Section 130 vs Section 129 of CGST Act: Karnataka HC Rules Release Mechanism Changes Once Confiscation Order Is Passed
Background and Overview
The Karnataka High Court recently pronounced a significant ruling in Sreekrishna Traders Vs State of Karnataka, addressing a critical legal question under GST law — whether the provisional release mechanism available under Section 129 of the CGST/KGST Act continues to operate even after a formal confiscation order has been issued under Section 130 of the same Act. The Division Bench dismissed both writ appeals — W.A.No.1385/2026 and W.A.No.1388/2026 — which arose from interim orders passed by a Single Judge in WP.No.34329/2025 (T-RES) and WP.No.33220/2025 (T-RES) respectively.
The case involved the interception and detention of arecanut consignments along with accompanying vehicles by GST enforcement authorities in Karnataka. Confiscation orders had been issued in Form GST MOV-11 alongside summary orders in GST DRC-07, and the assessees were seeking modification of conditions imposed for provisional release. The ruling draws a clear and firm boundary between two distinct statutory regimes governing detained goods and confiscated goods under the CGST/KGST framework.
Facts of the Case
The assessees involved in these proceedings were arecanut traders whose goods and vehicles were intercepted by enforcement authorities under the CGST/KGST Act. Upon interception, formal confiscation orders were passed under Section 130 in Form GST MOV-11, and corresponding summary orders were issued in GST DRC-07.
The assessees approached the Karnataka High Court by way of writ petitions challenging these confiscation orders. During the pendency of those writ petitions, the Single Judge passed interim orders — dated 05.12.2025 and 13.11.2025 — directing provisional release of the seized goods and vehicles subject to the following conditions:
- The assessees were required to deposit 25% of the demand raised in GST DRC-07
- A bank guarantee was to be furnished for the remaining 75% of the demanded amount
Both the Government Pleader and the counsel for the assessees had jointly submitted that release should be governed by the conditions laid down by a Division Bench in W.A.No.1599/2024 in The Assistant Commissioner of Commercial Taxes And Another Vs. Trillion Lead Factory Private Limited, and the Single Judge accordingly passed the interim orders on that basis.
Subsequently, the assessees filed I.A.No.1/2026 in both writ petitions seeking modification of these interim conditions.
Contentions Raised by the Assessees
Senior Counsel Sri D.R. Ravishankar, appearing on behalf of the assessees, raised multiple grounds in support of the modification sought:
Parity Argument — Similar Cases, Different Relief
The assessees pointed out that in a batch of writ petitions — WP.Nos.37627/2025, 37643/2025, 37805/2025 and 37841/2025 — involving other arecanut traders in Chitradurga District who were similarly subjected to interception, detention, and confiscation by the same respondent authorities, the Karnataka High Court had granted interim relief by:
- Staying the impugned detention orders
- Directing release of goods and conveyances on deposit of 200% of the tax payable on the subject goods
- Requiring the assessees to execute indemnity bonds in favour of the concerned respondents
The Senior Counsel argued that the facts and circumstances in the present matters were identical to those in the said batch of petitions. Therefore, relying on the principle of consistency and uniformity in judicial discretion, he pressed for similar treatment.
Rule 138C Argument — Limitation on Inspection Period
A significant procedural argument was raised based on Rule 138C of the CGST/KGST Rules, which prescribes a maximum period of three days for the completion of inspection and verification proceedings. The Senior Counsel contended that: