GST- State Authorities Cannot Act On Whims And Fancies To Harass Trading Community: Allahabad High Court

The petitioner, who is a registered dealer engaged in the business of selling Ancle (sweet supari) and Varanasi Ashik (betel nut product) had sold 90 bags of betel nut product to two different registered dealers by issuing two tax invoices which were being transported to the destination along with proper tax invoices and e-way bill when it was intercepted by a proper officer in Varanasi. It was found on physical verification that three of these bags did not have a tax invoice and thus a show-cause notice was issued to the petitioner. In response, the petitioner submitted the tax invoice which he explained, was given to the transporter who left it behind by mistake. The petitioner further submitted that since the value of the goods was less than INR 50,000, an e-way bill was not generated and requested that since the other part of the consignment (left 87 bags) was complete in all aspects and had been sold to another dealer, that should not have been seized and if any discrepancy had to be attributed, it should have been attributed only to the extent of 3 bags. His prayer was that the goods be released immediately, without any payment of security.

Respondent's argument relied on a combined reading of S.129(3) and Rule 138, through which the respondent's counsel concluded that issuance of the e-way bill was required for all transactions and since there was no e-way bill for 3 bags, and even the tax invoice was submitted only in response to the showcase notice, a contravention of the provisions of UP GST Act has occurred.

Justice Piyush Agrawal observed that since the petitioner had submitted the tax invoice with the reply to show cause notice, no adverse inference could be drawn from the case. The court noted that "the quasi-judicial authority while exercising their statutory powers have to act fairly and with an open mind. Once the tax invoice was submitted along with the response to the show-cause notice, the authorities must have to act fairly while adjudicating the same especially when they have the power to take a punitive step against a person, to whom the show-cause notice was issued." The court further observed that since the value of the consignment in question (the 3 bags) was less than INR 50,000, as per Rule 138, there was no requirement of generating an e-way bill with regard to the same.

The court also noted that "The authorities have acted in an illegal and arbitrary manner while referring to the various discrepancies such as the pouches were not having batch number, packing date, expiry date, manufacturing date etc. But so far as the GST is concerned, the authorities have failed to record any provision for justification of the seizure of goods in question."

Thus, the writ petition was allowed with cost of INR 20,000 payable to the petitioner within one month from the date of this judgment and the respondents were given the liberty to recover such cost from the officer who erred. Court further ordered that any deposited amount concerning the impugned order shall be refunded within two months from the date of this judgment.

Case Title: S/S Shri Surya Traders v. Union Of India And 4 Others
Citation: 2022 LiveLaw (AB) 10

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