“Myopic Vision” would Create Hostility Between S.129 and S.130 of CGST Act, Says Gujarat HC as It Remands Batch of Petitions for Reconsideration [Read Order]

The GujaratHigh Court, in a detailed common judgment spanning nearly fifty petitions, has held that a narrow or myopic interpretation of Sections 129 and 130 of the Central Goods and Services Tax Act, 2017 (CGST) would “create hostility” between the two provisions and defeat the statutory scheme governing detention, seizure, and confiscation of goods in transit.

The petitions arose from a series of MOV‑10 notices issued under Section 130, proposing confiscation of goods and conveyances intercepted during transit under Section 129.

The petitioners, M/S Panchii Traders, argued that after the 2022 amendments, introduced through the Finance Act, 2021, Section 129 had become a self‑contained code, complete with its own mechanism for recovery of penalty through auction under Section 129(6).

They contended that the deletion of the non‑obstante clause from Section 130 and its retention in Section 129 demonstrated a legislative intent to delink the two provisions, thereby preventing the authorities from invoking Section 130 while Section 129 proceedings were still underway.

The petitioners relied heavily on the Supreme Court’s decision in ASP Traders v. State of U.P. (2025), arguing that confiscation cannot be triggered mechanically and must be preceded by a complete Section 129 process.

They also cited Rajiv Traders v. Union of India (Karnataka HC, 2022) to contend that confiscation cannot be used as a substitute for assessment or recovery proceedings under Sections 73 and 74.

The petitioners also invoked Dhanlaxmi Metals v. State of Gujarat (2022) to argue that provisional release under Section 67(6) remains available even after confiscation proceedings begin, and Shiv Enterprises v. State of Punjab (2022) to contend that MOV‑10 notices cannot be issued merely based on portal discrepancies or e‑way bill defects. They further argued that the intent to evade tax, central to Section 130, cannot be presumed at the interception stage and must be established through a proper inquiry under Section 67.

The State, represented by the Advocate General, countered that the petitioners’ arguments were squarely answered by the Division Bench in Synergy Fertichem, which held that Sections 129 and 130 are mutually independent and that confiscation under Section 130 is not contingent upon the failure to comply with Section 129.

The Division bench of Justice AS Supehia and Justice Pranav Trivedi noted that the amendments did not alter the fundamental character of Sections 129 and 130 as distinct remedies, one dealing with detention and release, and the other with confiscation based on intent to evade tax.

The Court observed that the presence or absence of a non‑obstante clause does not, by itself, determine the hierarchy or exclusivity of statutory provisions, especially when no direct conflict exists.

Crucially, the Court held that a myopic reading that treats Section 129 as a complete code to the exclusion of Section 130 would undermine the legislative scheme and create artificial hostility between the provisions.

The Court reaffirmed that Section 130 can be invoked at the interception stage, provided the officer records strong reasons indicating intent to evade tax—consistent with the safeguards outlined in Synergy Fertichem. At the same time, the Court cautioned that MOV‑10 notices cannot be issued mechanically or based on mere suspicion.

In light of its statutory analysis and reaffirmation of Synergy Fertichem, the Gujarat High Court declined to adjudicate the merits of the individual MOV‑10 or MV‑11 confiscation notices. Instead, the Court held that the proper course was to remand the entire batch of petitions to the respondent‑authorities for fresh consideration strictly in accordance with the interpretative framework laid down in the judgment.

The authorities have been directed to re‑examine all MOV‑10 notices and MV‑11 orders in the light of the Court’s findings, and to withdraw any confiscation action that runs contrary to the principles articulated, particularly the requirement of strong prima facie material, recorded reasons, and the prohibition against mechanical invocation of Section 130.

Where infringements fall only within the scope of Section 129, the Court has mandated that the goods or conveyance be released under that provision.

The Court further directed that if the authorities believe confiscation is imminent, they must refrain from taking coercive action for two weeks, thereby enabling the petitioners to approach the Court again if necessary.

The Bench cautioned that confiscation is a harsh and severe measure with direct consequences for trade and business, and any officer acting in defiance of the Court’s observations would be liable for contempt of court.

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