Allahabad High Court
M/S Creative Lab Situated At 12 vs State Of Up And 2 Others on 28 August, 2024
Author: Piyush Agrawal
Bench: Piyush Agrawal
HIGH COURT OF JUDICATURE AT ALLAHABAD Neutral Citation No. - 2024:AHC:137550 Court No. - 2 Case :- WRIT TAX No. - 1036 of 2024 Petitioner :- M/S Creative Lab Situated At 12 Respondent :- State Of Up And 2 Others Counsel for Petitioner :- Rakesh Kumar Garg,Yash Garg Counsel for Respondent :- Mr. Arvind Mishra, Standing Counsel Hon'ble Piyush Agrawal,J.
1. Heard Mr. Yash Garg, learned counsel for the petitioner and Mr. Arvind Mishra, learned Standing Counsel for the State-respondents.
2. By means of present petition, the petitioner is, inter alia, praying for the following reliefs:-
"i) Issue a writ, order or direction in the nature of certiorari quashing the impugned order dated 23.09.2022 passed by the respondent no. 3 u/s 20 of the IGST Act, 2017 (Annexure No. 1 to this writ petition) and the impugned order dated 27.4.2023 passed by the respondent no. 2 u/s 107 (11) of the CGST Act, 2017 (Annexure No. 2 to this writ petition) for the tax period September 2022 to September 2022 in the Financial Year 2022-23.
ii) Issue a writ, order or direction in the nature of mandamus directing the respondents to refund the amount of penalty deposited by the petitioner firm on 23.9.2022 in pursuance of the impugned penalty order dated 23.9.2022 passed by the respondent no. 3 u/s 20 of the IGST Act, 2017 read with Section 129 (3) of the CGST Act, 2017 for the tax period September 2022 to September 2022 in the Financial Year 2022-23."
3. Learned counsel for the petitioner submits that the petitioner is a registered firm engaged in the business of manufacturing and supplying of Engineering Lab Equipment having GST No. 06BABPM7520F1Z0. He submits that in the normal course of business, the petitioner has sold the goods to Government Polytechnic Munger at Ramnkabad via Haveli, Khadgpur, Munger, Bihar, amounting to Rs. 44,97,924/- including taxes and in pursuance thereof, tax invoice no. 1550 dated 7.9.2022 was raised and E-way bill no. 341493082493 was generated mentioning therein Vehicle No. HR 37E0120 and the said e-way bill was valid up to 15.9.2022 but due to break down in the said vehicle the transportation of the goods could not be started, therefore, the transporter has arranged vehicle i.e. HR 37 C 9598 from which the goods were transported. The petitioner before start of transportation of goods has updated the vehicle number in the said e-way bill and generated an updated e-way bill and dispatched the goods. A copy of the aforesaid e-way bills are enclosed as Annexure nos. 4 and 5 of this writ petition.
4. He submits that during transportation of the goods on its onward journey, the vehicle was intercepted by respondent no. 3 on 16.9.2022 at Salemgarh and thereafter FORM GST MOV -2 has been issued against the proprietor of the firm mentioning therein that validity of the e- way bill was expired. On 20.9.2022, GST MOV-6 was issued and thereafter a show cause notice was issued in GST DRC 01 on 21.9.2022 to which the petitioner has submitted reply on 23.9.2022, specifically mentioning therein that there was no intention to avoid the payment of tax, however, being not satisfied with the same, the impugned order dated 23.9.2022 has been passed demanding penalty. Feeling aggrieved to the said order, the petitioner filed an appeal, copy of which has been filed as Annexure no. 12 to this writ petition. In the grounds of appeal, it was specifically stated at ground no. 3 that in the impugned order, no reason has been assigned. He submits that the said fact has been noticed in the appellate order but the same has not been dealt with. He submits that there is only a technical error but the appellate authority has also not considered the same and passed the impugned order dated 27.4.2023, which is illegal.
5. In support of his submission, he relied upon the judgement of this Court in the case of M/s Namo Narayan Singh Vs. State of UP and others, Writ Tax No. 1476 of 2022 (Neutral Citation No. 2023: AHC: 194723 and M/s Sun Flag Iron and Steel Company Limited Vs. State of UP, Writ Tax No. 837 of 2023 (Neutral Citation No. 2023: AHC:215906). He prays for allowing the present writ petition.
6. Per contra, learned Standing Counsel has supported the impugned orders and submits that the proceeding has rightly been initiated against the petitioner as at the time of inspection of the vehicle in question, the e-way bill has been expired, therefore, the proceeding has rightly been initiated.
7. In support of his contention, learned Standing Counsel has relied upon the decision of Hon'ble the Apex Court in the case of Vardan Associates Pvt. Ltd Vs. Assistant Commissioner of State Tax Central Section and others, (Special Leave Petition (c) No. 21079 of 2022 decided on 3.10.2023.
8. After hearing learned counsel for the parties, the Court has perused the records.
9. It is admitted between the parties that after passing the order, the amount has already been deposited by the petitioner and thereafter the goods in question has been released. It is also not in dispute that the goods in question was accompanying with the tax invoice, R.R. and e-way bills. In the e-way bill, the truck numbers have been mentioned and copies of the same has been annexed as Annexure no. 4 and 5 to the writ petition. After change of vehicle due to break down of the earlier vehicle, the petitioner, instead of cancelling the e-way bill, has updated the same with new vehicle number. The said fact is not disputed at any stage. Further, it is not a case of the respondent that goods were inspected and seized for the reason that different description of the goods has been mentioned in the accompanying documents. The respondent authority has neither pointed out any discrepancy nor any other material to show that there was any intention of the petitioner to avoid the payment of tax except the e-way bill expired on 15.9.2022.
10. It is also not a case of the respondent authority that tax invoices and e-way bill, which were generated earlier, were cancelled within 24 hours as provided under the Act. In the GST regime, all details are available on the GST portal and it was not denied that the details were not available on the GST portal or tax invoice / e-way bill were not generated in respect of the goods in question. Once the movement of the goods in question has not been disputed by the respondent authority and further the petitioner has not withdraw the tax invoice as well as e-way bill then merely on technical ground that the e-way bill accompanying with the goods in question was expired on 15.9.2022, whereas the vehicle in question was intercepted on the very next date on 16.9.2022, the proceeding is not justified.
11. In the reply, the said fact was brought to the notice of the respondent authority, in pursuance of the show cause notice that the earlier vehicle, which was mentioned in e-way bill (annexed as Annexure no. 4 of this writ petition) was updated by adding new vehicle number in the updated e-way bill (as annexed as Annexure no. 5 to this writ petition) but neither any due weightage of the same was given by the respondent authority nor the same has been disbelieved.
12. This Court in the case of M/s Sun Flag Iron and Steel Company Ltd. (supra) has held as under:-
"11. Under the G.S.T. regime, all the details are available on the G.S.T. portal and it is admitted that e-tax invoice was raised and e-way bill was generated and the same was not cancelled within 24 hours as provided under the Act. Once the said fact is not disputed and the petitioner has not exercised its right either to withdraw the tax invoice or e-way bill in question, it was well within the knowledge of the department that movement of the goods in question has been undertaken by the petitioner. Merely on the technical ground that e-way bill accompanying with the goods in question was expired on 1.6.2023 whereas the vehicle had been intercepted in the intervening night of 2/3.6.2023.
12. The purpose of e-way bill is that the department should know the movement of goods. Once the e-way bill has been generated and same has not been cancelled by the petitioner within the time prescribed under the Act, the movement of goods as well as genuineness of transaction in question cannot be disputed. The goods in question could not reach to its destination due to the breakdown of vehicle as stated above and after repair, the vehicle was ready for its onward journey but the same was intercepted in the intervening night of 2/3.6.2023. Since the authorities below have not recorded a finding that there was any intention of the petitioner to evade the payment of tax, the penalty is not justified."
13. Once the transaction in question was well within the knowledge of the department as complete details of the same, were available on GST portal, then merely on technical ground of expiry of e-way bill just one day before, the seizure as well as the penalty orders of the goods in question, cannot be justified.
14. The record further reveals that in reply to the show cause notice, the petitioner has submitted that there was no intention to avoid the payment of tax but both the authorities below have neither whispered a word in respect of the plea taken by the petitioner nor brought any contrary material on record to controvert the same.
15. This Court in the case of M/s Shyam Sel & Power Limited Vs. State of U.P. & 2 Others [Writ Tax No. 603/2023, decided on 05.10.2023] has held as under:-
10. For invoking the proceeding under section 129(3) of the CGST Act, section 130 of the CGST Act was required to be read together, where the intent to evade payment of tax is mandatory, but while issuing notice or while passing the order of detention, seizure or demand of penalty, tax, no such intent of the petitioner was observed. Once the dealer has intimated the attending and mediating circumstances under which e-way bill of the purchasing dealer was cancelled, it was a minor breach. The authority could have initiated proceedings under section 122 of the CGST Act instead of proceedings under section 129 of the CGST Act. Section 129 of the CGST Act must be read with section 130 of the said Act, which mandate the intention to evade payment of tax. Once the authorities have not observed that there was intent to evade payment of tax, proceedings under section 129 of the CGST Act ought not to have been initiated, but it could be done under section 122 of the CGST Act in the facts & circumstances of the present case. It is also not in dispute that after release of the goods, the same were sold to P.L. Trading Company.
11. Section 129 of the CGST Act deals with detention, seizure and release of goods in case violation of the provisions of the CGST Act is found. Section 130 deals with confiscation of goods or conveyance and levy of penalty. Both the sections revolve around a similar issue and provide for the proceedings available at the hands of the proper Officer upon him having found the goods in violation of the provisions of the Act, Rule 138 of the Rules framed under the CGST Act being one of them. Upon a purposive reading of the sections, it would sufice to state that the legislation makes intent to evade tax a sine qua non for initiation of the proceedings under sections 129 and 130 of the CGST Act.
12. This aspect is no more res integra and the same stands finalized in the judgement of the Apex Court in M/s Satyam Shivam Papers Private Limited (supra); wherein, it has been categorically stated that:-
"As notices hereinabove, on the facts of this case, it has precisely been found that there was no intent on the part of the writ petitioners to evade tax and rather, the goods in question could not be taken to the destination within time for the reasons beyond the control of the writ petitioners."
13. Recently, the Division Bench of this Court in Writ Tax No. 600 of 2022 (M/s Gobind Tobacco Manufacturing Company & Another Vs. State of U.P. & Others) quashed the levy of penalty under section 129 of the GST Act with heavy costs upon the Revenue for abuse of their powers.
14. In view of the aforesaid facts & circumstances of the present case as well as the law laid down by the Apex Court and this Court, as aforesaid, the writ petition succeeds and is allowed. The impugned order dated 18.06.2022 passed by the respondent no. 2 as well as the impugned order dated 25.11.2021 passed by the respondent no. 3 are hereby quashed."
16. Further, the Division Bench of this Court in the case of M/s Bhawani Traders Vs. State of U.P. & Another [Writ Tax No. 854/2023, decided on 24.07.2023] has held as under:-
"He, however, could not dispute the fact that intention to evade tax is a per-requisite for imposition of penalty under Section 129 of the Act. The E-way Bills being the documents of title to the goods were accompanying the goods hence, the conclusion of the revenue that the petitioner was not the owner of the goods is patently erroneous. Consequently, the penalty proceedings were liable to be initiated under Section 129(1)(a) and not 129(1)(b) as has been done in the present case.
In view of the above, expressing our full agreement with the view expressed by the Coordinate Bench of this Court in the case of M/s Sahil Traders (Supra) we set aside the impugned penalty order dated 17.06.2023 passed in Form MOU-09 under Section 129(1)(b) of the Goods and Services Tax Act, 2017. The writ petition is allowed."
17. Punjab & Haryana High Court, in the case of M/s Raghav Metals Vs. State of Haryana & Others [CWP No. 25057/2021, decided on 14.03.2022] has held as under:-
"9. Keeping in view these circumstances, it cannot be said that the petitioner had any intent to evade the tax or the mismatch in the quantities is of such nature which shall entail proceedings under Section 129 of the Act. A person, who has already paid a tax of Rs.1276717.68/- on a consignment cannot be said to have an intent to evade tax amounting to Rs.11000/-. At this stage, Mr. Goyal states that the petitioner is ready to pay even the tax and penalty imposed by the State-Authorities which comes to be around Rs.22000/-.
10. In light of the fair stand taken by the petitioner and the fact that the mismatch cannot be termed as contravention of the provisions of the Act, we deem it appropriate to allow the present writ petition. Proceedings against the petitioner under Section 129 of the Act are hereby quashed. Fine and penalty, if any, imposed against the petitioner and deposited by him, be refunded to him within a period of 15 days from the date of receipt of certified copy of this order. Since goods already stand released, no further order is required."
18. The record further reveals that in para 2 of the impugned order dated 23.9.2022, no irregularities were pointed out. The relevant portion of the order is quoted hereunder:
"2. परिवहन किए जा रहे माल की जांच के अंतर्गत दिनांक। . को की गई थी और निम्नलिखित विसंगतिया प्रकाश में आई थी।
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19. The same ground has also been raised by the petitioner, in the appeal at serial no. 3, which is quoted hereunder:
"(3) यह कि प्रश्नगत मामले में मात्र E-Way-Bill Expired के आधार पर धारा-129 के अन्तर्गत कार्यवाही करते हुए धारा-129 (3) के अन्तर्गत पारित आदेश (सलग्नक 1) के अनुसार रू0 1372248=00 आईजीएसटी के अन्तर्गत अर्थदण्ड निर्धारित किया गया है। अर्थदण्ड आदेश के पृष्ठ सं0-2 पर किसी विसंगति का उल्लेख नही किया गया है। पारित समरी आदेश में केवल यह उल्लेख किया गया है "Validity of E way bill (341-493082-493) expired at the time of investigation."
20. Although, the said fact has been noticed in the initial paragraph of the impugned order passed by the appellate Court but no reason has been recorded as to why the competent authority was not required to assign any reason in its order. The said ground has also been taken in paragraph nos. 13 and 23 of the writ petition, which is also not denied by the respondents in paragraph nos. 11 and 13 of the counter affidavit.
21. Learned Standing Counsel submits that it is not required to assign any reason or mention any details in respect of the irregularities in the order of penalty as the same were available on the GST portal.
22. It is settled law that reason is the heartbeat of every conclusion. An order without valid reasons cannot be sustained. To give reasons is the rule of natural justice. One of the most important aspect for necessitating to record reason is that it substitutes subjectivity with objectivity. It is well settled that not only the judicial order, but also the administrative order must be supported by reasons recording in it.
23. Highlighting this rule, the Hon'ble Supreme Court, in the cases of Assistant Commissioner, Commercial Tax Department, Works Contract & Leasing, Kota Vs. Shukla & Brothers, (2010) 4 SCC 785, M/s Travancore Rayon Ltd. v. Union of India, 1969 (3) SCC 868 have observed that the administrative authority and the tribunal are obliged to give reasons, absence whereof would render the order liable to judicial chastisement.
24. Once the reason has not been assigned by the competent authority, on this ground alone, the impugned order cannot be sustained in the eyes of law.
25. Learned Standing Counsel has relied upon the judgement of Supreme Court in the case of Vardhan Associates Pvt. Ltd. (supra) and submits that the penalty order has rightly been passed.
26. On close scrutiny of the said judgement passed by the Apex Court, on the ground that after expiry of e-way bill, the goods were transported from the originating place, therefore, 50% of the penalty was confirmed. However, in the present case, the goods were accompanying with all necessary and valid documents during transportation but before reaching its destination, the e-way bill has been expired due to technical error as the earlier truck had break down and after another truck was arranged by the transporter, the journey was started. Hence the said judgement relied upon by the learned Additional Chief Standing Counsel is of no aid to the State.
27. As discussed above, the movement of goods in question was well within the knowledge of the GST department as tax invoice, e-way bill was available on the GST portal and its genuineness has not been assailed, however due to some technical error that the e-way bill was expired on 15.9.2022, during its onward journey and the vehicle was intercepted on the very next date i.e. 16.9.2022, the impugned orders are not justified.
28. In view of the facts and circumstances of the case as well as law laid down by this Court, the impugned orders dated 23.9.2022 and 27.4.2023 cannot be sustained in the eyes of law and same are hereby quashed. The writ petition succeeds and is allowed.
29. The authority concerned is directed to refund any amount deposited by the petitioner either pursuant to the impugned orders or in pursuance of the direction made by this Court, within a period of one month from the date of production of a certified copy of this order.
Order Date :- 28.8.2024 Rahul Dwivedi/-