GST Act | Proceedings Ought Not To Be Initiated If Rectified Tax Invoices, E-Way Bills Produced Before Passing Detention Order: Allahabad HC

The Allahabad High Court has held that once rectified/ correct tax invoices and e-way bills are produced before the authorities before passing of the detention/ seizure order, the proceedings under the Goods and Service Tax Act, 2017 ought not to be initiated.

Relying on the decision of the division bench of the Allahabad High Court in M/s Axpress Logistics India Pvt. Ltd. Vs. Union of India and others and M/s Bhumika Enterprises Vs. State of UP and others, the bench comprising of Justice Piyush Agrawal held

“Once the documents were produced before passing of the detention / seizure order, the authorities ought not to have proceeded further as held by the the Division Bench judgement of this Court in the case of M/S Axpress Logistics India Pvt. Ltd (supra) and M/s Bhumika Enterprises (supra).”

Factual Background

Petitioner is a proprietorship engaged in the business of manufacturing and sale of laminated papers. Goods were dispatch from Muzaffarnagar to Rajasthan along with tax invoices, E-way Bills and GR. During transit, they were intercepted and Form GST MOV-2 was issued after recording the statement of the truck driver. Thereafter, Form GST MOV-04 was issued after physical verification on grounds that the goods were different from what was mentioned in accompanying documents. Being dissatisfied with the reply of the petitioner, penalty order was passed. Appeal against the same was dismissed.

Counsel for petitioner contended that a rectified tax invoice and e-way was produced before physical verification was carried out by the authorities. However, the show cause notice and the penalty order were passed without proper consideration of the same. It was contended that once genuine tax invoices with e-way bills were produced before issuance of show cause notice, the proceedings out not to have been initiated. It was submitted it was an error on part of the accountant and the petitioner had no intention to evade tax.

Further, petitioner relied on decisions of Allahabad High Court in M/s Axpress Logistics India Pvt. Ltd. Vs. Union of India and others and M/s Bhumika Enterprises Vs. State of UP and others to contend that if the tax invoices and E-way bill are produced before passing the seizure as well as detention order, proceedings are not justified.

Per contra, defending the penalty order, counsel for respondent submitted that as discrepancies were found at the time of detention of goods, if interception was not made, petitioner would have successfully evaded tax. Further, it was argued that subsequent tax invoice was a breach of Rule 31 (1) of UP GST Rules.

High Court Verdict

The Court observed that “the authorities below has not accepted the documents on the ground that same were produced after the movement of goods. But lost the site of the fact that the discrepancies were cured before the detention or seizure order could be passed.”

Accordingly, relying on M/s Axpress Logistics India Pvt. Ltd and M/s Bhumika Enterprises, the Court held that authorities ought not to have proceeded once the documents were produced.

“Since the Division Bench has specifically decided the said issue in an identical matter way-back in the year 2018, the impugned order is not justified as the documents have already been produced before passing of the detention as well as seizure order.”

The impugned order was set aside with a direction to the first appellate authority to pass fresh orders.

Case Title: M/S Galaxy Enterprises vs. State Of U.P. And 2 Others 2023 LiveLaw (AB) 425 [WRIT TAX No. - 1412 of 2022]

Citation: 2023 LiveLaw (AB) 425

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