The Karnataka High Court, in a judgment delivered by Justices Sachin Shankar Magadum and Rajesh Rai K, addressed the legal distinction between the powers exercised under Sections 129 and 130 of the CGST/KGST Act concerning the detention and confiscation of goods and conveyances in transit. The appeals arose from interim orders passed by a Single Judge, which directed the provisional release of goods and vehicles subject to the petitioner furnishing 25% of the demand as security and a bank guarantee for the remaining 75%.
The appellants contended that in similar cases involving arecanut traders, the Court had previously ordered the release of goods upon deposit of 200% of the tax payable and execution of indemnity bonds. They argued that the facts of the present cases were identical and that the statutory timeline for inspection under Rule 138C had been exceeded, rendering the detention and confiscation orders without jurisdiction. The appellants further relied on the principle of consistency in interlocutory orders, citing Supreme Court and Gujarat High Court precedents.
The State, represented by the Additional Government Advocate, countered that the present cases involved final orders of confiscation under Section 130, not mere detention or notices under Section 129. It was argued that once an order under Section 130 is passed, title to the goods and conveyance vests in the Government, and the only mechanism for release is through payment of a fine not exceeding the market value of the goods, less applicable taxes, as per Section 130(5). The State maintained that the Single Judge’s interim orders were consistent with the statutory framework and should not be modified.
The Division Bench undertook a detailed analysis of the statutory scheme. It distinguished between Section 129, which governs detention and provisional release of goods in transit, and Section 130, which deals with confiscation and vests title in the Government upon the passing of a confiscation order. The Court cited its own previous decision, emphasizing that once an order under Section 130 is made, the mechanisms under Section 129 are no longer available, and the adjudication of confiscation, valuation, and penalties is governed exclusively by Section 130.
The Court concluded that the interim orders passed by the Single Judge, which imposed conditions for the provisional release of goods after confiscation orders had been made, were in accordance with law. The Bench held that the appellants were not entitled to seek modification of these orders based on precedents involving only detention or notices under Section 129, as the legal consequences and statutory mechanisms differ fundamentally once confiscation under Section 130 occurs.
Accordingly, the Court dismissed the appeals, affirming that after a confiscation order under Section 130, the title to the goods and conveyance vests in the Government, and the remedies and procedures under Section 129 are no longer applicable. The judgment reinforces the statutory distinction between detention and confiscation proceedings under the CGST/KGST Act and clarifies the legal position regarding the release of goods post-confiscation.
Case Reported at:
Case Name: Sreekrishna Traders v. State of Karnataka and Ors.
Case Citation: (2026) taxcode.in 1010 HC
