Allahabad High Court Monthly Tax Digest: January 2024

1. UP GST | No Interference Under Article 226 Unless Inherent Lack Of Jurisdiction Or Absence Of Relevant Material Established: Allahabad High Court

Case Citation: 2024 LiveLaw (AB) 4

The Allahabad High Court has held that the writ court should not interfere in notice issued under Section 73 of the UP Goods and Service Tax Act, 2017 unless there is inherent lack of jurisdiction or complete absence of relevant material is alleged and established.

The bench comprising of Justice Saumitra Dayal Singh and Justice Manjive Shukla held that

“The satisfaction required to be recorded in terms of Section 61(3) of the Act is primarily subjective. Unless inherent lack of jurisdiction or complete absence of relevant material is alleged and established, no interference may be warranted in exercise of extraordinary jurisdiction of this court under Article 226 of the Constitution of India.”

2. Typo Error In E-Way Bill, Penalty Can't Be Imposed If There Is No Intention To Evade Tax: Allahabad High Court

Case Citation: 2024 LiveLaw (AB) 9

The Allahabad High Court has held that a minor typographical error in the e-way bill without any other material establishing an intention to evade tax will not attract a penalty under Section 129 of the Goods and Service Tax Act, 2017.

Placing reliance on the decision of Allahabad High Court in M/s. Varun Beverages Limited v. State of U.P. and 2 others, the judgment of Supreme Court in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another, Justice Shekhar B. Saraf held that

“Upon perusal of the judgments, the principle that emerges is that the presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to the imposition of penalty.

3. CGST Act | Once Registration Is Cancelled, Uploading Notice On Portal Not Sufficient Notice, Must Be Given At Assesee's Address: Allahabad HC

Case citation: 2024 LiveLaw (AB) 14

The Allahabad High Court has held that once the registration of the assesee is cancelled, any notice for proceedings under the Central Goods and Service Tax Act, 2017 shall be served on the address of the assesee. The Court observed that merely uploading notice on the web portal without any intimation to the assesee will vitiate any subsequent action as being bad in law.

Elaborating on the need for judicious application of the principle of audi alteram partem in legal and administrative proceed, Justice Shekhar B. Saraf held that

“In the present case, when the petitioner had cancelled its registration in the year 2019, a proper notice was required to be issued to it under Section 74 of the Act at its address. However, the authorities simply uploaded the Section 74 show cause notice on the web portal inspite of knowing that the petitioner had already cancelled its registration prior to the date of issuance of the show cause notice. This action clearly prevented the petitioner from appearing in the hearing in the original proceeding under Section 74 of the Act that was accordingly passed ex parte.”

4. UPGST | Truck Is Capital Asset Of Transporter, Seizure Without Notice Affects Civil Rights: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 25

The Allahabad High Court has held that the seizure of a vehicle transporting goods affects the civil rights of the transporter as the truck is a capital asset of the transporter. The Court held that the transporter ought to be afforded an opportunity of hearing before passing any penalty order against him.

While observing that the vehicle carrying the goods could be released under proviso-1 of Section 129 (6) of the UP Goods and Service Tax Act, 2017 on payment of Rs. 1 Lakh, the bench comprising of Justice Saumitra Dayal Singh and Justice Manjive Shukla held that

“Truck being the valuable property and a capital asset of the transporter which is utilised to generate revenue/ income, we perceive valuable civil right of the petitioner having being adversely affected exparte.”

5. UPGST | Invoice Contains Vehicle Details, Error In Not Filling Part-B Of E-Way Bill Technical: Allahabad High Court Quashes Penalty Order

Case citation: 2024 LiveLaw (AB) 31

The Allahabad High Court has held that if the invoice accompanying the goods contains all the details of the vehicle then not filing of Part-B of the e-way bill is a technical error without any intention to evade tax. The court quashed the penalty order under Section 129(3) of the UP Goods and Service Tax Act, 2017.

Relying on the decision of the Allahabad High Court in M/s Citykart Retail Private Limited through Authorized Representative v. Commissioner Commercial Tax and Another, Justice Shekhar B. Saraf held that

“In the present case, the facts are quite similar to one in M/s Citykart Retail Pvt. Ltd.'s case (supra) and I see no reason why this Court should take a different view of the matter, as the invoice itself contained the details of the truck and the error committed by the petitioner was of a technical nature only and without any intention to evade tax. Once this fact has been substantiated, there was no requirement to levy penalty under Section 129(3) of the Act.”

6. VAT Act | Granite Stone Falls Within Definition Of Stone Under Entry 109, Taxable At 5%: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 32

The Allahabad High Court has upheld the order of Tribunal classifying granite stone as “stone” under Entry 109 of the Schedule II Part A as per notification No.KANI-2-421/XI-9(1) dated 31.03.2011 under the Value Added Tax Act, 2008.

The bench comprising of Justice Shekhar B. Saraf held that

“On an interpretation of the intention of the Legislature, I am of the view that glazed stone, marble and marble chips have been specifically excluded from the definition of "stone" in Entry No.109. If the Legislature wanted to exclude granite stone, the same could have very well been done by the amendment carried out on March 31, 2011.”

7. Section 5 Of Limitation Act Does Not Apply To Section 107 Of CGST Act: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 47

The Allahabad High Court has held that Section 5 of the Limitation Act, 1963 does not apply to appeals filed under Section 107 of the Central Goods and Services Tax Act, 2017.

“The Central Goods and Services Act is a special statute and a self-contained code by itself. Section 107 of the Act has an inbuilt mechanism and has impliedly excluded the application of the Limitation Act. It is trite law that Section 5 of the Limitation Act, 1963 will apply only if it is extended to the special statute. Section 107 of the Act specifically provides for the limitation and in the absence of any clause condoning the delay by showing sufficient cause after the prescribed period, there is complete exclusion of Section 5 of the Limitation Act,” held Justice Shekhar B. Saraf.

8. UPGST | Opportunity Of Hearing Mandatory Under S75(4) Before Imposing Tax/Penalty: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 49

The Lucknow Bench of the Allahabad High Court held that before passing of any adverse order, such as imposing tax or penalty, opportunity of hearing is mandatory under Section 75(4) of the Uttar Pradesh Goods and Service Tax Act, 2017.

The bench comprising of Justice Vivek Chaudhary and Justice Om Prakash Shukla held “Since in the present cases, both tax and penalty are imposed against the petitioners and admittedly, an adverse decision is contemplated against the petitioners, therefore, under Section 75(4) of the Act of 2017, an opportunity of hearing was mandatorily required to be given by the department to the petitioners and merely marking the same as "NO" in the option cannot entitle the department to pass an order without giving any opportunity or even without waiting for the petitioners to appear on the date fixed.”

9. UPGST | Burden To Prove Intention To Evade Tax Lies Solely On Department: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 50

The Allahabad High Court held that the burden to prove intention to evade tax lies solely on the Department. The Court held penalties in tax laws should not be imposed solely on insignificant technical errors which do not have any financial consequences.

The Court held that penalties should only be imposed where there is concrete evidence to show that an assesee is deliberately trying to defraud the system and not in cases of unintentional mistakes.

10. Commercial Tax | Allahabad High Court Upholds Condonation Of 1365 Days Delay On Sufficient Cause

Case citation: 2024 LiveLaw (AB) 51

The Allahabad High Court has upheld condonation of delay of 1365 days by the Commercial Tax Tribunal in filing of appeal as it was sufficiently explained by the authorities.

The Court relied on N. Balakrishnan v. M. Krishnamurthy, where the Supreme Court had held that it is the discretion of the Court to condone delay. The delay can be very small but unjustified, and very long but condonable due to satisfactory explanation.

11. [Limitation Act] Allahabad High Court Extends Benefit Of Exclusion Of Time U/S.14 To Appeals Under S.107 CGST Act

Case citation: 2024 LiveLaw (AB) 52

The Allahabad High Court direct the Additional Commissioner, CGST, (Appeals), Meerut, to grant benefit of Section 14 of the Limitation Act to the petitioner and hear the appeal filed under Section 107 of Central Goods and Service Tax Act, 2017 afresh.

12. CGST Act | Time Extension For Filing Appeal Against Orders U/S 73, 74 Can Be Extended To Orders U/S 129, 130: Allahabad HC Asks CBIT To Consider

Case citation: 2024 LiveLaw (AB) 54

The Allahabad High Court, on Wednesday, directed the Central Board of Indirect Taxes, Ministry of Finance to consider extending the benefit of extension of time to file appeal under Section 107(1) of the Central Goods and Services Act, 2017 to orders passed under Section 129 and Section 130 of the Act.

The bench comprising of Justice Shekhar B. Saraf observed that the Court cannot issue a writ of mandamus directing the Central Government to include Sections 129 and 130 of the Act in the said notification. However, he observed that “the Government can very well consider adding these two Sections in the said notification, so that the benefit that has been provided for the orders passed under Sections 73 and 74 of the Act can be extended to Sections 129 and 130 of the Act.”

13. GST | Show Cause Notice A Vital Checkpoint, Delineates Boundaries Within Which Any Authority Can Operate: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 57

The Allahabad High Court has held that authorities cannot travel beyond the show cause notice to impose penalty on the assesee.

Justice Shekhar B. Saraf held that

“At its core, a show cause notice represents the initial step in an administrative or legal process, wherein an individual or entity is formally apprised of allegations or discrepancies attributed to them. This notice serves as a mechanism to afford the recipient an opportunity to present their side of the story, provide clarifications, or rectify any perceived errors before any punitive action is taken.”

14. Writ Of Certiorari Not Issued As A Matter Of Course, But Granted At Discretion Of Superior Court: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 59

The Allahabad High Court has held that the writ of certiorari is discretion granted to a superior court to review and quash decisions of lower courts, tribunals, or administrative bodies and is not issued as a matter of course.

While dealing with the challenge to the order under Section 129 of the Central Goods and Service Tax Act, 2017 and the subsequent order of the first appellate authority, the bench comprising of Justice Shekhar B. Saraf held that:

“The writ of certiorari is not issued as a matter of course, but rather it is granted at the discretion of the superior court. Generally, certiorari is issued in cases involving errors of law apparent on the face of the record, jurisdictional issues, or procedural irregularities that may have a substantial impact on the fairness and legality of the proceedings.”

15. GST | Technical Error Without Any Financial Implications Do Not Attract Penalties: Allahabad High Court

Case citation: 2024 LiveLaw (AB) 59

The Allahabad High Court has held that mere technical errors under tax laws without any financial implications should not be grounds for imposition of penalties.

While dealing with the case of goods not accompanying e-way bill, Justice Shekhar B. Saraf held that

“Mere technical errors, without having any potential financial implications, should not be the grounds for imposition of penalties. The underlying philosophy is to maintain a fair and just tax system, where penalties are proportionate to the gravity of the offense. In the realm of taxation, imposition of penalty serves as a critical measure to ensure compliance with tax laws and regulations.”