Proceedings u/s 130 of GST Act against Third Party Insufficient Ground to Detain Vehicle & Goods in Transit: Andhra Pradesh HC Establishes Independent Nature of Section 129 & 130 [Read Order]

The High Court of Andhra Pradesh has clarified that proceedings initiated under Section 130 of the Goods and Services Tax (GST) Act against a third party are insufficient grounds for detaining vehicles and goods in transit. The court emphasised the independent nature of Sections 129 and 130 of the GST Act and highlighted that they serve distinct purposes.

The ruling came in response to the Writ Petitions filed by the petitioners, M/s.Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd. and T Srinivasulu.

The petitioners sought relief against the detention of their goods and vehicles by the Deputy Assistant Commissioner of State Tax (ST). The petitioners argued that the actions taken by the authorities were illegal.

The first petitioner, M/s. Arhaan Ferrous and Non-Ferrous Solutions Pvt. Ltd., had purchased iron scrap from M/s. K S Enterprises, the 4^th respondent and was transporting it from Vijayawada to Sankarampet, Medak District, Telangana. During transit, the goods and vehicles were detained by the authorities based on allegations that the 4^th respondent did not have a place of business in Vijayawada and had questionable credentials.

The revenue had initiated proceedings under Section 130 of the Andhra Pradesh Goods and Services Tax (APGST) Act, 2017, proposing to confiscate the goods and conveyance belonging to the 4^th respondent.

The petitioners, represented by V. Siddharth Reddy, contended that this action against the 4^th respondent should not be applied to them as they were the bonafide purchasers of the goods and were in possession of valid documents.

The respondent revenue argued that the detention and subsequent proceedings were valid because of doubts surrounding the 4^th respondent’s business activities and GST registration.

The revenue claimed that the 1^st petitioner should establish the authenticity of their transaction with the 4^th respondent, including the mode of payment and the mode of receiving the goods.

The bench emphasised the distinction between Sections 129 and 130 of the GST Act. Section 129 deals with the detention, seizure and release of goods and conveyances in transit and is primarily focused on ensuring tax and penalty recovery.

On the other hand, Section 130 pertains to the confiscation of goods or conveyance and the imposition of tax, penalty and fines for violations of the Act.

The bench ruled that while the authorities could initiate proceedings under Section 130 against the 4^th respondent, they could not confiscate the goods of the 1^st petitioner without initiating separate proceedings under Section 129 against them.

The responsibility to prove the genuineness of the transaction between the 1^st petitioner and the 4^th respondent lay with the 1^st petitioner, who must demonstrate that they were the bona fide purchasers who acted in good faith, relied on the 4^th respondent’s GST registration and had made legitimate payments.

The division bench comprising Justice U. Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa directed the authorities to release the detained goods in favour of the 1^st petitioner, subject to the 1^st petitioner depositing 25% of their value and executing a personal bond for the balance.

The court also instructed the release of the vehicles in favour of the second petitioner upon their execution of personal security bonds for the determined value as per the Road Transport Authority.

The bench thus clearly distinguished Sections 129 and 130 of the GST Act when dealing with the detention and confiscation of goods and conveyances in transit and highlighted the need for authorities to initiate separate proceedings against the purchaser/owner of the goods under Section 129 when detaining goods while they are in transit.

To Read the full text of the Order CLICK HERE

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