In a recent ruling, the Gujarat High Court addressed the issue of whether GST authorities can independently invoke confiscation proceedings under Section 130 of the CGST Act for goods detained in transit under Section 129, following amendments effective from January 1, 2022. The case involved M/s Panchhi Traders, whose goods were intercepted during transit, leading to detention proceedings under Section 129. While these proceedings were ongoing, notices were issued for confiscation under Section 130, prompting the petitioners to challenge the legality of this action.
The petitioners argued that post the Finance Act, 2021 amendment, authorities should complete Section 129 proceedings before invoking Section 130, and that confiscation requires established intent to evade tax. The court, however, held that Sections 129 and 130 operate independently and are not sequential, even after the 2021 amendment. The deletion of the non-obstante clause in Section 130 does not make it subordinate to Section 129, allowing confiscation during transit if there is intent to evade tax.
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The court clarified that while proving mens rea as in criminal proceedings is unnecessary, authorities must form a bona fide opinion based on substantial evidence before invoking Section 130. It was also noted that Section 67(6) regarding provisional release does not apply to transit cases post-amendment. The court disposed of the writ petitions, emphasizing that confiscation powers should be exercised cautiously and only with strong prima facie evidence of tax evasion.
Parties: M/s Panchhi Traders v. State of Gujarat & Anr.
Order Date: 11 December 2025
Facts
- The petitioners’ goods were intercepted during transit by GST authorities, following which detention proceedings were initiated under Section 129 of the CGST Act.
- During the pendency of such detention, notices in Form GST MOV-10 were issued proposing confiscation of goods under Section 130 without first completing proceedings under Section 129.
- The petitioners challenged the confiscation proceedings contending that post the Finance Act, 2021 amendment, authorities were bound to conclude Section 129 proceedings before invoking Section 130.
- It was further argued that confiscation could not be initiated in the absence of established intent to evade tax.
Issue
- Whether, after the amendment to Sections 129 and 130 of the CGST Act with effect from 01.01.2022, GST authorities can directly invoke confiscation proceedings under Section 130 for goods detained in transit under Section 129?
Order
- The High Court held that Sections 129 and 130 of the CGST Act operate independently and are not sequential, even after the 2021 amendment.
- It was observed that deletion of the non-obstante clause in Section 130 does not subordinate it to Section 129, and confiscation proceedings can be initiated during transit if facts disclose intent to evade tax.
- The Court clarified that while mens rea need not be proved as in criminal proceedings, authorities must form a bona fide opinion based on cogent material before invoking Section 130.
- It was further held that Section 67(6) relating to provisional release has no application to transit cases post-amendment. The writ petitions were disposed of with directions that confiscation powers must be exercised cautiously and only in cases supported by strong prima facie evidence of tax evasion.
