The Hon’ble Gujarat High Court in the case of M/s Shree Devidayal Metals v. State of Gujarat & Ors. [R/SCA No. 6598 of 2025 dated May 08, 2025] held that questions of fact surrounding the relation between supplier entities and the movement of goods must be adjudicated before the appellate authority under Section 107 of the CGST Act, and not in writ jurisdiction under Article 227.
Facts:
M/s Shree Devidayal Metals (“the Petitioner”), a scrap trader, challenged the confiscation order dated April 6, 2025 in Form GST MOV-11, along with the prior MOV-6 detention order and MOV-10 notice of confiscation passed by the State Tax Officer, Amirgadh Mumbai Squad, (“the Respondents”) under Section 130 of the CGST Act, 2017. The petitioner’s goods and conveyance were intercepted on March 22, 2025, and physical verification was conducted on the same date.
The Respondents issued detention order in Form GST MOV-6 based on findings that the petitioner’s supplier, M/s Dhatu Metallo Industries Pvt. Ltd., and its upstream supplier, M/s Mewad Scrap, were non-existent or operated from unverifiable premises. The Respondents further alleged that suspicious e-way bills were generated after the vehicle was already intercepted, indicating a potential circular trading mechanism and intent to evade tax.
The Petitioner submitted that the impugned orders were passed without granting an opportunity of hearing and without due consideration of the reply filed in response to the MOV-10 notice. The Petitioner thus approached the High Court under Article 227 of the Constitution seeking quashing of the confiscation and detention orders.
Issue:
Whether the High Court should exercise jurisdiction under Article 227 of the Constitution in light of the factual disputes and the alternative statutory remedy available under Section 107 of the CGST Act?
Held:
The Hon’ble Gujarat High Court in R/SCA No. 6598 of 2025 held as under:
- Observed that, the dispute raised issues of fact, including the nature of relationship between M/s Dhatu Metallo Industries and M/s Mewad Scrap and the validity of e-way bills, which are not amenable to writ jurisdiction under Article 227.
- Relied on, the decision of the Hon’ble Supreme Court in Assistant Commissioner v. Commercial Steel Limited [2021 (9) TMI 480 – SC] wherein it was held that writ petitions should not be entertained when effective statutory remedies under Section 107 of the CGST Act are available, unless exceptions such as violation of natural justice or lack of jurisdiction are established.
- Held that, in the present case, no such exception was made out, and since a notice was served on the person in charge of the conveyance, there was no breach of natural justice.
- Further held that, that the petition could not be entertained under Article 227 and accordingly dismissed it, while granting liberty to the petitioner to pursue the appellate remedy under Section 107 of the CGST Act.
Our Comments:
The present judgment aligns closely with the well-established principle laid down by the Supreme Court in Assistant Commissioner of State Tax and Others v. M/s Commercial Steel Limited. The Apex Court in that case emphasized that while the availability of an alternate statutory remedy under Section 107 of the CGST Act does not operate as an absolute bar to the maintainability of a writ petition under Article 226, such petitions ought to be entertained only in exceptional circumstances. These exceptions primarily involve breaches of fundamental rights, violations of natural justice, excess of jurisdiction, or challenges to the constitutional validity of the statute or delegated legislation. The Court observed that in the absence of such exceptional grounds, litigants must pursue the remedy provided within the statute itself, thereby preserving the efficacy of the legislative framework and preventing the unnecessary burdening of writ courts with factual disputes or appellate matters.
In the instant matter, the Court relying in the precedent, found that none of the exceptional circumstances were made out by the petitioner. There was no allegation or evidence of denial of natural justice, especially since a notice was served on the person in charge of the conveyance. The factual questions concerning the existence of business premises, validity of invoices, and intentions behind the transactions are clearly disputes of fact and fact-finding which fall squarely within the purview of the appellate authority. Therefore, this Court’s reluctance to entertain the writ petition and its direction to the petitioner to avail the statutory remedy under Section 107 is a faithful adherence to the statutory scheme and judicial discipline as mandated by the Supreme Court.
This approach reinforces the importance of the hierarchical dispute resolution mechanism envisaged under the GST laws, where the appellate remedy acts as the proper forum for factual and legal scrutiny of assessment and confiscation orders.
Relevant Provision:
Section 107 – Appeals to Appellate Authority (the CGST Act):
“(1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.
(6) No appeal shall be filed under sub-section (1), unless the appellant has paid—
(a) the full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
(b) a sum equal to ten per cent. of the remaining amount of tax in dispute arising from the said order, in relation to which the appeal has been filed. ….”
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