Andhra Pradesh HC Quashes Illegal GST Confiscation Notices; Supreme Court Upholds HC’s Ruling

The present writ petitions (W.P. Nos. 15481, 15482, 15486 & 15487 of 2023) have been filed by a company named M/s. Arhaan Ferrous and Non-Ferrous Solutions Private Limited and Others (petitioners) against the Deputy Assistant Commissioner-1 (ST), the Principal Commissioner of State Tax, and others (respondents) in the Andhra Pradesh High Court at Amaravati before the benches comprising the Honourable Sri Justice U. Durga Prasad Rao and the Honourable Smt. Justice Venkata Jyothirmai Pratapa, under Article 226 of the Constitution of India.

Background of Case

Petitioners purchased iron scrap from M/s. K.S. Enterprises (4th respondent) and sold it to M/s. Radha Smelters Pvt. Ltd., Telangana. When the goods were transported on 12.06.2023, vehicles were detained at Auto Nagar, Vijayawada; despite having a proper invoice and e-way bill, the goods and vehicles were detained. The GST department reported that the seller, i.e., the fourth respondent, was a fake dealer with no real business location, and his GST registration was suspended on 13.06.2023. Officials issued Form GST MOV-01 (detention notice) and Form GST MOV-10 (confiscation notice under Section 130 CGST/APGST Act).

Petitioners’ Argument

The petitioners argued that they are bona fide buyers and bought goods after properly checking the GST registration of the seller on the GST portal. Goods were backed by valid invoices and e-way bills. At the time of interception, ownership had already transferred to them; the seller (4th respondent) had no more interest. If officials suspected the fraud, they should have issued a show cause notice under Section 129 for notifying the detention and also the penalty amount, not Section 130. Hence, the action is illegal, unfair, and against natural justice, and also the notices lacked a Document Identification Number (DIN).

When investigated, it was discovered that the seller, i.e., the fourth respondent, was fake, as it possessed a fake GST registration and also did not have any business premises. Hence, since goods originate from a bogus dealer, the consignment itself was untrustworthy. Hence, confiscation notices under Section 130 were issued. Petitioners failed to prove their ownership and the genuineness of the purchase with payment details. The burden is on petitioners to show they are innocent purchasers.

Court’s Decision

When the High Court analysed the case, it cited earlier judgments, including Rajeev Traders v. Union of India (Karnataka HC, 2022) and Synergy Fertichem Pvt. Ltd. v. State of Gujarat (Gujarat HC, 2020). The court noted that since the petitioners had proper invoices and e-way bills for transportation, direct interception was not justified.

Therefore, the court ruled that authorities cannot impose proceedings against the buyer (petitioners) based on an action against a seller (4th respondent). Detention under Section 130 without following the detention process as stated under Section 129 is illegal and unfair. Therefore, the high court quashed the impugned confiscation notices (MOV-10).

Supreme Court’s Ruling:

The respondents, dissatisfied with the decision of the Andhra Pradesh High Court, thereafter filed a Special Leave Petition with the Supreme Court (Special Leave to Appeal (C) Nos. 24711-24714/2023), challenging the order; however, the Supreme Court dismissed their petition, saying they are not inclined to interfere in the matter.

Supreme Court Judgement