[GST] Penalty Can't Be Imposed On Goods In Transit With Tax Invoice & E-Way Bill, Citing Subsequent Suspension Of Registration: Allahabad HC
The Allahabad High Court has set aside the demand and penalty order passed under Section 129 of the Central Goods and Services Tax Act 2017 against a trader whose GST registration came to be suspended, after it found that the goods in transit were accompanied with proper tax invoice and e-way bill.
A division bench of Chief Justice Arun Bhansali and Justice Vikas Budhwar relied on M/s Sahil Traders v. State of U.P. and another, 2023 wherein a coordinate bench had held that once the goods were found with proper tax invoice and E-way bill, the consignee will be deemed owner and goods will have to be released in terms of Section 129(1)(a) of the CGST Act.
Section 129 provides for detention and seizure of goods and conveyances and their release on the payment of requisite tax and penalty in cases where such goods are transported in contravention of the provisions of the CGST Act or rules.
Petitioner's goods were being transported from Patna to Gurugram. It was aggrieved by demand of penalty in Form GST MOV-09. It claimed no discrepancy was found upon physical verification of the goods however, the same were detained by indicating movement of goods without proper documents.
Significant to note that the tax invoice and E-way bill accompanying the goods were dated 01.10.2024 whereas suspension of Petitioner's registration by the jurisdictional authority was dated 03.10.2024. The vehicle came to be intercepted on 04.10.2024 and a demand was raised against the Petitioner on 16.10.2024.
Counsel for the petitioner submitted that it is not the case of the respondent that the vehicle was not accompanied by the requisite documents. The show cause notice simply indicated that the registration of the petitioner was suspended based on which the demand was raised, which is not justified.
Standing counsel for the Department on the other hand claimed that the registration was obtained by the Petitioner based on fake documents and, therefore, as the documents which were accompanying the goods in question were obtained based on a fake registration, the passing of the order was justified.
At the outset, the High Court referred to Halder Enterprises v. State of U.P. and others (2023) wherein the goods were intercepted on 03.10.2023 and the suspension took place w.e.f. 18.09.2023.
It was held therein that once the goods were found with proper tax invoice and E-way bill, the circular dated 31.12.2018 issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing would apply.
The Circular provides that if the invoice or any other specified document is accompanying the consignment of goods, then either the consignor or the consignee should be deemed to be the owner.
In this backdrop the High Court observed,
“This is not the case of the respondents that the goods were not accompanied with proper tax invoice and E-way bill and only on account of the fact that the registration was suspended on 03.10.2024 that the action has been initiated and the order impugned has been passed as such the issue stands covered. Consequently, the writ petition is allowed.”
Appearance: Advocate Aditya Pandey for Petitioner; Standing counsel Ankur Agarwal for Respondent
Case title: M/S Lakhdatar Traders v. State Of Up And 2 Others
Case no.: WRIT TAX No. - 1852 of 2024