentlyfellinerrorintreatingthe'blameworthy

conduct'undertheActasequivalenttothecommissionofa

'criminaloffence',overlookingthepositionthatthe

'blameworthyconduct'intheadjudicatoryproceedingsis

establishedbyproofonlyofthebreachofaCivilobligation

undertheAct,forwhichthedefaulterisobligedtomake

amendsbypaymentofthepenaltyimposedunderSection23

(1)(a)oftheActirrespectiveofthefactwhetherhecommitted

thebreachwithorwithoutanyguiltyintention.Ouranswer
Page118of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
tothefirstquestionformulatedbyusaboveis,thereforein

thenegative."

112.InCommissionerofSalesTaxv.RamaandSons,

GeneralMerchant,Ballia,1999UPTC25,theAllahabadHigh

Courtobservedasunder:-

"TheprincipleofmensreacomesfromEnglishCriminalLaw

fromtimeswhenthelawwasnotcodified.Itwassaidthat

actusnonfacitreumnisimenssitrea(theintentandact

mustbothconcurtoconstitutethecrime).Butthisprinciple

haslostmuchofitssignificanceowingtogreaterprecisionof

modernstatutes.Thenatureofintentortheingredientsof

offencesarenowclearlystatedinthestatutesandnothing

furtherisrequiredtoestablishasoffencethenwhatthe

statutespecified.Wehavewordslike'voluntarily',

'intentionally','negligetly','knowingly',fraudulently',

'dishonestly','rashly','omits','withoutlawfulauthority'ect.,

'omits','withoutlawfulauthority'ect.,usedinvarious

sectionsSectionoftheIndianPenalCodedefiningvariousoffence.

ProofoftheStateofmindoroftheconductofthepersonas

indicatedbytheaforesaidwordestablishestheoffenceand

nofurtherguiltyintentormensreaneedbeproved.Infact

therearemanyactswhichareoffencesanddonotrequire

proofanymensreaorguiltyintention,forexample

possessionofillicitfirearm."

113.AFullBenchofAndhraPradeshHighCourt,inAdditional,

Commissioner,IncomeTaxv.DurgaPandariNathTulijayya

Co.,1977TaxLR258,observedasunder:-

"Thedoctrineofmensreaisofcommonlaworigindeveloped

byJudge-madelaw.IthasnoplaceintheLegislator'slaw.It

hasnoplaceintheLegislator'slawwhereoffencesare

definedwithsufficientaccuracy....Mensreaisanessential

ingredientofanoffence.However,itisaruleofconstruction.

Ifthereisaconflictbetweenthecommonlawandthe

statutorylaw,ithasalwaysbeenheldthatitisasoundrule

toconstrueastatuteinconformitywiththecommonlaw.But
Page119of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
itcannotbepostulatedthatstatutecannotalterthecourseof

thecommonlaw.Theparliament,inexerciseofits

constitutionalpowersmakesstatutesandinexerciseofthose

powersitcanaffirm,alterortakeawaythecommonlaw

altogether.Therefore,ifitisplainfromthestatutethatit

intendstoalterthecourseofthecommonlaw,thentheplaint

meaningshouldbeaccepted.Theexistenceofmensreaas

anessentialingredientofanoffencehastobemadeoutby

theconstructionofthestatute."

114.Whiledecidingthesaidcase,theFullCourtplacedreliance

uponajudgmentbyWright,J.inSherrasv.DeRuten,1985-1

QB918,whereinitwasobservedasunder:-

"Thereisapresumptionthatmensrea,anevilintentionora

knowledgeofthewrongfulnessoftheact,isanessential

ingredientineveryoffence,butthatpresumptionisliableto

bedisplacedeitherbythewordsofthestatutecreatingthe

offenceorbythesubjectmatterwithwhichitdeals,andboth

mustbeconsidered.......Inordertofindoutwhethermens

reai.e.aguiltymindisaningredientornot,referencehasto

bemadetothelanguageoftheenactment,theobjectand

subjectmatterofthestatuteandthenatureandcharacterof

theActsoughttosoughttobepunished."

115.TheHon'bleSupremeCourtinGujaratTravancore

agencyv.CommissionerofIncomeTax,AIR1989SC1971,

whereintheCourtconsideredtheprovisionofSection271(1)(a)of

theIncomeTaxActandheldthattheelementofmensreaisnot

involvedbecausethepenaltyimposedincivilmattersisalwaysof

acivilnatureanditismisnomertotreatsuchproceedingsas

quasi-criminalmerelybecausepenaltyisimposed,andobserved

asunder:-

"Inmostcasesofcriminalliability,theintentionoflegislature

isthatpenaltyshouldserveasadeterrent.Thecreationof
Page120of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
anoffencebythestatuteproceedswithapresumptionthat

societysuffersinjurybytheactoromissionofdefaulterand

thatadeterrentsentencemustbeimposedtodiscouragethe

repetitionoftheoffence.Inacaseofproceedingsunder

Section271(1)(a),however,itseemsthattheintentionofthe

legislatureistoemphasisthefactoflossofrevenueandto

providearemedyforsuchloss,although,nodoubt,an

elementofcoercionispresentinthepenalty.Inthis

connection,theterminwhichpenaltyfallstobemeasured,is

significant.Unlessthereissomethinginthenatureofstatute

indicationtheneedtoestablishtheelementofmensrea,itis

generallysufficienttoprovethatadefaultincomplyingwith

thestatutehasoccurred.Inouropinion,thereisnothingin

Section271(1)(a)whichrequiresthatmensreamustbe

provedbeforepenaltycanbeleviedunderthatprovisions.....

Accordingly,weholdthattheelementofmensreawasnot

requiredtobeprovedintheproceedingstakenbytheIncome

TaxOfficerunderSection271(1)(a)oftheIncomeTaxAct

againsttheassessee."

116.AConstitutionBenchoftheHon'bleSupremeCourtinJain

Bros.andSectionOrs.v.TheUnionofIndiaandOrs.,AIR1970SC

778,whileexaminingacaseofimposingthepenaltyunderthe

SectionIncomeTaxAct,heldthatpenaltywasmerelyanadditionaltax

beingacivilliabilityundertheTaxStatute,andobservedas

under:-

"Althoughpenaltyhasbeenregardedasanadditionallaxin

acertainsenseandforcertainpurpose,itisnotpossibleto

holdthatpenaltyproceedingsarejudicialandessentiallya

continuationoftheproceedingsrelatingtoassessmentwhere

areturnhasbeenfiled."

117.SectionInCommissionerofIncomeTaxv.KalyanDasRastogi,

1993(Suppl)1SCC663,theHon'bleSupremeCourtplaced

relianceupon,approvedandfollowedthejudgmentin

Gujarat-TravancoreAgency(supra)andreiteratedthesameview.

Page121of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
118.SectionInCommissionerofIncomeTax,Gujaratv.I.M.Patel

Co.,1993(Suppl)(1)SCC621,theHon'bleSupremeCourt

consideredalargenumberofitsearlierjudgments,including

GujaratTravancoreAgency(supra)andKalyanDasRastogi

(supra)andcategoricallyheldthatinalaxliability,thepleaof

mensreacannotbetaken.

119.SectionInIncomeTaxCommissioner,AndhraPradesh,

Hyderabadv.BhikajiDadabhaiCo.,AIR1961SC1265,the

ApexCourtheldthatpenaltyisanadditionaltaximposedupona

personinviewofhisdishonestyorcontumaciousconduct.

120.InCorpusJurisSecundum,85580,ithasbeenstatedas

under:-

"Apenaltyimposedforataxdelinquencyisacivilobligation,

remedialandcoerciveinitsnature,andisfardifferentfrom

thepenaltyforacrimeofafineorforfeitureprovidedas

punishmentfortheviolationofcriminalorpenallaws."

121.SectionInM/s.HindustanSteelLtd.v.TheStateofOrissa,AIR

1970SC253,theHon'bleSupremeCourtconsideredthe

provisionsoftheOrissaSalesTaxact,1947,particularlythe

provisionsrelatingtoimpositionofpenaltyimposedfordefaultin

registeringasadealerunderSection9(1)readwithSection25(1)

(a)ofthesaidAct,andheldasunder:-

"Buttheliabilitytopaypenaltydoesnotarisemerelyupon

proofofdefaultinregisteringasadealer.AnOrderimposing

penaltyforfailuretocarryoutastatutoryobligationisthe

resultofaquasi-criminalproceedings,andpenaltywillnot
Page122of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
ordinarilybeimposedunlessthepartyobligedeitheracted

deliberatelyindefianceoflaworwasguiltyofconduct

contumaciousordishonest,oractedincontumaciousor

dishonest,oractedinconsciousdisregardofitsobligation.

Penaltywillnotalsobeimposedmerelybecauseitislawful

todoso.Whetherpenaltyshouldbeimposedforfailureto

performastatutoryobligationisamatterofdiscretionofthe

authoritytobeexercisedjudiciallyandonaconsiderationof

alltherelevantcircumstances.Evenifaminimumpenaltyis

prescribed,theauthoritycompetenttoimposethepenaltywill

bejustifiedinrefusingtoimposepenalty,whenthereisa

technicalorvenialbreachoftheprovisionsoftheActor

wherethebreachflowsfromabonafidebeliefthatthe

offenderisnotliabletoactinthemannerprescribedbythe

statute.ThoseinchargeoftheaffairsoftheCompanyin

failingtoregistertheCompanyasadealeractedinthe

honestandgenuinebeliefthattheCompanywasnota

dealer.Grantingthattheyerred,nocaseforimposing

penaltywasmadeout."

122.Followingtheaforesaidprovisions,whileinterpretingthe

provisionsoftheMadhyaPradeshGeneralSalesTaxAct,1959,

theHon'bleSupremeCourt,intheSectionCementMarketingCo.of

IndiaLtd.v.TheAsstt.CommissionerofSalesTax,Indora

andOrs.,AIR1980SC346,heldthatimpositionofpenaltyis

penalincharacterandunlessthefilingofaninaccuratereturnis

accompaniedbyaguiltymind,theSectioncannotbeinvokedfor

imposingpenalty.Ifthecontraryviewistaken,theresultwould

bethateveniftheassesseeraisesabonafidecontentionthata

particularitemisnotliabletobeincludedinthetaxable

turnover,hewouldhavetoshowitasformingpartofthetaxable

turnoverinhisreturnandpaytaxuponitonpainofbeingheld

liableforpenaltyincasehiscontentionisultimatelyfoundbythe

Courttobenotacceptable.

Page123of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
123.InOmPrakashSheoPrakashandOrs.etc.etc.v.Union

ofIndiaAnr.,AIR1984SC1194,theHon'bleSupremeCourt

consideredtheprovisionsoftheAmendingSalesTaxAct,made

applicableretrospectivelyimposingthepenaltyalso,and

examineditsvalidityonthetouch-stoneofprovisionsofSectionArticle

19(1)(f)Section(g)andSectionArticle21oftheConstitutionofIndia,asSectionArticle

21oftheConstitutionofIndia,asSectionArticle20oftheConstitution

guaranteestheprotectioninrespectofconvictionfortheoffence

underanylawforthetime-beinginforceunlesstheother

conditionsprovidedthereinarecompliedwith.TheHon'bleApex

Courtconsideredalargenumberofitsearlierjudgments,

includingthemeaninganddefinitionof"penalty"andreachedthe

conclusionthat"apenaltyimposedbytheSalesTaxAuthorityis

onlyacivilliability,thoughpenalinnature,anditcanbe

imposedprovidedthedefaultcommittedbythedealeris

establishedataninquiryaftergivingthedealerconcernedan

opportunityofbeingheard.Moreso,thedegreeofremissness

involvedinthedefaultisarelevantfactortobetakeninto

accountwhilelevyingpenalty.SectionAstheActprovidesboththe

minimumandthemaximumamountofpenaltyleviableanditis

corelatedtotheamountoftaxwhichwouldhavehavebeen

avoidediftheturnoverreturnedbysuchdealerhadbeen

acceptedascorrect.Theorderlevyingpenaltyisquasi-judicialin

characterandinvolvesexerciseofjudicialdiscretion.

124.AConstitutionBenchoftheHon'bleSupremeCourt,in

KhemkaandCo.(Agencies)Pvt.Ltd.v.Stateof
Page124of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
Maharashtra,AIR1975SC1549,consideredtheprovisionsof

theCentralSalesTaxact,1956inacaseofdefaultinpaymentof

taxinrespectofSectionCentralActwithintheprescribedtime,andheld

asunder:-

"Penaltyisnotmerelysanction.Itisnotmerelyadjunctto

assessment.Itisnotmerelyconsequentialtoassessment.It

isnotmerelymachinery.Penaltyisinadditiontotaxandisa

liabilityundertheAct."

125.TheConstitutionBenchoftheSupremeCourtinSectionMaqbool

Hussainv.StateofBombay,AIR1953SC325,consideringthe

natureofproceedingsundertheSeaCustomsActandFERA,

1947,dealingwiththeprincipleandscopeunderlyinginSectionArticle

20(2)oftheitsConstitutionofIndia,heldasunder:-

"TheSeaCustomAuthoritieswerenotajudicialtribunaland

theadjudgingofconfiscation,increasedrateofdutyor

penaltyundertheprovisionsoftheSeaCustomsActdidnot

constituteajudgmentororderofaCourtofjudicialtribunal

necessaryforthepurposeofsupportingapleaofdouble

jeopardy."

126.ASevenJudgesBenchoftheHon'bleSupremeCourt,in

R.S.Joshietc.v.AjitMillsLtd.andAnr.etc.,AIR1977SC

2279,consideredthescopeofmens-reawhileinterpretingthe

provisionsofBombaySalesTaxAct,1959,andalsoconsidered

variousfacetsoftheexpression'penalty'.TheCourtobservedas

under;-

"Therewasacontentionthattheexpression'forfeiture'did

notdenoteapenalty.Thus,perhaps,mayhavetobedecided

inthespecificsettingofastatute.Butspeakinggenerally,

andhavinginmindtheobjectofSection37readwithSection

46,weareinclinedtotheviewthatforfeiturehasapunitive
Page125of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
impact.Black'slegalDictionarystatesthat'toforfeit'is'to

lose,orlosetherightto,bysomeerror,fault,offenceorcrime,

'toincurapenalty.''Forfeiture',asjudicallyannotted,is'a

punishmentannexedbylawtosomeillegalactor

negligence....',somethingimposedasapunishmentforan

offenceofdelinquency.Theword,inthissense,isfrequently

associatedwiththeword"penalty."AccordingtoBlack's

LegalDictionary,'theterms'fine','forfeiture'and'penalty'are

oftenusedloosely,andevenconfusedly,butwhena

discriminationismade,theword'penalty'isfoundtobe

genericinitscharacter,includingbothfineandforfeiture.A

'fine'isapecuniarypenalty,andiscommonly(perhaps

always)tobecollectedbysuitinsomeform.A'forfeiture'isa

penaltybywhichoneloseshisrightsandinterestinhis

property.

.......Theword'forfeiture'mustbearthesamemeaningofa

penaltyforbreachofaprohibitorydirection.Thefactthat

thereisarithmeticalidentity,assumingittobeso,between

thefiguresoftheillegalcollectionsmadebythedealersand

theamountsforfeitedtotheStatecannotcreatea

conceptualconfusionthatwhatisprovidedisnot

punishmentbutatransferenceoffunds.Ifthisviewbe

correct,andweholdsothelegislature,byinflictingthe

forfeiture,doesnotgooutsidethecreasewhenithitsout

againstthedealeranddepriveshim,bythepenaltyofthe

law,oftheamountillegallygatheredfromthecustomers.

TheSectionCriminalProcedureCode,CustomsandExciseLaws

andseveralotherpenalstatutesinIndiahaveuseddiction,

whichacceptsforfeitureasakindofpenalty.When

discussingtherelingsofthisCourtwewillexplorewhether

thistruenatureof'forfeiture'iscontradictedbyanythingwe

canfindinSection37(1),Section46or63.Evenherewemayreject

thenotionthatapenaltyorapunishmentcannotbecastin

theformofanabsoluteornofaultliabilitybutmustbe

proceededbymensrea.Theclassicalviewthat'nomens

rea,nocrime'haslongagobeenerodedandseverallawsin

India,andabroad,especiallyregardingeconomiccrimes

anddepartmentalpenalties,havecreatedsevere

punishmentsevenwheretheoffenceshavebeendefinedto

excludemensrea.Therefore,thecontentionthatSection
Page126of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
37(1)fastensaheavyliabilityregardlessoffaulthasnoforce

indeprivingtheforfeitureofthecharacterofpenalty."

127.SectionInStateofRajasthanv.D.P.Metals,AIR2001SC3076,

theHon'bleSupremeCourtconsideredthevalidityofthe

provisionsofSection78(5)oftheRajasthanSalesTaxAct,1994,

whichprovidesforimposingthepenaltyifthegoodsbeingcarried

inavehiclearebeingfoundwithoutdocumentsrequiredunder

theActandtheRulesframedthereunder,orthedocumentsare

foundtobefalseorforged.TheCourtheldasunder:-

"PersonInchargeofthegoodsshouldhavealltherequisite

documentsrelatingtothetitleorsaleofthegoods,whichare

beingtransported.PenaltyunderSection78(5)isleviable

undertwocircumstances:firstly,ifthereisnon-compliance

withSection78(2)(a),i.e.notearringthedocuments

mentionedinthatclause;andsecondly,iffalseorforged

documentsordeclarationissubmitted.ThisSub-section

cannotrelatetopersonalbelongingswhicharenotmeantfor

salebutwouldrelatetothosetypesofgoods,inrespectof

whichdocumentsreferredtoinSection78(2)(a)existorcan

exist.Suchsubmissionoffalseorforgeddocumentsor

declarationatanycheckpostoreventhereaftercansafelybe

presumedtohavebeenmotivatedbydesiretomisleadthe

Authorities.Hidingthetruthandtenderfalsehoodwouldper

se,soexistenceofmens-reaevenifrequired.

Similarly,wheredespiteopportunityhavingbeengranted

underSection78(5),iftherequisitedocumentsreferredto

inClause(a)ofSub-section(2)arenotproduced,even

thoughthesameareexisting,wouldclearlyprovetheguilty

intent.Itisnotpossibletoagreewiththelearnedcounsel

forrespondentsthatthebreachreferredtoinSection78(5)

canberegardedastechnicalorvenial.Oncetheingredients

ofSection78(5)areestablishedaftergivingahearingand

complyingwiththeprinciplesofnaturaljustice,thereisno

discretionnottolevyorlevylesseramountofpenalty."

Page127of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
128.SectionInBengalIronMerchantAssociationandAnr.v.

Commissioner,CommercialTaxandAnr.,1996(7)SCC537,

theHon'bleSupremeCourtexaminedtheprovisionsofRule89-A

(2)oftheBengalSalesTaxRules,1941,andheldthatthesaid

provisionsofRule89-A(2)ofthesaidRules,1941requiredthat

anyconsignmentofnotifiedgoodsshallbeaccompaniedbya

declarationbytheconsignororhisauthorisedagentinrelationto

theconsignmentortocomplywiththem.Therulesquarely

placedanobligationupontheconsignor/vendortoissuesucha

declarationandtheconsignee/purchaserstocarrythe

declaration.Theconsigneeswerenotentitledtocomplainthat

becauseironandsteelweretaxableonlyatthefirstpointofsale,

thesellers(manufacturers)werenotissuingthedeclarationas

contemplatedbyRule89-A(2)andtheywere,therefore,notina

positiontoproducethedeclarationwhendemandedbythe

authorities,incaseoffailuretoproducethesaiddeclaration

form,theywereliabletopaythepenalty,asperthesaidRules,

1941.

129.SectionInKishoriLalRakeshKumarMandiv.Commissionerof

SalesTax,1985UPTC211,aDivisionBenchoftheAllahabad

HighCourt,whiledecidingareferenceoninterpretationof

Section15-A(a)(g)oftheUttarPradeshSalesTaxAct,1948,

whichreferredtorenewalofregistrationandfordefault,whether

penaltycanbeimposedwithoutprovingmensrea,expressedthe

viewthemensreaisnotnecessaryforimposingpenaltyfor

defaultcoveredbyClause(g),observingasunder:-

Page128of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
"....thoughmensreaisanecessaryingredientofanoffence

buttheLegislaturecanfreeanyprovisionrelatingtoan

offenceinastatutefromthisfetter.Clause(g)isfreefromthe

bonodageofmensrea."

130.SectionInSaiElectricals(P)Ltd.v.CommissionerofSalesTax,

1997UPTC721,whiledealingwiththeprovisionsofSection4-B

oftheU.P.TradeTax,1948,theAllahabadHighCourtobserved

thatmensreaisnotintendedbythelegislatureforimposingthe

penalty,andheldasunder:-

"Apenaltyimposedforataxdelinquencyisacivilobligation,

remedialandcoerciveinitsnature,andisfardifferentfrom

thepenaltyforacrimeorafineorforfeitureprovidedas

punishmentfortheviolationofcriminalorpenallaws."

131.InM/s.RamaandSons,GeneralMerchant,Ballia(supra),

theAllahabadHighCourt,whiledealingwiththeprovisionsof

Section10-AofCentralSalesTaxAct,1956,observedthat

penaltyisleviableifapersonbeingaregistereddealer,falsely

representswhenpurchasinganyclassofgoodsthatgoodsof

suchclassarecoveredbyhiscertificateofregistration,andheld

asunder:-

"Thestatementsmadebythedealerswere,therefore,untrue

butthepenaltyhasbeenquashedonthegroundthatthere

wasnomensreainmakingthewrongavermentsinFormC."

132.TheCourtfurthercametotheconclusionthattheword

'falsification'mighthaveslightlydifferentinterpretationifthe

criminalprosecutionwaslaunched,butitwasacaseofpenalty,

whichwasleviedtocompensatetheRevenueandtocausethe

delinquenttocomplywiththelaw;therefore,mensreawasnotat
Page129of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
allattractedinthecase.

133.TheDivisionBenchoftheMadrasHighCourtinSectionVijaya

Electricalsv.StateofTamilNadu,199182STC268,while

interpretingtheanalogousprovisionsofSection10-Areadwith

Section10(b)oftheAct,heldthatmensreaneednotbe

establishedandifrepresentationisfoundtobefalse,itis

sufficienttolevythepenalty.

134.SimilarviewwasreiteratedbytheDivisionBenchofthe

MadhyaPradeshHighCourtinSectionCentralIndiaMotorsv.C.L.

Sharma,AssistantCommissionerofSalesTax,Indore

Region,IndoreandAnr.,198046STC.

135.SectionInStateofMadhyaPradeshv.NarainSinghandOrs.,

1983(3)SCC596,theHon'bleSupremeCourtconsideredascase

wheretwotruckscarryingfertilizerswereinterceptedbythe

MadhyaPradeshAuthoritiesundertheSectionEssentialCommodities

Actandtheaccuseddidnotdenythetransportoffertilizerbags

orinterceptionofitslorriesorseizureoffertilizerbagsandthe

onlydefencetakenthereinwasthantheywerenotawareofthe

contentsofthedocumentsseizedfromthemandtheywerenot

engagedinexportingthefertilizerbagsfromMadhyaPradeshto

MaharashtrainconsciousviolationofprovisionsoftheFertilizer

MovementControlOrder,1973readwithSections3andSection7ofthe

EssentialCommoditiesAct,1955.TheHon'bleSupremeCourt,

reversingtheorderofacquittal,heldthatmensreawasnotatall

attractedastheprovisionsofSection7(1)oftheEssential
Page130of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
Commoditiesactrequiredtobeinterpretedintrueperspective

anditprovidedtatifanypersoncontravenes,whetherknowingly,

intentionallyorotherwiseanyordermadeunderSection3,he

willbepunishedundertheF.M.C.O.TheCourtheldthatthe

elementofmensreainexportoffertilizerbagswithoutavalid

permitwas,therefore,notanecessaryingredientforconvicting

personforcontraventionoftheordermadeunderSection3ofthe

F.M.C.O.ifthefactumofexportorattempttoexportisprovedby

theevidenceadduced.Thisjudgmentisanauthoritytoshowthat

mensreamaybeanessentialingredientinacaseofoffencefor

punishingaperson,butlegislatureiscompetenttoprovidefor

punishmentincludingtheimprisonmenteveninacriminalcase,

excludingthescopeorattractionofmensrea.

136.SectionInC.A.Abrahimv.IncomeTaxOfficer,AIR1961SC609,

theApexCourtlaiddowntheguidelinesininterpretingthe

provisionsofFiscalStatutes,observingasunder:-

"Ininterpretingafiscalstatute,theCourtcannotproceedto

makegoodthedeficiency,iftherebeany;theCourtmust

interprettheStatuteasitstandsandincaseofdoubt,ina

mannerfavourabletothetax-paper.Butwhereasinthe

presentcase,byuseofthewords'capableofcomprehensive

import,provisionismadeforimposingliabilityforpenalty

upontax-paperguiltyoffraud,grossnegligenceorm

contumaciousconduct,aassumptionthatthewordswere

usedinarestrictedsensesoastodefeattheavadeobjectof

thelegislaturequaandcertainclauseswillnotbelightly

met."

137.SimilarviewhasbeenreiteratedinM/s.BhikajiDadabhai

Co.(supra),.

Page131of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
138.Similarly,inSectionCommissionerofSalesTaxv.ParsonTools

Plants,AIR1975SC1039,theApexCourtobservedas

under:-

"Wherethelegislatureclearlydeclaresitsintentinthe

schemeandlanguageofastatute,itisthedutyoftheCourt

togiveeffecttothesamewithoutscanningitswisdomor

policy,andwithoutengrafting,addingorimplyinganything

whichisnotcongenialtoorconsistentwithsuchexpressed

intentofthelaw-giver;moresoifthestatuteisataxing

statute."

RelevantprovisionsofSection22-AoftheActreadsas

under:-

"(3)Theownerorpersoninchargeofavehicle,boator

animalshallcarrywithhimagoodsvehiclerecord,tripsheet

oralogbook,asthecasemaybe,and(suchother

documents)asmaybeprescribedinrespectofthegoods

carriedinoronthevehicle,boatoranimal,asthecasemay

be,andproducethesamebeforeanyofficerinchargeof

check-postorbarrieroranyotherofficerasmaybe

empoweredbytheGovernmentinthatbehalf.Theowneror

personinchargeofavehicle,boatoranimalenteringthe

StatelimitsorleavingtheStatelimitsshallalsogivea

declarationcontainingsuchparticularsasmaybeprescribed

ofthegoodscarriedinoronthevehicle,boatoranimal,as

thecasemaybe,beforetheofficerinchargeofthecheckpost

rbarrierortheofficerempoweredasaforesaidandgiveone

copyofthedeclarationtosuchofficer,andkeeponecopy

withhim.

(7)(a)Theofficerinchargeofthecheckpostorbarrierorany

otherofficernotbelowtherankofanAssistantCommercial

TaxesOfficer,empoweredinthisbehalfmay,aftergivingthe

ownerorpersoninchargeofthegoodsreasonable

opportunityofbeingheardandafterholdingsuchfurther

enquiryashemaydeemfit,imposeonhimforpossessionof

goodsnotcoveredbygoodsvehiclerecord,anyother

documentsprescribedunderSub-section(3)orforsub
Page132of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
missionoffalsedeclarationordocuments,apenaltyequalto

fivetimesoftherateoftaxnotifiedunderSection5oftheAct,

forsuchgoodsor30%ofthevalueofsuchgoods,asmaybe

determinedbysuchofficerwhicheverisless.

Providedthatwherethegoodsarebeingcarriedwithout

properdocumentsasrequiredbySub-section(3)orwithany

falsedeclarationorstatementsandtheownerortheincharge

orthedriverofthevehicle,boatoranimalcarryingsuch

goodsisfoundincollusionforsuchcarryingofgoods,the

vehicleboatoranimalshallalsobeseizedbytheofficer

empoweredunderSub-section(7)andsuchofficer,after

affordinganopportunityofbeingheardtosuchowner,

inchargeordrivermayimposeapenaltynotexceeding30%

ofthevalueofthegoodsbeingcarriedandshallreleasethe

vehicle,boatoranimalonthepaymentofthesaidpenalty,or

onfurnishingsuchsecurityinsuchformasprescribedunder

Clause(b)ofSub-section(7)................"

139.SectionInMahaveerConductorsv.AssistantCommercialTaxes

Officer,1997(104)STC65,thisCourthasinterpretedthe

provisionsofSection22-A(7)holdingthatmensreawasa

necessaryingredient,observingasunder:-

"....Anyorderimposingpenaltyforfailuretocarryout

statutoryobligationisquasi-criminalinnature.TheStatute

hasnotprovidedanypresumptionabouttheexistenceof

mensreaagainstthedefaulter,therefore,asaprosecutor,

burdenofprovingisprimarilyontheRevenue.TheRevenue

hasfailedtodischargeitsburdeninasmuchasithasmerely

reachedapresumptionofsuchdeliberatebreach....."]

140.SimilarviewhasbeenreiteratedinSectionAssistantCommercial

TaxOfficer,FlyingSquadev.VoltasLtd.,2000(120)STC270.

Whiledecidingthesaidcase,reliancehasbeenplaceduponthe

earlierjudgmentsinMahaveerConductors(supra)and

HindustanSteelLtd.(supra).

Page133of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
141.ADivisionBenchoftheRajasthanHighCourtinSectionLalji

MooljiTransportCompanyv.StateofRajasthan,DBCWPNo.

324/2002.,decidedon10.4.2002,consideringthejudgmentsof

theHon'bleSupremeCourtinR.S.JoshiandM/s.D.P.Metal

(supra)andM/s.D.P.Metals(supra)etc.,hastakenaviewthatit

wouldnotbecorrecttoprotectataxevadersayingthattherewas

absenceofmensrea.Thesubmissionoffalseofforgeddocument

ofdeclarationatthecheckpostoreventhereafter,cansafelybe

presumedtohavebeenmotivatedbydesiretomisleadthe

authorities.Thus,itisnotalwaysnecessarythatthedoctrineof

mensreaisattractedineveryfiscalstatuteinallsituations.The

Courtfurtherheldasunder:-

"Therequirementoflawismeanttobestrictlyconstrued,

particularlyinareasofevasionoftax.Wecannotlosesightof

thefactthatofthethereareattemptstoavoidstatutory

obligationorrequirementofobliquereason.Anundue

indulgenceandleniencyinfavourofthetax-evaderson

technicalormisplacedsympatheticgroundsleadstoserious

consequence'saffectingtherevenue,andassuch,

developmentandsecurityoftheState.Wearenotobliviousof

thefactthatthepenaltyprovisionscannotbeusedasa

revenue-yieldingprovision.Theobjecttothepenaltyprovision

istoensurecomplianceinthelargerpublicinterest."

142..Finallyintheaforesaidcontext,wemayrefertoadecision

oftheSupremeCourtinthecaseofSectionTamilNaduHousingBoard

vs.CollectorofCentralExcise,reportedin1994Supp.4SCR

62,whereintheSupremeCourt,whiledealingwiththescopeof

theprovisotoSection11AoftheCentralExciseSectionSaltAct,1944,

observedasunder;

Page134of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
"Whenthelawrequiresanintentiontoevadepaymentof

dutythenitisnotmerefailuretopayduty,Itmustbe

somethingmore.Thatis,theassesseemustbeawarethat

thedutywasleviableanditmustdeliberatelyavoidpaying

it.Theword'evade'inthecontextmeansdefeatingthe

provisionoflawofpayingduty.Itismademorestringentby

useoftheword'intent'.Inotherwordstheassesseemust

deliberatelyavoidpaymentofdutywhichispayablein

accordancewithlaw.SectionInPadminiProductsv.Collectorof

CentralExcise,itwasheldthatwheretherewasscopefor

doubtwhethercasefordutywasmadeoutornottheproviso

toSection11AoftheActwouldnotbeattracted.The

appellantisastatutorybody.Ithadtakenoutlicencefor

concreteasitwasbeingsoldtooutsiders.Nolicencewas

takenoutforwoodproductsasaccordingtoititwasadvised

sobytheExciseDepartmentitself.Itwouldhavebeenbetter

iftheappellantwouldhaveexaminedtheofficerwhowas

advisednottotakelicence.Butmerenon-examinationof

officercouldnotgiverisetoaninferencethattheappellant

wasintentionallyevadingpaymentofduty.Whenthe

appellantwasfoundnottohavebeenmakinganyprofitand

ithadtakenoutlicenceforconcreteunittheninabsenceof

anyothermaterialtoproveanydeliberateactofthe

appellantthepresumptionofreasonabledoubtofthe

appellantcannotbesaidtohavebeensuccessfullyrebutted.

ThefindingoftheTribunalthattherewasanintentiononthe

partoftheappellanttoevadepaymentofduty,isnotbased

onanymaterial.Itwasaninferencedrawnforwhichthere

wasnobasis."

143.Confiscationproceedingisaquasijudicialproceedingand

notacriminalproceeding.Ordinarily,proofbeyondreasonable

doubtandproofofmensreaareforeigntothescopeofthe

confiscationproceeding.However,thelanguageofthestatute

shouldbereadclosely.Sometimes,thelanguageofthestatute

mayindicatetheneedtoestablishtheelementofmensrea.Itis

truethatmensreaisnotanessentialelementforimposing
Page135of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
penaltyforbreachofcivilobligationsorliabilities.However,

applyingthedictumoftheSupremeCourtaslaidinTamilNadu

HousingBoard(supra),theprovisionsofSection130oftheActis

mademorestringentbyuseoftheword"intent".Whenthelaw

requiresintentiontoevadepaymentofduty,thenitisnotmere

failuretopayduty.Itmustbesomethingmore.Thissomething

moreshouldnotbeconstruedasobligatoryonthepartofthe

Revenuetoestablishorprovethenecessarymensreaforthe

purposeofconfiscationandpenalty.

144.Whenitcomestoconfiscatingthevehicle,theconsideration

wouldbealtogetherdifferent.Theideaistoconfiscatethe

vehicle,irrespectiveofitsownershiporparticipationoftheowner

intheactualtransportofthegoodsincontraventionofthe

provisionoftheActortheRules.Itiswhatiscalledaprovision

oflaw"tocondemnthevehicle".Inotherwords,becausethe

vehiclecarriedthegoodsincontraventionoftheprovisionsofthe

ActortheRuleswithanintenttoevadethepaymentoftax,it

hadbecometaintedandis,therefore,liabletobeconfiscated.Of

course,Section130providesthattheownerofthevehiclemay

payredemptionfineinlieuofconfiscation.Theownerofthe

conveyancecanalsoprovethatthevehiclewasusedwithouthis

knowledgeorconnivanceorhisagentorthepersoninchargeof

theconveyance.

145.Inanappropriatecase,evenafterdeterminingtheamount

oftaxandpenaltyunderSection129oftheActandreleaseofthe

goodsandvehicle,theauthoritiesmaybejustifiedinissuing
Page136of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
noticeunderSection130oftheActforthepurposeofinitiating

confiscationproceedings.Inotherwords,atthestageofSection

129oftheAct,theremaynotbesufficientevidenceforthe

purposeofcomingtotheconclusionthatthecaseisonewhere

theownerofthegoodsorthedriverofthevehiclehadthe

intentiontoevadepaymentoftax.Afurtherinquiryinthisregard

mayrevealofsuchintentiontoevadetax.Insuchcircumstances

also,theauthoritymaybejustifiedininitiatingtheconfiscation

proceedings.

146.ItwasvociferouslyarguedbeforeusthatSection130ofthe

Actcanbeinvokedonlyiftheperson,transportinganygoods,or

theownerofthegoods,failstopaytheamountoftaxandpenalty

asprovidedinsub-section(1)ofSection129within14daysof

detentionorseizure.Inotherwords,theargumentisthatthe

goodsortheconveyanceareliabletobeconfiscatedonlyinthe

eventofnon-complianceoftheprovisionofSection129(6)ofthe

Act.Weareafraid,suchargumentisnotsustainableinlaw.We

havealreadytakentheviewthatSections129andSection130oftheAct

aremutuallyexclusiveandindependentofeachother.Inour

opinion,Section130oftheActisnotdependentonSection

129(6)oftheAct.Thereasonwhywearesayingsoisthatifthe

amountoftaxandpenaltyisdeterminedbytheauthority

concernedunderSection129oftheActforthepurposeofrelease

ofthegoodsandtheconveyance,andsuchamountis,ultimately,

notdeposited,thentheobviousconsequenceofthesamewould

beforfeitureofthegoodsandthevehiclewiththeGovernment.

Theauthoritiesarenotexpectedtokeepthegoodsorthevehicle
Page137of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
intheirpossessionforanindefiniteperiodoftime.Clause(5)of

Section130makesitclearthatwherethegoodsorconveyance

areconfiscatedundertheAct,thetitleofsuchgoodsor

conveyancewouldvestintheGovernment.

147.However,evenincaseoffailuretocomplywithclause(6)of

Section129oftheAct,theconfiscationwouldnotbeautomatic

butanoticewillhavetobeissued,callingupontheownerofthe

goodstoshow-causeastowhythegoodsshouldnotbe

confiscated.

148.However,intheaforesaidcontext,wewouldliketoclarify

something.Ifasituationariseswhereinafterthedetermination

ofthetaxandpenaltyinaccordancewiththeprovisionsof

Sections129(2)and(3)respectively,iftheperson,transporting

anygoods,ortheownerofthegoods,failtopaytheamountof

taxandpenaltywithin14daysofsuchdetentionorseizure,then

furtherproceedingswouldbeinitiatedinaccordancewiththe

provisionsofSection130,i.e,forthepurposeofconfiscation.

However,insuchaneventuality,itwouldnotbenecessaryfor

thedepartmenttoestablishanyintentiontoevadepaymentof

tax.Sub-clause(6)ofSection129providesaneventuality,by

which,itwouldbeopenfortheauthoritytoputthegoodsand

theconveyancetoauctionanddepositthesaleproceedthereof

withtheGovernment.

149.Itwasalsosoughttobearguedonbehalfofthepetitioners

thatoncethereisdetentionandseizureofgoodsandconveyance,
Page138of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
thenitismandatoryfortheproperofficer,detainingorseizing

goodsorconveyancetoissueanoticespecifyingthetaxand

penaltypayableand,thereafterpassanorderforpaymentoftax

andpenaltyunderclause(a)orclause(b)orclause(c).The

emphasisissoughttobeplacedontheword"shall"inclause(3)

ofSection129.Theargumentproceedsonthefootingthat

withoutanynotice,ascontemplatedunderSection129(3)ofthe

Act,thereisnoscopefortheauthoritytostraightwayproceedto

Section130oftheActforthepurposeofconfiscation.

150.Theaforesaidsubmissioncanbelookedintoandanswered

intwoways.First,theword"shall"shouldbereadin

conjunctionwithclause(4)ofSection129.Clause(4)provides

thatnotax,interestorpenaltycanbedeterminedunder

sub-section(1)withoutgivingthepersonconcernedan

opportunityofhearing.Thus,forthepurposeofgivingan

opportunityofhearing,noticeundersub-section(3)isamust.

Thisdoesnotnecessarilyimplythattherecannotbeproceedings

forconfiscationintheabsenceofanyactionunderSection129of

theActfirstinpointoftime.Thesecondwayoflookingatthis

submissionistoconstruetheword"shall"as"may".Inother

words,theword"shall"shouldbereadasdirectoryandnot

mandatory.Inthisregard,Mr.Trivedi,thelearnedAdvocate

GeneralinvitedtheattentionofthisCourttoadecisionofthe

SupremeCourtinthecaseofSectionMayGeorgevs.Special

TahsildarOrs.,reportedin(2010)13SCC98.Mr.Trivedi

placedrelianceontheobservationsmadebytheSupremeCourt

inparas-13to26.ThecasebeforetheSupremeCourtwasone
Page139of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
undertheSectionLandAcquisitionAct,1894.Section9(3)oftheAct,

1894wasasubjectmatterofconsiderationbeforetheSupreme

Court.Wequotetherelevantparas;

"13.Section9(3)oftheActreadsasunder:-

"TheCollectorshallalsoservenoticetothesameeffectonthe

occupier(ifany)ofsuchlandandonallsuchpersonsknown

orbelievedtobeinterestedtherein,ortobeentitledtoactfor

personssointerested,asresideorhaveagentsauthorizedto

receiveserviceontheirbehalf,withintherevenuedistrictin

whichthelandissituate"

14.Section9oftheActprovidesforanopportunitytothe

"personinterested"tofileaclaimpetitionwithdocumentary

evidencefordeterminingthemarketvalueofthelandandin

caseapersondoesnotfileaclaimunderSection9evenafter

receivingthenotice,hestillhasarighttomakean

applicationformakingareferenceunderSection18ofthe

Act.Therefore,schemeoftheActissuchthatitdoesnot

causeanyprejudicialconsequenceincasethenoticeunder

Section9(3)isnotserveduponthepersoninterested.

15.Whiledeterminingwhetheraprovisionismandatoryor

directory,inadditiontothelanguageusedtherein,theCourt

hastoexaminethecontextinwhichtheprovisionisusedand

thepurposeitseekstoachieve.Itmayalsobenecessaryto

findouttheintentofthelegislatureforenactingitandthe

seriousandgeneralinconveniencesorinjusticetopersons

relatingtheretofromitsapplication.Theprovisionis

mandatoryifitispassedforthepurposeofenablingthe

doingofsomethingandprescribestheformalitiesfordoing

certainthings.

16.InDattatrayaMoreshwarVs.TheStateofBombay

Ors.,AIR1952SC181,thisCourtobservedthatlawwhich

createspublicdutiesisdirectorybutifitconfersprivate

rightsitismandatory.Relevantpassagefromthisjudgment

isquotedbelow:-
"Itiswellsettledthatgenerallyspeakingtheprovisionsofthe

statutecreatingpublicdutiesaredirectoryandthose
Page140of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
conferringprivaterightsareimperative.Whentheprovision

ofastatuterelatetotheperformanceofapublicdutyandthe

caseissuchthattoholdnullandvoidactsdoneinneglectof

thisdutywouldworkseriousgeneralinconvenienceor

injusticetopersonswhohavenocontroloverthoseentrusted

withthedutyandatthesametimewouldnotpromotethe

mainobjectoflegislature,ithasbeenthepracticeofthe

Courtstoholdsuchprovisionstobedirectoryonlytheneglect

ofthemnotaffectingthevalidityoftheactsdone."

17.AConstitutionBenchofthisCourtinStateofU.P.Ors.

Vs.BabuRamUpadhyaAIR1961SC751,decidedtheissue

observing:-

"ForascertainingtherealintentionoftheLegislature,the

Courtmayconsider,interalia,thenatureandthedesignof

thestatute,andtheconsequenceswhichwouldfollowfrom

construingittheonewayortheother,theimpactofother

provisionswherebythenecessityofcomplyingwiththe

provisionsinquestionisavoided,thecircumstance,namely,

thatthestatuteprovidesforacontingencyofthe

non-compliancewiththeprovisions,thefactthatthe

non-compliancewiththeprovisionsisorisnotvisitedby

somepenalty,theseriousortrivialconsequencesthatflow

therefrom,and,aboveall,whethertheobjectofthe

legislationwillbedefeatedorfurthered."

18.InRazaBulandSugarCo.Ltd.,RampurVs.Municipal

Board,RampurAIR1965SC895;andSectionStateofMysoreVs.

V.K.Kangan,AIR1975SC2190,thisCourtheldthatasto

whetheraprovisionismandatoryordirectory,would,inthe

ultimateanalysis,dependupontheintentofthelaw-maker

andthathastobegatherednotonlyfromthephraseologyof

theprovisionbutalsobyconsideringitsnature,itsdesign

andtheconsequencewhichwouldfollowfromconstruingitin

onewayortheother.

19.InSharif-Ud-DinVs.AbdulGaniLoneAIR1980SC303,

thisCourtheldthatthedifferencebetweenamandatoryand

directoryruleisthattheformerrequiresstrictobservance

whileinthecaseoflatter,substantialcomplianceoftherule

maybeenoughandwherethestatuteprovidesthatfailureto

makeobservanceofaparticularrulewouldleadtoaspecific
Page141of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
consequence,theprovisionhastobeconstruedas

mandatory.

20.SimilarviewhasbeenreiteratedbythisCourtinBalwant

SinghOrs.Vs.AnandKumarSharmaOrs.(2003)3SCC

433;BhavnagarUniversityVs.PalitanaSugarMillPvt.Ltd.

Ors.AIR2003SC511;andChandrikaPrasadYadavVs.

StateofBiharOrs.,AIR2004SC2036.

21.InM/s.RubberHouseVs.M/s.ExcellsiorNeedle

IndustriesPvt.Ltd.AIR1989SC1160,thisCourtconsidered

theprovisionsoftheHaryana(ControlofRentEviction)

Rules,1976,whichprovidedformentioningtheamountof

arrearsofrentintheapplicationandheldtheprovisiontobe

directorythoughtheword"shall"hasbeenusedinthe

statutoryprovisionforthereasonthatnon-complianceofthe

rule,i.e.non-mentioningofthequantumofarrearsofrentdid

involvenoinvalidatingconsequenceandalsodidnotvisit

anypenalty.

22.InB.S.KhuranaOrs.Vs.MunicipalCorporationof

DelhiOrs.(2000)7SCC679,thisCourtconsideredthe

provisionsoftheDelhiMunicipalCorporationAct,1957,

particularlythosedealingwithtransferofimmovable

propertyownedbytheMunicipalCorporation.After

consideringtheschemeoftheActforthepurposeof

transferringthepropertybelongingtotheCorporation,the

CourtheldthattheCommissionercouldalienatetheproperty

onlyonobtainingthepriorsanctionoftheCorporationand

thisconditionwasheldtobemandatoryforthereasonthat

theeffectofnon-observanceofthestatutoryprescription

wouldvitiatethetransferthoughnospecificpowerhadbeen

conferredupontheCorporationtotransfertheproperty.

23.InStateofHaryanaAnr.Vs.RaghubirDayal(1995)1

SCC133,thisCourthasobservedasunder:-

"Theuseoftheword`shall'isordinarilymandatorybutitis

sometimesnotsointerpretedifthescopeoftheenactment,on

consequencestoflowfromsuchconstructionwouldnotso

demand.Normally,theword`shall'primafacieoughttobe

consideredmandatorybutitisthefunctionoftheCourtto

ascertaintherealintentionofthelegislaturebyacareful

examinationofthewholescopeofthestatute,thepurposeit

seekstoserveandtheconsequencesthatwouldflowfrom
Page142of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
theconstructiontobeplacedthereon.Theword`shall',

therefore,oughttobeconstruednotaccordingtothe

languagewithwhichitisclothedbutinthecontextinwhich

itisusedandthepurposeitseekstoserve.Themeaninghas

tobedescribedtotheword`shall;asmandatoryoras

directoryaccordingly.Equally,itissettledlawthatwhena

statuteispassedforthepurposeofenablingthedoingof

somethingandprescribestheformalitieswhicharetobe

attendedforthepurpose,thoseprescribedformalitieswhich

areessentialtothevalidityofsuchthing,wouldbe

mandatory.However,ifbyholdingthemtobemandatory,

seriousgeneralinconvenienceiscausedtoinnocentpersons

orgeneralpublic,withoutverymuchfurtheringtheobjectof

theAct,thesamewouldbeconstruedasdirectory."

24.InGullipilliSowriaRajVs.BandaruPavani@Gullipili

Pavani(2009)1SCC714,thisCourtwhiledealingwitha

similarissueheldasunder:

"...Theexpression"may"usedintheopeningwordsofSection

5isnotdirectory,ashasbeensoughttobeargued,but

mandatoryandnon-fulfilmentthereofwouldnotpermita

marriageundertheActbetweentwoHindus.Section7ofthe

1955ActistobereadalongwithSection5inthataHindu

Marriage,asunderstoodunderSection5,couldbe

solemnisedaccordingtotheceremoniesindicatedtherein"

25.Thelawonthisissuecanbesummarisedtotheeffect

thatinordertodeclareaprovisionmandatory,thetesttobe

appliedisastowhethernon-complianceoftheprovision

couldrenderentireproceedingsinvalidornot.Whetherthe

provisionismandatoryordirectory,dependsupontheintent

ofLegislatureandnotuponthelanguageforwhichtheintent

isclothed.Theissueistobeexaminedhavingregardtothe

context,subjectmatterandobjectofthestatutoryprovisions

inquestion.TheCourtmayfindoutaswhatwouldbethe

consequencewhichwouldflowfromconstruingitinoneway

ortheotherandastowhethertheStatuteprovidesfora

contingencyofthenon-complianceoftheprovisionsandasto

whetherthenon-complianceisvisitedbysmallpenaltyor

seriousconsequencewouldflowtherefromandastowhether

aparticularinterpretationwoulddefeatorfrustratethe

legislationandiftheprovisionismandatory,theactdonein
Page143of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
breachthereofwillbeinvalid.

26.Theinstantcaseisrequiredtobeexaminedinthelightof

theaforesaidsettledlegalprovision.Infact,failureof

issuanceofnoticeunderSectionsection9(3)wouldnotadversely

affectthesubsequentproceedingsincludingtheAwardand

titleofthegovernmentintheacquiredland.Sofarasthe

personinterestedisconcerned,heisentitledonlytoreceive

thecompensationandtherefore,theremaybealarge

numberofdisputesregardingtheapportionmentofthe

compensation.Insuchaneventuality,hemayapproachthe

CollectortomakeareferencetotheCourtunderSectionsection30of

theAct."

151.However,tosaythatconfiscationispermissibleonlyinthe

eventoffailuretocomplywithSection129(6)oftheActisnot

tenableinlaw.Atthisstage,wemayrefertoadecisionofthe

KeralaHighCourt,uponwhich,strongreliancehasbeenplaced

bythelearnedcounselappearingforthepetitioners.Weare

referringtothedecisioninthecaseofSectionNoushadAllakkatvs.

StateTaxOfficer(WC),(2019)101taxmann.com75(Kerala).

Relianceissoughttobeplacedonthefollowingobservations;

"7.WenoticefromSection129thattheconfiscation

proceedingsunderSection130wouldbepossibleonlyifthe

dealerfailstopaytheapplicabletaxandpenaltyimposedby

anorderunderSection129(3).Confiscationishencea

coercivemeasuretoensurepaymentofthetaxandpenalty

leviedonadelinquentdealer;whootherwiseisatthreatof

loosingthegoodsitself.Confiscationisnotanautomatic

consequenceensuingfromdetentionandanorderpassed

underSection129(3),oftherebeingacontraventionofthe

provisionsoftheActorrulesmadethereunder.Wewouldnot

lookatothersituations,whereinconfiscationismandated,

whichisnotrelevantforthepurposeofdetentionsimplicitor

underSection129.Whensuchapplicabletaxandpenaltyis

notpaid,therecouldbeproceedingsinitiatedunderSection

130,whichwouldleadtoconfiscationofthegoodsitself.This
Page144of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
provisionisapplicableonly,intheeventoffailureonthepart

ofthedealertopaytheapplicabletaxandpenalty.Inthe

presentcase,thedealerwasallowedreleaseofthegoodsby

furnishingbankguaranteeforthetaxandpenalty.The

dealerhasalsofurnishedasecurityequivalenttothevalue

ofthegoods.Thereis,hence,noquestionoftheapplicable

taxandpenaltybeingnotpaid,sinceatanytimethebank

guaranteecouldbeenforced."

152.Aclosereadingofpara-7oftheKeralaHighCourtdecision,

referredtoabove,wouldindicatethatthesame,onthecontrary,

supportstheviewwehavetaken.Inpara-7,therelevant

observationsare"wewouldnotlookatothersituationswherein

confiscationismandatedwhichisnotrelevantforthepurposeof

detentionsimplicitorunderSection129".Theothersituations

whichtheKeralaHighCourtistalkingaboutarethesituations

asenvisagedinSection130oftheAct.Inouropinion,para-7of

theKeralaHighCourtjudgmentdoesnotlaydownaproposition

oflawthattheproceedingsunderSection130oftheActcanbe

initiatedonlyintheeventoftheapplicabletaxandpenaltynot

paid.

153.Ithasalsobeenarguedbeforeusbythelearnedcounsel

appearingforthepetitionersbyplacingrelianceonthe

explanation(1)totheprovisionsofSection74oftheActthat

Section130oftheActcannotbeinvokedbythedepartmentfor

thetransactionwithrespecttowhichthetheassesseehas

alreadypaidtheamountoftaxandpenaltyintermsofSection

129oftheAct.

Page145of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
154.Wearenotimpressedbysuchsubmission.Inouropinion,

theexplanationneitherprovidesthattheconfiscation

proceedingsagainstthepersonconcernedwouldbedeemedtobe

concludednorthattheconfiscationproceedingsagainst"allother

persons"wouldbedeemedtobeconcluded.Itmerelystipulates

thattheproceedingsrelatedtothe"penalty"undertheprovisions

ofSections122,Section125,Section129andSection130oftheActwouldbedeemedto

beconcluded.Inouropinion,theexplanationisnothelpfulto

thepetitionersinanymanner.WeareoftheviewthatSection

130oftheActcanbeinvokedevenincaseswheretheamountof

taxandpenaltyispaidintermsoftheprovisionsofSection129

oftheAct.Thiswouldbeprovided,thecaseisfallinginanyofthe

fiveeventualitiesprescribedinSection130(1)oftheAct.Whenit

comestoconfiscationoverandabovethetaxandpenalty,fine

canbeimposed.Suchfineleviableshallnotexceedthemarket

valueofthegoodsconfiscated,andatthesametime,the

aggregateofsuchfineandpenaltyleviablewillnotbelessthan

theamountofpenaltyleviableundersub-section(1)ofSection

129.
155.WeareatonewithMr.Trivedi,thelearnedAdvocate

GeneralappearingfortheStatethatitisincorrectonthepartof

thepetitionerstocontendthattheprovisionsofSections129and

Section130oftheActaresub-setsofSection122oftheAct.Rather,the

saidSections129andSection130oftheActcanbeinvokedforthe

eventualitieswhicharenotmentionedinSection122oftheAct

andhence,thesamecannotbesaidtoberelatedtothe

provisionsofSection122oftheAct,exceptforquantificationof
Page146of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
theamountofpenalty.Inadditiontothis,itisalsonotcorrecton

thepartofthePetitionerstocontendthattheprovisionsof

Section122oftheActaregeneralinnatureandtheprovisionsof

Sections129andSection130arespecificinnatureandhence,

non-obstanteclausesofthesaidsectionswouldoverridethe

provisionsofSection122oftheAct.Thesaidargumentfallsflat

onthebasicgroundthattheprovisionsofSections129andSection130

oftheActthemselvesrefertotheprovisionsofSection122ofthe

Act,soastodecide/computetheamountofpenaltytobe

imposedupontheAssessees.Thus,oncethereisnoconflict

betweentheprovisionsofSection122oftheActononehandand

Sections129andSection130oftheActontheother,therearisesno

questionofinvocationof'non-obstante'clauseinsucha

situation.

156.WearealsoatonewithMr.Trivedithatreferenceto

Sections73andSection74oftheActisnotwarrantedforinterpreting

Sections129andSection130oftheAct,moreparticularly,whentheyall

areindependentofeachother.TheprovisionsofSections73and

Section74oftheActaresimilartotheprovisionsofSection11Aofthe

CentralExciseActandSection28oftheCustomsAct,whichdeal

withtheadjudicationproceedings.Despitethis,Section110is

presentintheSectionCustomsAct,whichspeaksaboutseizureand

similarly,Section129ispresentintheActfordetention/seizure.

Therefore,Sections129andSection130oftheActhavenon-obstante

clauses,wherebytheycanbeoperateduponinspiteofSections

73andSection74oftheAct.

Page147of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
157.Intheaforesaidcontext,wemaylookintothedecisionof

theSupremeCourtinthecaseofSectionSalexTaxOfficerOrs.vs.

DuttaTraders,(2007)14SCC215,uponwhichstrongreliance

hasbeenplacedbyMr.Trivedi,moreparticularly,the

observationsmadeinparas-16and17.Wequoteparas-16and

17asunder;

"16.Itiswellsettledthattheconceptsofchargeability,

assessment,quantificationandrecoveryoftaxare

independentconceptsunderanytaxinglaw.Section12of

theActreferstoassessmentwhereasprovisionsafterSection

15ofthesaidActreferstorecoveryandcollectionoftax.The

schemeoftheAct,therefore,isbasedonthedichotomy

betweenassessmentononehandandrecoveryoftaxonthe

otherhand.UnderSection12,theassessingofficerhasto

examinethereturns.Hemayacceptthereturns.Ifhefinds

thatthereturnsarenotinorder,subjecttogivingnoticetothe

assessee,heisentitledtopassappropriateassessment

orders.However,incasesfallingunderSection16-Dwhere

evasionisdetectedatthecheck-postbytheSalesTaxOfficer

(Vigilance)andinordertogetthegoodsreleased,which

goodshavebeenseizedbythesaidofficer,theperson(s)

namedinthesectionofferstopaythetax,then,insucha

case,theSalesTaxOfficerisexpresslygiventheauthorityto

computethetaxandcalluponsuchperson(s)tomakethe

payment.Onsuchpaymentoftaxtogetherwithpenalty,the

SalesTaxOfficer(Vigilance)isrequiredtoreleasethegoods

whichhavebeenseized.Henceitisthecaseofcomputation

oftaxofandincidentaltotherecoveryoftaxonthespot.

17.Themainargumentadvancedonbehalfofthe

respondentisthattheSalesTaxOfficer(Vigilance)hasno

powertoassessthetax.Itiscontendedthatthepowerto

assesstaxexistsonlyinSection12oftheAct.Itiscontended

thattheSalesTaxOfficer(Vigilance)whocarriesoutsearch

andwhoseizesthegoodsunderSection16-Dhasnopower

toassessthetaxand,inthecircumstances,thesaidofficer

canonlycarryoutthesearch,seizethetruckandgoodsand

referthemattertotheassessingofficerwhois,thereafter,
Page148of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
requiredtocarryouttheassessmentproceedingsagainstthe

defaulter.Wefindnomeritinthisargument.Theword

`assess'inSection16-Dhasdifferentconnotation.Inour

view,theword`assess'inSection16-Dtalksabout

computation.Computationisalsoassessment.Section16-D

isaCodebyitself.Itoperatesinadifferentsphere.Under

Section12oftheAct,theassessingofficeranalyzesthe

returnswhicharefiledbythedealerwhereasincasesfalling

underSection16-Dwheretheassesseeofferstopaythetax

onthespotforreleaseofhisgoods/vehicle,theSalesTax

Officer(Vigilance)isrequiredtocalculate/computethetax

and,onpaymentoftax,heallowsthegoods/trucktobe

released.Inourview,thiscomputationundertakenbythe

SalesTaxOfficer(Vigilance)onthespotisalsoan

assessment.However,thatassessment(computation)ofthe

taxhasnothingtodowiththeregularassessmentunder

Section12oftheAct."

158.Inmanymattersofthepresenttype,wehavenoticedthat

thegoodsaredetainedonthegroundthatthetaxpaidonthe

productwasless.Insuchmatters,althoughthedocumentswere

foundtobeinorderandthedescriptionoftheproductalso

accordedwiththerelevantdeclaration,stilltheconsignmentwere

detainedonthegroundthatthetaxpaidwasless.

159.Inouropinion,thedetentionandseizureofgoodsonsuch

groundcannotbejustified.Insuchaneventuality,thecorrect

procedurewhichtheinspectingauthorityisexpectedtofollowis

toalerttheAssessingAuthoritytoinitiatetheproceedings"for

assessmentofanyallegedsaleatwhichthedealerwillhavehis

opportunitiestoputforwardhispleasonlawandonfact.What

wewanttoconveyisthattheprocessofdetentionofthegoods

cannotberesortedtowhenthedisputeisbonafideespecially

concerningtheexigibilityoftaxand,moreparticularly,therateof
Page149of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
thattax.Intheaforesaidcontext,wemayrefertoandrelyupona

decisionoftheKeralaHighCourtinthecaseofN.V.K.

MohammedSulthanRawtgerSonsDindigul,TamilNadu,

RepresentedbySectionManagingPartner,RajaMohammedOrs.,

vs.UnionofIndiaOrs.,reportedin(2019)61GSTR307,

whereinalearnedSingleJudgeoftheKeralaHighCourtobserved

asunder;

"24.DetentionundertheKSGSTActhasanelaborate

remedialmechanism.Now,wefocusonthereleaseofthe

product,anditliesinnarrowconfines.Sufficeitformeto

examinethissingularissue:CantheStateTaxOfficerinvoke

Section129oftheActanddetaingoodsonthegroundthetax

paidontheproductisless?Here,thedocumentsareinorder

andtheproductdescriptionaccordswithwhatthefirst

petitionerhasalreadydeclared,say,inhisreturnsbeforethe

assessingauthority.Then,cantheASTOstillholdupthe

consignmentbecausethedeclarationalreadymadedoesnot

suithisnotionofwhattheproductis?

25.True,aliteralreadingofSection129oftheActpresentsa

differentpictureand,perhaps,lendssupporttotheState's

view.Butpurposiveinterpretationandthepractical

commercialconsiderationstrumpthatview.

26.ChapterXVIoftheCombinedActsdealswithinspection,

search,andseizure.Section129underChapterXIXprovides

themechanismfordetention,seizure,andreleaseofgoods

andconveyancesintransit.Itbeginswithanon-obstante

clauseandgoesontolaydowntheprocedure.Ifanyperson

transportsorstoresanygoods"contraveningthisAct"orits

rules,allthosegoodsandmeansoftransportanddocuments

relatingtothosegoodsandconveyancewillbedetainedor

seized.Theywill,however,bereleasedtotheownerofthe

goods(a)onitspayingtheapplicabletaxandpenaltyequal

toonehundredpercentofthetaxpayableonthegoods.Ifthe

goodsbelongtoanexemptedcategory,adifferentrate

applies,though.
27.TheRevenueassertsthatthereis"contravention",and
Page150of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
thatcontraventionconcernsmisbrandingtheproductand

payinglesstax.UndertheerstwhileKeralaValueAddedTax

Act,thefirstpetitionerandthosetradinginthesame

product--betelnut--havehadmanyroundsoflitigation.

Eventually,asseenfromtheExts.P1toP5proceedings,this

CourtandtheRevenueacceptedthattheproductisnot

suparianditattractslessertax.TheExts.P6,P6(a),P7,and

P7(a)arethefirstpetitioner'spurchaseandsupplyinvoices.

28.TheExts.P8andP8(a)areimportant;theyarethefirst

petitioner'srecentGSTreturnsforJuneandAugust,2018.In

thosereturns,thefirstpetitionerhasassignedthesameHSN

Code,ashedidreflectintheExt.P9invoice.Hepaidtaxonly

at5%.Thusthedocumentsbeforetheassessingauthority

andthosethataccompaniedtheconsignmentaccordwith

oneanother.

29.Inthiscontext,wemayexamineSectionJ.K.SyntheticsLimited

v.CommercialTaxesOfficer,(1994)4SCC276.Onhowto

interpretTaxStatutes,theSupremeCourthasheldthat

chargingprovisionsmustbeconstruedstrictly,butnotthe

machineryprovisions,"whichshouldbeconstruedlikeany

otherstatute".Ithasalsoheldthat"thepowertolevyand

collectinterestissubstantivelawthoughpartofmachinery

provision".

30.InJ.K.SyntheticsLimitedtheissuewaswhetherthe

appellantshouldpayinterestontheadditionalsalestax.The

Revenue,asithasdonehere,contendedthatwhenthelaw

enjoinsontheAssesseetofilesa'return',itcanonlymeana

trueandcorrectreturn,thatis,areturnwhichreflectsthetax

dueonfinalassessment.TheSupremeCourtinthatcontext

hasheldthattheinformationtobefurnishedinthereturn

"mustbe'correctandcomplete',thatis,trueandcompleteto

thebestofknowledgeandbelief,withoutthedealerbeing

guiltyofwillfulomission."Thedealer,accordingtoJ.K.

SyntheticsLimited,mustdepositthefulltaxdue,basedon

theinformationfurnished.Andthatinformationmustbe

correctandcompletetothebestofthedealer'sknowledge

andbelief.Ifthedealerhasfurnishedfullparticulars

regardinghisbusiness,withoutwillfullyomittingor

withholdinganyparticularinformationaffectingthe

assessmentoftax,andifhehonestlybelievestobe'correct

andcomplete',thedealerissaidtohaveacted'bonafide'in
Page151of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
depositingthetaxdueandfilingthereturn.Ofcourse,thetax

sodepositedistobedeemedtobeprovisionalandsubjectto

necessaryadjustmentsunderthefinalassessment.

31.Tosupportitsratio,J.K.SyntheticsLimitedacceptsthe

minorityofviewinAssociatedCementCo.Ltd..v.CTO,

(1981)4SCC578Andithasfinallyheldthatiftheassessee

paysthetax,whichaccordingtohimisduebasedonthe

informationsuppliedinhisreturn,therewouldbenodefault

onhisparttomeethisstatutoryobligation.Therefore,it

wouldbedifficulttoholdthatthe'taxpayable'byhim'isnot

paid'andthatheisliableforconsequences.

32.ThecorrectnessoftheExts.P8andP8(a)accepted,as

heldinJ.K.SyntheticsLimited,wewillexaminewhat

amountstostatutoryviolationorcontraventionunderSection

129oftheAct.AptisthecasedecidedbythisCourt:SectionRamsv.

SalesTaxOfficer.ThepetitionerinRamscontractedwiththe

GovernmentofIndiatoprintandsupplyalargenumberof

telephonedirectories.Forthispurpose,heprocuredpaper

fromtheTamilNadugovernmentagency.Whenthepaper

wasundertransport,atKochiasalestaxofficerdetainedthe

lorry,underSection29A(2)oftheKeralaGeneralSalesTax

Act,1963.

33.Thedetentionwasbecausethepetitioner,an

unregistereddealer,hadallegedlyattemptedtoevadethe

salestax.Thepetitioner'sproducingallthedocumentshad

noimpact.Instead,thedetainingofficerinsistedonthe

petitioner'sfurnishingbankguaranteeforcertainsumasa

conditionforreleaseofthegoods,pendingenquiry.

34.TheorderinenquiryaffirmedthattheEnquiryOfficer

was"satisfied"thattherewasattemptatevasionoftax.So

thepenaltyfollowed.Inthiscontext,alearnedSingleJudge

ofthisCourthasobservedthatwhenthereisscopefora

genuinedisputeregardinganyliabilityfortax,thequestionof

detainingthegoodsatthecheck-postorimposingpenalty

underSection29Adoesnotarise.Thereisagroundfora

genuinedisputewhethertherewasanytaxablesaleatall.

Rams,then,furtherobserves:

"Insuchcasesitisnotforthecheck-postauthoritytoacton

meresuspicionandtofindthatthereisanyattemptat

evasionofpaymentoftax,whichalonevestshimwiththe
Page152of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
jurisdictiontoactunderSectionS.29A.Atbest,hecanonlyalertthe

assessingauthorityinErnakulamtoinitiateproceedingsfor

assessmentofanyallegedsale,atwhichthepetitionerwill

haveallhisopportunitiestoputforwardhispicasonlawand

onfact.Theprocessofdetentionofthegoodsatthecheck

post,cannotberesortedtoinsuchcaseswhenthereisa

bonafidedisputeregardingtheveryexistenceofasaleand

exigibilityfortax.S.29Aisnotintendedtosubservesuchan

object.

35.ImayexaminetheimpugnedExt.P11notice,orinother

wordstheactofdetention,inthelightofthedictainJ.K.

SyntheticsLimitedandRams.Intheformer,theSupreme

Courthasemphaticallyheldthatifthedealerfurnishesall

particularsabouthisbusiness,assessesthetaxashe

honestlybelievestobecorrect,andpaysit;hisconduct

cannotbefaultedasmalafideorasanefforttoevadetax.

Here,theExts.P8andP8(a)arethereturnsfortworecent

months.ThefirstpetitionerdeclaredtheHSNCodehehas

felthisproductwouldattractandpaidthetaxaccordingly.

Thereturnsareverymuchonrecordbeforetheassessing

officer.Therefore,tothatextentthefirstpetitioner'sconduct

cannotbefaulted,norcanhebeaccusedofevadingthetax.

36.Then,ImayexaminethedictumofRams,ajudgment

renderedbythisCourt.Insomewhatananalogoussituation

aswefacehere,Ramsheldthattheinspectingauthoritymay

entertainasuspicionthatthereisanattempttoevadetax.

Butiftherecordsheseizestrulyreflectthetransactionand

theassessee'sexplanationaccordswithhispastconduct,for

example,thereturnshehasfiledearlier,thedetentionisnot

theanswer.InthewordsofRams,atbesttheinspecting

authoritycanalerttheassessingauthoritytoinitiatethe

proceedings"forassessmentofanyallegedsale,atwhich

thepetitionerwillhaveallhisopportunitiestoputforward

hispleasonlawandonfact."Indeed,emphaticisthe

enunciationoflawinRamsthattheprocessofdetentionof

thegoodscannotberesortedtowhenthedisputeisbona

fide,especially,concerningtheexigibilityoftaxand,more

particularly,therateofthattax."

160.Weareinfullagreementwiththeaforesaidenunciationof
Page153of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
lawlaiddownbytheKeralaHighCourt.Thus,inacaseofa

bonafidedisputewithregardtotheclassificationbetweenthe

transporterofthegoodsandtheSquadOfficer,theSquadOfficer

mayinterceptthegoods,detainthemforthepurposeof

preparingtherelevantpapersforeffectivetransmissiontothe

jurisdictionalAssessingOfficer.ItisnotopentotheSquad

Officertodetainthegoodsbeyondareasonableperiod.The

processcan,atbest,takeafewhours.Itgoeswithoutsaying

thattheperson,whoisinchargeoftransportation,willhaveto

necessarilycooperatewiththeSquadOfficerforpreparingthe

relevantpapers.[SeeJeyyamGlobalFoods(P.)SectionLtd.vs.Unionof

IndiaOrs.,(2019)64GSTR129(Mad.)]
161.Inthecourseofthehearingofthesematters,anattempt

wasalsomadeonbehalfofthelearnedcounselappearingforthe

petitionerstocomparetheprovisionsoftheSectionCustomsAct/SectionExcise

ActwiththeprovisionsoftheAct,2017,moreparticularly,

Section129oftheAct.

162.Section110(1)oftheCustomsActcannotbecomparedwith

Section129(1)oftheActinasmuchas,theprovisionsofSection

110oftheCustomsActcontemplatesthattheproperofficermay

seizethegoodswhichareliableforconfiscation,whereasthe

provisionsofSection129contemplatethattheproperofficermay

detain/seizethegoods/conveyanceintransitincontraventionof

theprovisionsoftheActortheRules.

163.TheprovisionsofSections110(2)andSection124respectivelyofthe
Page154of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
CustomsActdonotcontemplatethatthegoodswhichareseized

aretobereleasedinaspecifictimelimit,muchless,withina

periodofsixmonths.Aproposthis,thesaidsectionsmerelycast

adutyonthedepartmenttoissueashowcausenoticewithina

periodofsixmonthsfromthedateoftheseizureofthegoods,

butthesamedoesnotcontemplateastoinhowmuchtime,the

samehastobeadjudicatedupon.Therefore,thecontention

raisedonbehalfofthePetitionersthatthegoodswhichareseized

aretobereleasedwithinashortspanoftimeandthatthe

legislaturehasnotcontemplatedtoretainthegoodspendingthe

confiscationproceedings,isnottenable.

164.Inadditiontotheabove,evenotherwise,theprovisionsof

Section110AoftheCustomsAct,whichdealwiththe'provisional

release'ofthegoods,donotcontemplatethereleaseofthegoods

onlyonpaymentofpenaltyandinterestbut,theproposed

amountoffineisalsotobeincludedfortheprovisionalreleaseof

thegoods.Inviewofthis,theamountoffineshouldbetakeninto

accountwhiledirectingtheprovisionalreleaseofthe

goods/conveyanceasperSection129(2)readwithSection67(6)

oftheActreadwithRule-140oftheRules.

165.Weshallnowproceedtodealwiththelastsubmissionas

regardsthephysicalavailabilityofthegoodsandtheconveyance

forthepurposeofredemptionoffine.Thissubmissionhasbeen

canvassedbyMr.P.M.Dave,thelearnedcounselappearingfor

thewritapplicantsoftheSpecialCivilApplicationNo.9105of

2019.TheargumentofMr.Daveisthattheconceptof
Page155of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
redemptionfineisembodiedinSection130oftheAct.Evenwhile

orderingconfiscation,theofficerconcernedhastogive,theowner

ofthegoods,anoptiontopay,inlieuofconfiscation,suchfineas

thesaidofficermaydeemfit.Thisiscalledtheconceptof

redemptionoffine.Itissubmittedthattheconceptof

redemptionfinearisesintheeventthegoodsareavailableand

aretoberedeemed.Ifthegoodsarenotavailable,thereisno

questionofredemptionofthegoods.Therefore,accordingtoMr.

Dave,oncethegoodsarereleaseduponpaymentoftaxand

penaltyunderSection129oftheAct,thenthegoodsarenot

availablewiththeauthorityforthepurposeofredemptionfine.

Therefore,accordingtoMr.Dave,thereisnoquestionof

proceedingfurtherunderSection130oftheActforthepurpose

ofconfiscation.Mr.Dave,insupportoftheaforesaid

submission,hasplacedrelianceonthefollowingdecisions;

"(1)InthecaseofCommissionerofCustoms(import),

Mumbaivs.FinesseCreationInc.,reportedin2009(248)

ELT122(Bom.);

(2)CommissionerofCustoms,Amritsarvs.Raja

Impex(P.)Ltd.,2008(235)ELT623(Tri.-LB)

166.InFinesseCreationInc.(supra),theBombayHighCourt

heldasunder;

"4.CESTATinitsorderreliedonthejudgmentofthePunjab

HaryanaHighCourtinthecaseofCommissionerof

Customs,AmritsarVs.RajaImpex(P)Ltd.2008(229)ELT

185(PH).ThelearnedDivisionBenchamongstothers,

wasconsideringthesubstantialquestionoflaw,namely
Page156of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
whetherredemptionfineunderSectionsection125oftheCustoms

Act,1962canbeimposedevenifthegoodsareneither

availableforconfiscationnorclearedonundertaking/bond.

Afterconsideringthevariouscontentionsandjudgments

reliedupon,thelearnedDivisionBenchofthePunjab

HaryanaHighCourtupheldtheorderofthetribunalthatin

theabsenceofthegoodsbeingavailablenofinecanbe

imposed.Revenuehadreliedonthejudgmentofthe

SupremeCourtinWestonComponentsLtd.Vs.

CommissionerofCustoms,NewDelhi2000(115)E.L.T.278

(S.C.).TheSupremeCourttherenotedthatthegoodswere

releasedontheapplicationbytheappellantandappellant

executedabond.Thecourtthenobservedthatinthese

circumstances,ifsubsequentlyitisfoundthattheimport

wasnotvalidorthattherewasanyotherirregularitywhich

wouldentitlethecustomsauthoritiestoconfiscatethesaid

goods,thenthemerefactthatthegoodswerereleasedon

thebondbeingexecuted,wouldnottakeawaythepowerof

thecustomsauthoritiestolevyredemptionfine.The

contentiontherefore,oftheappellantstherethatthe

redemptioncannotbeimposedbecausethegoodswerenot

availableforcustodyoftherespondentauthoritieswas

rejected.

5.Inouropinion,theconceptofredemptionfinearisesin

theeventthegoodsareavailableandaretoberedeemed.If

thegoodsarenotavailable,thereisnoquestionof

redemptionofthegoods.UnderSection125apoweris

conferredontheCustomsAuthoritiesincaseimportof

goodsbecomingprohibitedonaccountofbreachofthe

provisionsoftheAct,rulesornotification,toorder

confiscationofthegoodswithadiscretionintheauthorities

onpassingtheorderofconfiscation,toreleasethegoodson

paymentofredemptionfine.Suchanordercanonlybe

passedifthegoodsareavailable,forredemption.The

questionofconfiscatingthegoodswouldnotariseifthere

arenogoodsavailableforconfiscationnorconsequently

redemption.Oncegoodscannotberedeemednofinecanbe

imposed.Thefineisinthenatureofcomputationtothe

stateforthewrongdonebytheimporter/exporter.

6.Inthesecircumstances,inouropinion,thetribunalwas

rightinholdingthatintheabsenceofthegoodsbeing
Page157of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
availablenofineinlieuofconfiscationcouldhavebeen

imposed.Thegoodsinfacthadbeenclearedearlier.The

judgmentinWeston(supra)isclearlydistinguishable.In

ouropinion,therefore,thereisnomeritinthequestionsas

framed.Consequentlyappealstandsdismissed."

167.InRajaImpex(supra),thePunjabHaryanaHighCourt

heldasunder;

"11.Therespondentinthepresentcasetookclearanceof

importedmachineryunderBillofEntryNo.1546dated

04.12.2004.Theshowcausenoticewasissuedsubsequently

on31.03.2005andtheAdjudicatingAuthorityordered

confiscationofmachineryunderSection111oftheActand

imposedredemptionfineandpenalty.Sincethegoodshad

beenreleasedunconditionallyandwerenotavailable,those

couldnotbeconfiscated.TheCommissionerofCustoms

foundthatproceedingsfortheconfiscationofgoodswere

invalidastheyhadbeeninitiatedbyissuingshowcause

noticeafterclearanceofthegoodsandthereisnoaverment

intheshowcausenotice,whichmayshowthatthe

appellantsweretheownersofthegoodsatthetimeof

issuingoftheshowcausenotice.TheCommissionerof

Customsalsofoundthatthegoodswerenotavailableandno

undertakinghadbeenobtainedbythedepartmentatthe

timeofreleaseofgoodsandtherefore,confiscationofthe

goods,cannotbemaintainedandnofineinlieuof

confiscationcanbeimposedespeciallywherethegoodswere

neitherseizednorclearedonundertaking.Whilepassingthe

saidorder,theCommissionerofCustomshasrelieduponthe

observationsofHon'bleApexCourtinthecaseofM/s

WestonComponentsLtd.Vs.CommissionerofCustoms,

NewDelhi(supra),RamKhazanaElectronicvs.CC

(AIRCargo)Jaipurreportedas2003(156)ELT122

(Indel)andChinkuExportsvs.CC,Calcuttareportedas

1999(112)ELT400(Tri.).BeforetheTribunal,the

contentionoftherevenuewasthatevenincaseswherethe

goodsarenotavailable,orderofconfiscationcanbepassed.
However,theTribunalvideimpugnedorder,relieduponthe

observationoftheHon'bleApexCourtinthecaseofM/s

WestonComponentsLtd.Vs.CommissionerofCustoms,
Page158of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
NewDelhi(supra)andthejudgmentoftheTribunalinthe

caseofSectionRamKhazanaElectronicv.CC(AirCargo),

Jaipur(supra)andheldthatthereisnoerrorinthe

impugnedorders,whicharebaseduponthejudgmentofthe

Hon'bleApexCourt.

12.ItmayalsobenoticedherethatinthecaseofM/s

WestonComponentsLtd.Vs.CommissionerofCustoms,

NewDelhi(supra),thegoodswerereleasedtotheassessee

onanapplicationmadebyitandontheexecutionofabond

bytheassesseeandinthosecircumstances,theHon'ble

ApexCourtheldthatthemerefactthatthegoodswere

releasedonthebondbeingexecutedwouldnottakeaway

thepowerofcustomauthoritytolevyredemptionfine.A

readingofthejudgment/orderoftheHon'bleApexCourtin

M/sWestonComponentsLtd.Vs.Commissionerof

Customs,NewDelhi(supra),wouldshowthattheApex

Courthastakentheviewthatredemptionfinecanbe

imposedevenintheabsenceofthegoodsasthegoodswere

releasedtotheappellantonanapplicationmadebyitandon

theappellantexecutingabond.Sincethegoodswere

releasedonabondthepositionisasifthegoodswere

available.Theratiooftheabovedecisioncannotbe

understoodthatinallcasesthegoodswerepermittedtobe

clearedinitiallyandlaterproceedingsweretakenfor

under-valuationorotherirregularity,eventhenredemption

finecouldbeimposed.Weare,therefore,notinclinedto

acceptthecontentionraisedbytheappellantonthisissue

andsetasidetheredemptionfine.

13.Therelianceoflearnedcounselfortherevenueuponthe

provisionsofSection125oftheActisalsomisconceived.

Section125oftheActisapplicableonlyinthosecaseswhich

havebeenclearedbytheconcernedauthoritiessubjectto

furnishingundertaking/bondetc.However,inthepresent

case,admittedly,thegoodswereclearedbythe

respondent-authoritieswithoutexecutionofany

bond/undertakingbytheassessee.Thus,inviewofthefact

andcircumstancesofthecase,wefindnoerrorinthe

impugnedorders.Nosubstantialquestionoflawarisesfor

ourdeterminationinthepresentappealandthesameis

herebydismissed.."

Page159of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
168.Theprinciplediscerniblefromtheaforesaidtwodecisionsis

thattheredemptioncannotbeimposedifthegoodsarenot

available.Redemptioncanbeimposedprovidedthegoodswere

handedovertotheowneruponexecutionofany

bond/undertaking.

169.IntheSupremeCourtdecision,thegoodswerereleasedon

executionofbond.However,later,whenthesaidgoodsbecame

liableforconfiscation,andthegoodswereavailable,ithasbeen

heldthatthepoweroftheCustomsAuthoritytoconfiscatethe

goods,orinlieuthereof,toreleasethesameonpaymentof

redemptionfineisnottakenawaymerelybecausethegoodswere

initiallyreleasedonexecutionofbond/undertaking.Inthetwo

HighCourtdecisions,thegoodswerenotavailablefor

confiscation,andinsuchcircumstances,therewasneithera

questionofconfiscationofgoodsnorredemptionthereof.

AccordingtoMr.Trivedi,ifthegoodsareunderseizure,orthey

wereclearedonunderstandingthatthesamewouldbemade

availableincaseoforderofconfiscationthereof,theninthat

case,thegoodscaneitherbeconfiscatedorredeemed(released)

onpaymentoffineinlieuofconfiscation,providedtheyare

availableatthattime.Inspiteofhavingreleasedthegoodson

executionofbondandundertaking,,ifthesamearenotmade

availabletotheauthoritiesatthetimeofconfiscation

proceedings,theninthatcase,thoughconfiscationor

redemptionmaynotbephysicallypossible,thetermsofthebond

andundertaking/bankguaranteecanbeenforcedbyseekingto
Page160of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
recoverthefullvalueofthegoods.Hence,innutshell,itcouldbe

saidthatifthegoodsareavailableforconfiscation,thenonlythe

questionofgivinganoptionofredemptionfineinlieuof

confiscationarisesandnotincaseswherethegoodsarenot

availableforconfiscation.

170.Atthisstage,wemustlookintothedecisionofthe

SupremeCourtinthecaseofSectionWestonComponentsLtd.vs.

CommissionerofCustoms,NewDelhi,2000(115)ELT278

(S.C.),whereintheSupremeCourt,inaveryshortorder,has

observedasunder;

"tiscontendedbythelearnedcounselfortheappellant

thatredemptionfinecouldnotbeimposedbecausethe

goodswerenologerinthecustodyofthe

respondent-authority.Itisanadmittedfactthatthe

goodswerereleasedtotheappellantonanapplication

madebyitandontheappellantexecutingabond.

Underthesecircumstancesifsubsequentlyitisfound

thattheimportwasnotvalidorthattherewasany

otherirregularitywhichwouldentitlethecustoms

authoritiestoconfiscatethesaidgoods,thenthemere

factthatthegoodswerereleasedonthebondbeing

executedwouldnottakeawaythepowerofthecustoms

authoritiestolevyredemptionfine."

171.Wearenotimpressedwiththeaforesaidsubmissionas

regardsredemptionoffineintheabsenceofthegoods.

172.Section130(2)hasprovidedforanoptiontopayfineinlieu

ofconfiscation.Section130(2)alongwiththethreeprovisosreads

asunder;

Page161of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
"130(2):-Wheneverconfiscationofanygoodsorconveyance

isauthorisedbythisAct,theofficeradjudgingitshallgiveto

theownerofthegoodsanoptiontopayinlieuof

confiscation,suchfineasthesaidofficerthinksfit:

Providedthatsuchfineleviableshallnotexceedthemarket

valueofthegoodsconfiscated,lessthetaxchargeable

thereon:

Providedfurtherthattheaggregateofsuchfineandpenalty

leviableshallnotbelessthantheamountofpenaltyleviable

undersub-section(1)ofSectionsection129:

Providedalsothatwhereanysuchconveyanceisusedfor

thecarriageofthegoodsorpassengersforhire,theownerof

theconveyanceshallbegivenanoptiontopayinlieuofthe

confiscationoftheconveyanceafineequaltothetaxpayable

onthegoodsbeingtransportedthereon."

173.Themeaningofthenoun"redemption"asfoundinthe

"CompactOxfordDictionary,ThesaurusandWordpowerGuide",

(Ninthimpression-2004)(DictionaryEditor:CatherineSoanes)",

whichmeans,"theactionofredeemingorthestateofbeing

redeemed".Thus,anyredemptionisnotnecessarilyconfinedto

thegoodsinquestion,buttheredemptioniswithregardtothe

conductaswell.

174.Theper-requisiteformakinganofferoffineunderSection

130oftheActispursuanttothefindingthatthegoodsareliable

tobeconfiscated.Inotherwords,ifthereisnoauthorisationfor

confiscationofsuchgoods,thequestionofmakinganofferbythe

properofficertopaythe"redemptionfine",wouldnotarise.

Therefore,thebasicpremiseuponwhichthecitadelofSection

130oftheActrestsisthatthegoodsinquestionareliabletobe

confiscatedundertheAct.It,therefore,followsthatwhatis
Page162of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
soughttobeofferedtoberedeemed,arethegoods,butnotthe

improperconductoftheownertotransportthegoodsin

contraventionoftheprovisionsoftheActortheRules.Wemust

alsobareinmindthattheownerofthegoodsisliabletopay

penaltyunderSection122oftheAct.Thefinecontemplatedisfor

redeemingthegoods,whereastheownerofthegoodsispenalized

underSection122fordoingoromittingtodoanyactwhich

renderedsuchgoodsliabletobeconfiscatedunderSection130of

theAct.Intheaforesaidcontext,wemayrefertoandrelyupona

decisionoftheMadrasHighCourtinthecaseofM/s.Visteon

AutomotiveSystemsvs.TheCustoms,ExciseServiceTax

AppellateTribunal,C.M.ANo.2857of2011,decidedon11th

August,2017,whereinthefollowinghasbeenobservedin

para-23;

"23.ThepenaltydirectedagainsttheimporterunderSection

112andthefinepayableunderSection125operateintwo

differentfields.ThefineunderSection125isinlieuof

confiscationofthegoods.Thepaymentoffinefollowedupby

paymentofdutyandotherchargesleviable,asper

sub-section(2)ofSection125,fetchesreliefforthegoods

fromgettingconfiscated.Bysubjectingthegoodstopayment

ofdutyandothercharges,theimproperandirregular

importationissoughttoberegularised,whereas,by

subjectingthegoodstopaymentoffineundersub-section(1)

ofSection125,thegoodsaresavedfromgettingconfiscated.

Hence,theavailabilityofthegoodsisnotnecessaryfor

imposingtheredemptionfine.TheopeningwordsofSection

125,"Wheneverconfiscationofanygoodsisauthorisedby

thisAct....",bringsoutthepointclearly.Thepowertoimpose

redemptionfinespringsfromtheauthorisationofconfiscation

ofgoodsprovidedforunderSection111oftheAct.When

oncepowerofauthorisationforconfiscationofgoodsgets

tracedtothesaidSection111oftheAct,weareofthe

opinionthatthephysicalavailabilityofgoodsisnotsomuch
Page163of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
relevant.Theredemptionfineisinfacttoavoidsuch

consequencesflowingfromSection111only.Hence,the

paymentofredemptionfinesavesthegoodsfromgetting

confiscated.Hence,theirphysicalavailabilitydoesnothave

anysignificanceforimpositionofredemptionfineunder

Section125oftheAct.WeaccordinglyanswerquestionNo.

(iii)."

175.Wewouldliketofollowthedictumaslaiddownbythe

MadrasHighCourtinpara-23,referredtoabove.

176.WemayalsorefertoandrelyuponaSupremeCourt

decisioninthecaseofSectionM.G.AbrolvsM/S.Shantilal

ChhotalalCo,AIR1965SC197,whereintheSupremeCourt

dealtwiththeverysameissueandheldasunder;

"Anothercontentionraisedfortherespondentisthatthe

AdditionalCollectorcouldnotconfiscatethegoodsafterthey

hadleftthecountryandthatthereforehisorderof

confiscationofthescrapwhichaccordingtohimwasnot

steelskullscrapwasbadinlaw.Theaffidavitfiledbythe

AdditionalCollector,appellantNo.1,mentionsthe

circumstancesinwhichthescrapexportedbyrespondent

wasallowedtoleavethecountry.Itwasallowedtoleavethe

countryaftertheCollectorhadformallyseizeditandafter

theagentsoftheshippingcompanyhadundertakennotto

releasethedocumentsinrespectofthecargotoits

consignees.Thisundertakingmeantthatthecargowould

remainunderthecontrolofthecustomsauthoritiesasseized

cargotillfurtherordersfromtheAdditionalCollector

releasingthecargoandmakingitavailabletotheconsignees

bythedeliveryofthenecessarydocumentstothem.The

documentswereallowedtobedeliveredtothemonthe

applicationoftherespondentsprayingforthepassingonof

thenecessarydocumentstothepurchasersofthegoodsin

Japanandontherespondentsgivingabankguaranteethat

thefullf.o.b.valuetobereleasedfromthesaidparchwould

bepaidtothecustomsauthoritiestowardspenaltyorfinein
Page164of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
lieuofconfiscationthatmightbeimposeduponthe

respondentsbytheadjudicatingauthority.Thecustoms

authoritieshadseizedthegoodswhentheywerewithintheir

jurisdiction.Itisimmaterialwheretheseizedgoodsbekept.

Inthecircumstancesofthecase,theseizedgoodsremained

ontheshipandwerecarriedtoJapan.Theseizurewaslifted

bytheAdditionalCollectoronlywhentherespondents

requestedandgavebankguarantee.'Theeffectofthe

guaranteewasthatincasetheAdditionalCollector

adjudicatedthatpartofthegoodsexportedwasnotin

accordancewiththelicenceandhadtobeconfiscated,the

respondents,would,inlieuofconfiscationofthegoods,pay

thefineequivalenttotheofthebankguarantee.Section183

oftheActprovidesthatwheneverconfiscationisauthorised

bytheActtheOfficeradjudgingitwouldgivetheownerof

thegoodsoptiontopayinlieuofconfiscationsuchfineasthe

officerthinksfit.Thisoptionwasextendedtotherespondent

atthestagebeforethegoodswerereleasedfromseizure.The

formalorderofconfiscationhadtobepassedafterthe

necessaryenquiryandthereforewhenpassedinthepresent

caseafterthegoodshadactuallyleftthiscountrycannotbe

saidtobeanorderwhichcouldnotbepassedbythe

CustomsAuthorities.I,therefore,donotagreewiththis

contention."

ScopeofinterferencebytheHighCourtunderSectionArticle226of

theConstitutionofIndiaduringthependencyofthe

confiscationproceedings.

177.SectionArticle226oftheConstitutionofIndiaconferspowerupon

theHighCourttoissueordersorwritstoanypersonorauthority

includinginappropriatecases,anyGovernmentwritsinthe

natureofhabeascorpus,mandamus,prohibition,quowarranto

andcertiorarifortheenforcementofanyoftherightsconferred

byPart-IIIorforanyotherpurpose.Similarly,SectionArticle227ofthe

ConstitutionofIndiaconfersthepowerofsuperintendenceover
Page165of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
alltheCourtsandTribunalsthroughouttheterritoriesinrelation

towhichanyHighCourtexercisesitsjurisdiction.Itisan

acknowledgedpositionoflawthatthepowersoftheHighCourt

underArticles226and227oftheConstitutionofIndiacannotbe

curtailedunderanycircumstanceasthepowerflowsfromthe

Constitutionitself.Nostatutorybarcaneffectthepowerofthe

HighCourtunderArticles226and227oftheConstitutionof

India.

178.Despitesuchwideanduntrammeledpowers,theCourts

haveevolvedcertainself-imposedlimitswhileexercisingthese

powers.TheHighCourts,normally,wouldnotgobeyondthe

justifiedinhibitionsunderanyStatuteexceptwherethereisa

completejettisoningoftheruleoflaworunderexceptional

circumstanceswhichdemandtimelyjudicialinterdict.This

inhibitionisbasicallyordained,keepinginmindthatthereisa

nationalwealbehindanyvalidpieceofLegislationincorporating

andinheringinitselfthesocialobjectivebehindanyLegislation.

Though,nolimitationsorfettershavebeenputonthepowersof

theHighCourtunderArticles226and227oftheConstitutionof

India,astheHighCourtsperformassentinelonthequi-vive,but

suchpowerisnottobeexercisedcasuallyandwithoutcomingto

theconclusionthatnon-exerciseofsuchpowerwouldleadto

positiveinjustice.Timeswithoutnumber,ithasbeenheldbythe

HighCourtsthatonlyunderconditionofapersonestablishing

thatsubstantialinjusticehasorislikelytoensue,such

extraordinarypowerscanbeexercised.Itneedsnoadumbration

bythisdatethattheplenarypowersoftheHighCourthaveonly
Page166of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
tobeexercisedintheinterestofjustice.

179.Thus,anorderofreleaseofgoodsorconveyancemaybe

passedunderSectionArticle226oftheConstitutionofIndia,even

pendingtheconfiscationproceedings,butonlywhenitis

establishedbeforetheCourtthattheprocedureprescribedand

thelawinthatregardhasbeencompletelyfloutedandthatthere

iscompleteviolationoftheprocedureprescribedforconfiscation,

viz.,noticetotheoffenderbeforeconfiscation,allowinghim

opportunityofgivingwrittenrepresentationandaffordinghearing

ontheissuetohimandthatsuchinjusticecannotberemedied

withouttheexerciseoftheextraordinarypower.

180.NeedlesstostatethatunderSectionArticle226oftheConstitution

ofIndia,theCourtwillnotgointothedisputedquestionoffacts.

181.Thus,thepowersdirectingforreleaseofthevehiclesor

goods,duringthependencyoftheconfiscation,canonlybe

sparinglyexercisedunderextraordinarysituationsand

circumstanceswheninjusticeoccursbecauseofnon-fulfillment

oftheconditionsforconfiscation.

FINALCONCLUSION:-

182.Wewouldsumupourconclusionofthepointsraisedinthe

writapplicationsasfollows;

"(i)Section129oftheActtalksaboutdetention,seizureand

releaseofgoodsandconveyancesintransit.Ontheotherhand,

Section130talksaboutconfiscationofgoodsorconveyanceand
Page167of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
levyoftax,penaltyandfinethereof.Although,boththesections

startwithanon-obstanteclause,yet,theharmoniousreadingof

thetwosections,keepinginmindtheobjectandpurposebehind

theenactmentthereof,wouldindicatethattheyareindependent

ofeachother.Section130oftheAct,whichprovidesfor

confiscationofthegoodsorconveyanceisnot,inanymanner,

dependentorsubjecttoSection129oftheAct.Boththesections

aremutuallyexclusive..

(ii)Thephrase"withanintenttoevadethepaymentoftax"in

Section130oftheActassumesimportance.Whenthelaw

requiresanintentiontoevadepaymentoftax,thenitisnotmere

failuretopaytax.Itmustbesomethingmore.Theword"evade"

inthecontextmeansdefeatingtheprovisionsoflawofpaying

tax.Itismademorestringentbyuseoftheword"intent".The

assesseemustdeliberatelyavoidthepaymentoftaxwhichis

payableinaccordancewithlaw.However,theelementofmens

reacannotbereadintoSection130oftheAct.

(iii)Forthepurposeofissuinganoticeofconfiscationunder

Section130oftheActatthethreshold,i.e.,atthestageof

detentionandseizureofthegoodsandconveyance,thecasehas

tobeofsuchanaturethatonthefaceoftheentiretransaction,

theauthorityconcernedshouldbeconvincedthatthe

contraventionwaswithadefiniteintenttoevadepaymentoftax.

Theaction,insuchcircumstances,shouldbeingoodfaithand

notbeamerepretence.Inotherwords,theauthoritiesneedto

makeoutaverystrongcase.Meresuspicionmaynotbe
Page168of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
sufficienttoinvokeSection130oftheActstraightway.

(iv)Iftheauthoritiesareoftheviewthatthecaseisoneof

invokingSection130oftheActattheverythreshold,thenthey

needtorecordtheirreasonsforsuchbeliefinwriting,andsuch

reasonsrecordedinwritingshould,thereafter,belookedintoby

thesuperiorauthoritysothatthesuperiorauthoritycantakean

appropriatedecisionwhetherthecaseisoneofstraightway

invokingSection130oftheAct.

(v)Evenifthegoodsortheconveyanceisreleasedupon

paymentofthetaxandpenaltyunderSection129oftheAct,

later,iftheauthoritiesfindsomethingincriminatingagainstthe

ownerofthegoodsinthecourseoftheinquiry,ifany,thenit

wouldbepermissibletothemtoinitiatetheconfiscation

proceedingsunderSection130oftheAct.

(vi)Section130oftheActisnotdependentonclause(6)of

Section129oftheAct.

(vii)Sections129andSection130respectivelyoftheActaremutually

exclusiveandindependentofeachother.Iftheamountoftaxand

penalty,asdeterminedunderSection129oftheActforthe

purposeofreleaseofthegoodsandtheconveyance,isnot

depositedwithinthestatutorytimeperiod,thentheconsequence

ofthesamewouldbeforfeitureofthegoodsandthevehiclewith

theGovernment.Thisdoesnotnecessarilyimplythatthe

confiscationproceedingscanbeinitiatedonlyintheeventofthe

failureonthepartoftheownerofthegoodsortheconveyancein
Page169of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
depositingtheamounttowardsthetaxandliabilitydetermined

underSection129oftheAct.

(viii)ForthepurposeofSection129(6)oftheAct,itwouldnotbe

necessaryforthedepartmenttoestablishanyintentiontoevade

paymentoftax.Ifthetaxandpenalty,asdeterminedunder

Section129,isnotdepositedwithinthestatutorytimeperiod,

thenthegoodsandtheconveyanceshallbeliabletobeputto

auctionandthesaleproceedsshallbedepositedwiththe

Government.

(ix)Similarly,thereferencetoSections73andSection74respectively

oftheActisnotwarrantedforthepurposeofinterpreting

Sections129andSection130oftheAct,moreparticularly,whentheyall

areindependentofeachother.TheprovisionsofSections73and

Section74oftheActaresimilartotheprovisionsofSection11Aofthe

CentralExciseActandSection28oftheCustomsAct,whichdeal

withtheadjudicationproceedings.Despitethis,Section110is

presentintheSectionCustomsAct,whichspeaksaboutseizureand

similarly,Section129ispresentintheActfordetention/seizure.

Therefore,Sections129andSection130oftheActhavenon-obstante

clauses,wherebytheycanbeoperateduponinspiteofSections

73andSection74oftheAct.

(x)TheprovisionsofSectionsections73andSection74respectivelyoftheAct

dealwiththe'demandsandrecovery'tobemadebytheassessing

officerbasedupontheassessment,whereastheprovisionsof

Section129oftheActdealwiththe'detention/seizure'.While

assessingthereturns,iftheassessingofficerfindsthatthe
Page170of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
amountoftaxhasnotbeenpaidorerroneouslyrefunded,or

wheretheinputtaxcredithasbeenwronglyavailedorutilizedfor

anyreason,eitherwithmalafideintentionorwithoutthesame,

asthecasemaybe,theprovisionsofSection73/Section74oftheAct

wouldbeinvoked.However,theprovisionsofSection129ofthe

Actdealwithsituationwheretheevasionoftax/contraventionof

theAct/Rulesisdetectedduringtransititself,requiringthe

adoptionofsummarylikeproceedings.Therefore,thesaid

provisionsoperateindifferentspheres.

(xi)ThecomparisonoftheprovisionsofSectionCustomsAct/SectionExcise

ActononehandandtheprovisionsoftheActontheother,as

soughttobedrawnonbehalfofthewritapplicants,isnot

correct.Section110(1)oftheCustomsActisnotcomparableto

Section129(1)oftheActinasmuchas,theprovisionsofSection

110oftheCustomsActcontemplatesthattheproperofficermay

seizethegoodswhichareliableforconfiscation,whereasthe

provisionsofSection129contemplatethattheproperofficermay

detain/seizethegoods/conveyanceintransitincontravention

oftheprovisionsoftheActortheRules.

(xii)TheprovisionsofSections110(2)andSection124oftheCustoms

Actdonotcontemplatethatthegoodswhichareseizedaretobe

releasedinaspecifictimelimit,muchless,withinaperiodofsix

months.Aproposthis,thesaidsectionsmerelycastadutyonthe

departmenttoissueashowcausenoticewithinaperiodofsix

monthsfromthedateofseizureofgoods,butthesamedoesnot

contemplateastoinhowmuchtime,thesamehastobe

adjudicatedupon.Therefore,thecontentionraisedonbehalfof
Page171of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
thewritapplicantsthatthegoodswhichareseizedaretobe

releasedwithinashortspanoftimeandthatthelegislaturehas

notcontemplatedtoretainthegoodspendingtheconfiscation

proceedings.isnottenable.Inadditiontotheabove,even

otherwise,theprovisionsofSection110AoftheCustomsAct,

whichdealwiththe'provisionalrelease'ofthegoods,donot

contemplatethereleaseofthegoodsonlyonpaymentofpenalty

andinterestbuttheproposedamountoffineisalsotobe

includedforprovisionalreleaseofthegoods.Inviewofthis,the

amountoffineshouldbetakenintoaccountwhiledirectingthe

provisionalreleaseofthegoods/conveyanceasperSection

129(2)readwithSection67(6)oftheActreadwithRule140of

theRules.

(xiii)Althoughthereisnoseriouschallengetothevalidityofthe

provisionsofSections129andSection130respectivelyoftheAct,yetit

isasettledprincipleoflawthatthepowertolevytaxincludesall

theincidentalpowerstopreventtheevasionofsuchtax.The

powertoseizeandconfiscatethegoodsintheeventofevasionof

taxandthepowertolevypenaltyaremeanttochecktaxevasion

andisintendedtooperateasadeterrentagainstthetax-evaders

andare,therefore,ancillaryorincidentaltothepowertolevytax

onthegoodsandthus,fallwithintheambitandscopeofthe

legislativepowers.

(xiv)Thegoodsarenotliabletobedetainedonthegroundthat

thetaxpaidontheproductwasless.Insuchcircumstances,the

InspectingAuthorityisexpectedtoalerttheAssessingAuthority

toinitiateappropriateproceedings"forassessmentofanyalleged
Page172of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
saleatwhichthedealerwillhavehisopportunitiestoputforward

hispleasonlawandonfact.Theprocessofdetentionofthe

goodscannotberesortedtowhenthedisputeisbonafide,

especiallyconcerningtheexigibilityoftaxand,moreparticularly,

therateofthattax.

(xv)Evenintheabsenceofthephysicalavailabilityofthegoods

ortheconveyance,theauthoritycanproceedtopassanorderof

confiscationandalsopassanorderofredemptionfineinlieuof

theconfiscation.Inotherwords,evenifthegoodsorthe

conveyancehasbeenreleasedunderSection129oftheActand,

later,confiscationproceedingsareinitiated,theneveninthe

absenceofthegoodsortheconveyance,thepaymentof

redemptionfineinlieuofconfiscationcanbepassed.

(xvi)TheextraordinarypowersunderSectionArticle226ofthe

Constitution,directingforreleaseofthevehiclesorgoods,during

thependencyoftheconfiscation,canonlybesparinglyexercised

underextraordinarysituationsandcircumstanceswheninjustice

occursbecauseofnon-fulfillmentoftheconditionsfor

confiscation.

183.Oneandallshouldbemindfulofthefactthatthecountry

hasaltogetheranewtaxregime.Ithasbeenjusttwoyearssince

thenewtaxregime,intheformofGST,hasbeenimplemented.

Although,thispath-breakingreformmeetsthelongstanding

demandoftradeandindustrytosimplifyandstreamlinethetax

regimeinthecountry,yet,therearemanyissueswhichneedto

beaddressed.Theassesseesneedtobeeducatedsofarasthe
Page173of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
newtaxregimeisconcerned.Ithasbeenbroughttoournotice

thatthegovernmenthaspreparedtheModelGSTLawinEnglish.

Further,alltheacts,rules,regulationsandFAQregardingGST

areavailableinEnglishlanguage.Entrepreneursofmany

establishmentsinIndiamaynothaveproficiencyinEnglish

languagetounderstandtheModelGSTLawandtherules

associatedwithit.Thegovernmentmusttranslatetheexisting

GSTrulesandregulationsinvernacularlanguagessothatitcan

bebetterunderstoodbyalltheassesses,especiallyintheMSME

sector.

184.Wewouldalsoliketoobservethatanefficientdispute

resolutionmechanismisrequiredtobesetuptosettlethe

disputesinatime-boundmanner.Thegovernmentmayconsider

theformationofdisputeresolutioncommitteesinallthestates

andunionterritoriesforhearingsuchdisputes.These

committeesmustbestaffedwithexpertsfromthelegalandaudit

profession.

185.AsaCourtoflaw,wecanonlyurgetheassesseestokeep

theirtransactionsfairandtransparent.Ifthetransactionsare

fairandtransparent,thenthereshouldbenoroomforany

complaint.Atthesametime,wealsoexpecttheGSTAuthorities

toensurethatnoundueharassmentiscausedtotheassessees.

TheGSTAuthoritiesshouldtrytounderstandthevarious

provisionsoftheActaswellastheRulesinthebestpossible

mannerforthepurposeofsmoothexecutionandimplementation

ofthelaw.Thenewtaxregimeinthecountry,overaperiodof
Page174of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
time,willprovetobeaneffectiveone,andwiththepassageof

timeandproperimplementationoftheprovisionsoftheAct,the

difficultieswhichtheassesseesarefacingtodaywillgetminimal.

Allthatweintendtosayisthat,inagivesituation,the

authoritiesshouldadoptapracticalapproachtoresolvethe

disputeratherthanenterintoalongdrawnlitigation.The

Governmentshouldstrivehardtoensurethatthelitigation

arisingfromthenewtaxregimegetsminimizedoveraperiodof

time.

186.Weclarifythatwehave,otherwise,notgoneintothemerits

ofthepetitions.Allthepetitionsareatthestageofnoticeforthe

purposeofconfiscation.Inallthecases,thisCourthasordered

interimreleaseofthegoodsaswellastheconveyance.This

releaseissubjecttothefinaloutcomeoftheconfiscation

proceedings.Wehavenotexaminedindividualpetitionforthe

purposeoffindingoutwhetherthenoticeforconfiscationunder

Section130oftheActisjustifiedinthefactsandcircumstances

ofthecaseornot.Wehavelaiddowngeneralprincipleswith

regardtotheapplicabilityofSections129andSection130oftheAct.Let

thesemattersnowbenotifiedbeforetheHon'bleCourttakingup

taxmattersforthepurposeofdecidingwhethertheconfiscation

noticedeservestobequashedandsetasideornot.

(J.B.PARDIWALA,J)
(A.C.RAO,J)
Page175of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
(PER:HONOURABLEMR.JUSTICEA.C.RAO)
187.Ihavehadthebenefitofgoingthroughthefinalconclusion

drawnbymyLearnedBrotherJusticeJ.B.Pardiwalainthe

judgment,withwhich,Ihaveconcurred.However,Iwouldliketo

addfewwordsofmyownonthesubject.

188.FromtheplainreadingofSections129andSection130oftheAct,

itisclearthatthesuppliersorreceiversofthegoodstransport

anygoodsincontraventionofprovisionsoftheActortheRules

madethereunderareliableforthedetentionorseizureofthe

goodsunderSection129oftheActandunderSection130(i)(v)of

theActforconfiscationofthegoodsandconveyance.Thus,for

thesamebreachand/orcontraventionoftheprovisionsofthe

Act,therearetwotypesofpenaltiesprovidedunderSection129

andSection130(i)(v)oftheAct.

189.Inthisregard,wewouldliketoobserveasheldbythe

SupremeCourtthatitwouldbeimportanttonoticecertainwell

settledcanonsofinterpretationofstatutes.Theprimaryand

foremosttaskofaCourtininterpretingastatute,istoascertain

theintentionofthelegislature,actualorimputed.Having

ascertainedtheintention,theCourtmustthenstrivetoso

interpretthestatuteastopromoteandadvancetheobjectand

purposeoftheenactments.Iftwoconstructionsarepossible

uponthelanguageofthestatute,theCourtmustchoosetheone

whichisconsistentwithgoodsenseandfairness,andeschewthe

otherwhichmakesitsoperationundulyoppressive,unjustor

unreasonableorwhichwouldleadtostrange,inconsistent

resultsorotherwiseintroduceanelementofbewildering
Page176of177
Downloadedon:TueDec2420:31:29IST2019

C/SCA/4730/2019CAVJUDGMENT
uncertaintyandpracticalinconvenienceintheworkingofthe

statute.Forthispurpose,wherenecessary,theCourtmayeven

departfromtherulethatplainwordsshouldbeinterpreted

accordingtotheirplainmeaning.Thereneednotbemeekand

mutesubmissionstotheplainnessofthelanguage.Toavoid

patentinjustice,anomalyorasburdity,theCourtwouldwellbe

justifiedindepartingfromtheso-calledgoldenruleof

constructionsoastogiveeffecttotheobjectandpurposeofthe

enactmentbysupplementingthewrittenwordifnecessary.

Thoughnormallyitisnotpermissibletoreadwordsinastatute

whicharenotthere,but,"wherethealternativeliesbetween

eithersupplyingbyimplicationwordswhichappeartohavebeen

accidentlyomittedoradoptingaconstructionwhichdeprives

certainexistingwordsofallmeaning,itispermissibletosupply

thewords."Havingregardtothecontextinwhichaprovision

appearsandtheobjectofstatuteinwhichthesaidprovisionis

enacted,theCourtshouldconstrueitinaharmoniouswayto

makeitmeaningful.Anattemptmustalwaysbemadesoasto

reconciletherelevantprovisionsastoadvancetheremedy

intendedbythestatute.

190.IamoftheviewthattheLegislatureshould,onceagain,

lookintoboththeprovisions,i.e,Sections129andSection130oftheAct

andamendthesectionsaccordinglysoastoremovecertain

inconsistenciesinthetwoprovisions.Letthisaspectbelooked

intobytheStateGovernmentinaccordancewithlaw.

(A.C.RAO,J)

Vahid
Page177of177
Downloadedon:TueDec2420:31:29IST2019