Monthly Round-up of Latest GST Judgments | March 2024

The Court referred to the judgement by the respondents wherein it was held that scope of Section 6(2)(b) and Section 70 of the CGST Act are different and distinct, as the former deals with any proceedings on subject matter, whereas the latter deals with power to issue summon in an inquiry and therefore, the words “proceedings” and “inquiry” cannot be mixed up to read as if there is a bar for the respondents to invoke the power under Section 70 of the CGST Act. The Court referred to the Judgement wherein it was held that issuance of summons is not initiation of proceedings referable to under Section 6(2)(b) of the CGST Act. Similar was the view of Madras High Court wherein, it was held that in issuance of summons for conducting an inquiry and to obtain a statement from the appellant cannot be construed to be bar under Section 6(2)(b) of the CGST Act. Thus, the Court held that issuance of summons under Section 70 of the CGST Act is not hit by Section 6(2)(b) of the CGST Act.

The Court observed that the appellate order relied upon by the petitioners was under challenge before the Customs Excise and Service Tax Appellate Tribunal (For short “CESTAT”). In such circumstances, the petition is required to be kept pending till the CESTAT decides such issue since petitioner challenged the order-in-original without availing alternative remedy on the ground that the respondent authorities is bound by the appellate order passed in identical facts. Therefore, in the view of the court, matter was required to be considered on merits without relegating the petitioners to avail alternative remedy. Ad interim granted earlier to continue as interim relief till the final disposal of this petition.

The Court held that, the impugned order does not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand. Thus, it was held that Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. The registration was thus restored.

The Court observed that so far as the default on the part of the petitioner in not filing returns within the stipulated period of time at the relevant point of time is concerned, the impugned order did not in any manner deal with the fact that the petitioner has subsequently submitted the returns after the show cause notice having been issued on 2-7-2020 and the default pointed out in the show cause notice stood cured and rectified. Thereafter, there was no such default on the part of the petitioner so far as non-furnishing of returns upto April, 2023.

As regards the the contentions raised by the learned counsel for the Department so far as the alleged fraudulent act of the petitioner availing fraudulent I.T.C. to the tune of Rs. 31 Crores is concerned, the court observed that the plain reading of the order of cancellation did not reflect any such allegation against the petitioner. On the contrary the order of cancellation references to the show cause notice, dated 2-7-2020 alone. The order of cancellation, dated 25-8-2023 reflects that there was substantial period of time of more than three (3) years at the hands of the respondents, during which period they could have taken appropriate steps against the petitioner, if at all they intended to do so. So far as the so-called fraudulent availing of I.T.C. is concerned, the impugned order did not reflect any of these developments that have transpired during the intervening said three (3) years period.

The Court thus held that in the given factual backdrop, particularly taking into consideration the submissions made by the learned senior counsel for the petitioner that after the show cause notice having been issued, taking advantage of the circular of the Government of India extending the time of furnishing the returns, the returns have already been filed by the petitioner within the extended period of time, the impugned order, therefore, was not sustainable and the same deserved to be and was accordingly set-aside/quashed. The respondent authorities were directed to forthwith restore the G.S.T. registration of the petitioner.

The Court observed that though the notice does not specify any cogent reason, there was an observation in the notice stating “failure to furnish returns for a continuous period of six months”. Further, the said Show Cause Notice also did not put the petitioner to notice that the registration was liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. Further, the impugned order dated 15-12-2022 passed on the Show Cause Notice did not give reason of cancellation. It stated that the registration was liable to be cancelled for the following reason “whereas no reply notice to show cause has been submitted”. However, the said order in itself was contradictory. The order stated “reference to your reply dated 02/01/2022 in response to the notice to show cause dated 02/12/2021” and the reason stated for cancellation is “Whereas no reply to notice to show cause has been submitted”. The order further stated that effective date of cancellation of registration is 1-7-2017 i.e., a retrospective date.

There is no material on record to show as to why the registration is sought to be cancelled retrospectively.

The Court was of the view that order dated 15-12-2022 did not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand. Show Cause Notice and the impugned order were bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.

The Court thus held that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons. In view of the fact that Petitioner did not seek to carry on business or continue the registration, the impugned order dated 15-12-2022 was modified to the limited extent that registration shall now be treated as cancelled with effect from 2-12-2021 i.e., the date when the Show Cause Notice was issued.

The Court observed that the said Notice did not give the name of the officer or place where the petitioner had to appear. Further, digital signatures in the Show Cause Notice merely mentioned “digitally signed by DS GOODS AND SERVICES TAX NETWORK 07.” Further, the said Show Cause Notice also did not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Thus, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. Thereafter, the impugned order dated 29-2-2024 passed on the said Show Cause Notice also did not give reasons of cancellation. It merely stated “reference to show cause notice issued dated 5-1-2024” and subsequently states “effective date of cancellation of your registration is 5-5-2018”.

The Court thus observed that the Show Cause Notice and the impugned order were bereft of any details accordingly the same cannot be sustained. Neither the Show Cause Notice, nor the order spelled out the reasons for retrospective cancellation. In view of the aforesaid, order dated 29-2-2024 cannot be sustained and was accordingly set aside. The GST registration of the petitioner was restored.

“This has reference to your reply dated 21/10/2021 in response to the notice to show cause dated 07/10/2021. Whereas no reply to notice to show cause has been submitted;”

The Court relied upon its earlier judgement and held that although the appeal is barred by time under section 107 of the Act, however, taking into consideration the original order and the same being non-reasoned, thus the same is set aside and petitioner is allowed to file reply to the show cause notice.

The Court further observed that Section 29(2)(e) of the CGST Act undoubtedly enabled the proper officer to cancel the registration even with retrospective effect. However, cancellation may be effected under clause (e) only based on material supporting an inference that the registration was obtained by means of fraud, wilful misstatement or suppression of facts. In this case, the registration was obtained in the year 2019 and no material was placed on record to support the inference that the registration was obtained in early 2019 by means of fraud, wilful misstatement or suppression of facts. Therefore, the impugned order was quashed and the matter was remanded back.

The Court held that merely because at the place of business no stock was found it was concluded that the petitioner did not conduct any business activity. There is no law which mandates a businessman to always retain stock at the place of business. To come to such a conclusion the authorities should have undertaken further exercise to indicate that the returns filed by the assessee themselves were fraudulently filed only to claim Input Tax Credit. The authorities have failed to discharge the duties and merely because the place of business did not contain any stock the registration of the petitioner was cancelled.

Thus, the Court held that the impugned orders were illegal and arbitrary and accordingly set aside. The Court further stated that it was open for the authorities to issue a fresh notice on any specific ground mentioned under section 29 (2) of the GST Act, which proceedings, if any initiated, may be decided on its own merits without being prejudiced by any of the observation made in this order.

The Court observed that the petitioner placed on record the relevant tax invoice. Such tax invoice indicated prima facie that the supply was made to a SEZ unit and that it consequently qualified as a zero-rated supply. GSTR-3B return of the petitioner was in line with the supply being zero rated. It was also noticeable from the invoice and returns that the supply pertained to the July quarter of assessment period 2017-18. This was during the nascent stage of GST implementation.

The Court held that by taking into account the above facts and circumstances, this was an appropriate case to provide an opportunity to the petitioner. Consequently, the impugned assessment order was quashed and the matter was remanded for re-consideration by the assessing officer. The petitioner was permitted to submit a reply to the show cause notice within a maximum period of fifteen days from the date of receipt of a copy of this order by enclosing all relevant documents. Upon receipt thereof, the assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order.

The Court observed that while a Personal Hearing (P.H.) was fixed on 30-7-2020, but admittedly it was premature in nature; thus, another personal hearing should have been granted to the petitioner after 31-7-2020 i.e., after receipt of reply to SCN, for making submissions and production of relevant/necessary papers and documents, to ensure that the Adjudicating Authority can examine such submissions and verify those documents before passing any order. However, interestingly, the final order itself was passed on 31-7-2020.

The Court held that the order was also non-speaking order i.e., without recording any reasons, though the same was mandatory under Rule 92(3) of the Rules, 2017, and therefore unsustainable and was fit to be quashed, inasmuch as, none of the submissions made by the petitioner were considered and the claim of refund was rejected on the ground that P.H. scheduled on 30-7-2020, in this case, was not attended and no documents were uploaded/submitted to clarify/resolve the discrepancies as pointed in the SCN uploaded dated 15-7-2020 in form RFD-08.

The Court also held that the impugned order was also bad in law, in as much as, from perusal of Show Cause Notice dated 15-7-2020 and the rejection order of refund dated 31-7-2020, it would transpire that there was no DIN quoted on those Notice/Order, and as such those Notice/Order were invalid and deemed to have never been issued as per the Circular No. 122/41/2019-GST dated 05-11-2019 and Circular No. 128/47/2019-GST dated 23-12-2019, therefore the entire subsequent proceedings were null and void.

No justification was shown by the respondent for delay in payment of refund within the stipulated period. Thus, even though, the petitioner may not have claimed interest in his refund applications, his claim of interest cannot be denied under section 56 of the Act as the same is mandatory and payable automatically in terms of the provisions of the Act.

Original Judgement in R.J. Trading Co. v. Commissioner of CGST, Delhi North [2021] 128 taxmann.com 344 (Delhi)

A careful perusal of this communication would show (something that we have noticed hereinabove) that the Joint Commissioner (AE), Gautam Budh Nagar wanted to know, in connection with the investigation of an entity going by the name M/s Mridul Tobie Inc., as to whether RJT, which was its L2 category supplier, actually existed. There is nothing stated in the document which could have formed the basis for issuing an authorization of even date by the Additional Commissioner CGST Delhi North Commissionerate. In other words, the communication dated 5-3-2021 gives no clue that “any” goods of RJT were liable for confiscation or “any” documents, or books or things which would be useful for or relevant for proceedings under the CGST Act had been secreted to any place; a prerequisite for the formation of belief, and therefore, for the exercise of powers concerning search and seizure.

As noticed above, both the order of seizure of documents and the order of prohibition, simply replicate the language of sub-section (2) of section 67 and the corresponding Rule i.e. rule 139(2). Thus, according to us, the very trigger for conducting the search [i.e. the authorization issued by the Additional Commissioner, CGST Delhi North Commissionerate] was flawed and unsustainable in law.

The court held that the assessee has not approached the respondents under section 67(6) of the GST Act and as such, there is no reason for this Court to interfere at this stage save and except, if any application is made by the assessee with the respondent no. 1 in terms of Section 67(6) of the GST Act, the same shall be considered in accordance with law.

The Court observed that Section 74 would get attracted only in the event of their being strong materials available on record to show that the petitioner had played fraud or there was any misstatement made by him and there being any suppression of fact. Applicability of Section 74 would come into play only if the conditions stipulated in Section 73 has not been met with by the taxpayer i.e. to say in the event if the conditions stipulated in Sub-Section (5) of Section 73 is not honored by the taxpayer in spite of the tax liability being brought to his knowledge. Then in the said circumstances, Section 74 would automatically attract and in those circumstances, the contention of the learned Senior Standing Counsel would be acceptable. The attempt of the learned Senior Standing Counsel trying to bring the conduct of the petitioner within the purview of fraud, misstatement and suppression of fact would not be sustainable and the said contention stands negated by the Bench simply for the reason that Sub-Section (1) of Section 73 permits a taxpayer to even clear wrongly availed I.T.C. and also wrongly utilized I.T.C. and it is this what is alleged against the petitioner of having wrongfully and irregularly availed I.T.C. Thus, it was held that the action on the part of the respondents in initiating the show cause proceedings under Section 74 and passing of the impugned order dated 15.11.2023 both were in excess of their jurisdiction and the same therefore were set-aside/quashed.

The Court considering the aspects as stated by the petitioner, including the nature of orders passed by the Hon’ble Allahabad High Court, the Hon’ble Gujarat High Court, the Hon’ble Punjab & Haryana High Court and the Hon’ble Madras High Court, observed that the petitioner shall file its reply to the impugned Show Cause Notice on or before 15-3-2024. It was further observed that till the returnable date, the proceedings initiated pursuant to the impugned Show Cause notice may proceed, but no final order in respect of the impugned Show Cause Notice shall be passed.

The Court observing the intimation, show cause notice and assessment order on record held that on examining the same, it was evident that the amount communicated in the intimation was much lower than the amount in respect of which the petitioner was called upon to show cause. Similarly, the tax demand under the impugned assessment order was much higher than the amount in respect of which the petitioner was called upon to show cause. The petitioner had also place on record the request for adjournment. As a result of the denial of such request, it was clear that the impugned order came to be issued without considering the submissions of the petitioner. In the overall facts and circumstances, the impugned assessment order was quashed and the matter was remanded for reconsideration.

The Court in view of the above facts, observed that albeit by putting the petitioner on terms, the petitioner should be provided another opportunity and thus orders impugned were quashed. Also since the bank account of the petitioner was attached pursuant to a communication from the respondent to the Bank, the respondent was directed to appropriate 10% of the disputed tax demand in respect of each assessment year from such bank account. The petitioner was permitted to submit a reply to the show cause notice within a period of three weeks from the date of receipt of a copy of this order. Upon receipt of the petitioner’s reply and upon being satisfied of the receipt of 10% of the disputed tax demand in respect of each assessment year, the Assessing Officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue fresh orders within a period of two months.

“Since, no payment has been made within 30 days of the issue of the notice by you; therefore, on the basis of documents available with the department and information furnished by you, if any, demand is created for the reasons and other details attached in annexure”.

The High Court stated that the impugned order dated 22-12-2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. The proper officer had to at least consider the reply on merits and then form an opinion whether the explanation was sufficient or not. He merely held that since no payments has been made within 30 days of the issue of notice by you and no proper reply/explanation has been received” which ex-facie shows that proper officer has not even looked at the reply submitted by the petitioner. Accordingly, the Impugned order being bereft of any reasoning was held to be not sustainable and was set aside. The matter was accordingly remitted to the proper officer to readjudicating the Show Cause Notice after giving an opportunity of personal hearing to the petitioner.

The High Court noticed that the order dated 31-12-2023 records that no proper reply/explanation has been received from the taxpayer despite sufficient and repeated opportunities which indicates that the taxpayer has nothing to say in the matter.

The observation in the impugned order dated 31-12-2023 was held not to be sustainable for the reasons that the reply filed by the petitioner is a detailed reply. The proper officer had to at least consider the reply on merits and then form an opinion whether the explanation was sufficient or not. He merely held that no proper reply/explanation has been received which ex-facie shows that proper officer has not even looked at the reply submitted by the petitioner. Accordingly, impugned order dated 31-12-2023 was set aside. The matter was remitted to the proper officer for re-adjudication of the show cause notice issued under section 73 of the Act after giving an opportunity of personal hearing to the petitioner.

Thus, the impugned assessment order was quashed and the matter was remanded for reconsideration. The assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh speaking assessment order after duly taking note of all the contentions of the petitioner.

The Court reproduced the relevant part of the Order as follows

“In failure to furnish the relevant documents for Tamil Nadu branch, you were once again requested to furnish all the connected records of Tamil Nadu branch and afforded appropriate opportunity and also personal hearing prospected, having received the notices and noticed the personal hearing opportunity afforded, the taxpayer has neither filed objection/reply or not availed opportunity of personal hearing, and not even demanded for further extension of time, therefore, it is construed that the taxpayer has no objection to the proposal found in the DRC-01, hence, the taxpayer is assessed for the year 2017-2018 under Section 73(9) of the TN GST Act as follows”

Court observed that in the face of chartered accountant’s certificate dated 12.10.2023 and the petitioner’s reply dated 13.10.2023, the above findings were completely unsustainable and clearly indicate non application of mind. Even otherwise, impugned order was completely unreasoned. Hence, interference was warranted with the order. For reasons set out above, impugned assessment order dated 22.12.2023 quashed and matter was remanded for reconsideration

The Court set aside the impugned order that considering the fact that personal hearing was not provided to the petitioner after the notice in Form DRC-01, dated 29-9-2023 and taking into consideration of the fact that the reply of the petitioner Company, dated 10-10-2023 was not considered by the respondent. The issue was remanded back to the respondent for fresh consideration.

“And whereas, the taxpayer has filed their objections/reply online on portal through DRC-06 which has been examined thoroughly and was found to be devoid of merits. Therefore, following principle of natural justice before passing any adverse order, further personal hearing opportunity was given to the taxpayer. And whereas, taxpayer/authorized representative appeared for personal hearing apart from reply filed no other additional information/documents were submitted by the taxpayer, hence undersigned is left with no other option but to issue DRC-07 on the basis of reply and documents available on the portal. And whereas, on examination of the reply/documents furnished by the taxpayer, it has been observed that since the reply is devoid of merits without any justification or: proper reconciliation, the demand raised in SCN/DRC-01 is hereby upheld along-with penalty.”

The Proper Officer opined that the reply is unsatisfactory. The Court held that the impugned order dated 24-12-2023 was not sustainable for the reasons that the reply filed by the petitioner was a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was devoid of merits. He merely held that the reply was devoid of merits which ex-facie reflected that Proper Officer had not applied his mind to the reply submitted by the petitioner. Further, if the Proper Officer was of the view that further details were required, the same could have been specifically sought from the petitioner. However, record did not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details. In view of the above, the order was held to be non-sustainable, and the matter was remitted to the Proper Officer for re-adjudication.

It was thus held that ex-facie it was apparent that proper officer had not taken into consideration the reply filed by the petitioner while passing the cryptic order dated 31-12-2023. Consequently, order dated 31-12-2023 was held to be non-sustainable and thus set aside. The matter was remitted to the proper officer to re-adjudicate the Show Cause Notice dated 29-9-2023 by taking into account the detailed reply filed by the petitioner thereto.

“The taxpayer’s contention and verified and found that at the time of Inspection, the taxpayer had admitted the above defect. Now, they cannot go back their own statement. The proprietor has agreed to pay taxes and penalty for buying and selling of illegal trade of tobacco products, which was recorded in sworn statement. It is therefore no alternative except to confirm the proposals. Hence, the proposed addition turnover, tax and penalty are confirmed.”

The Court observed that tax demand and penalty were confirmed entirely on the basis of the statement recorded on 26-9-2022. Prima facie, such statement appeared to be based on the stock position as on that date. Since the impugned assessment orders did not take into account the returns, the reply and the documents annexed thereto, the orders were held to be non-sustainable and thus quashed and remanded for reconsideration.

“Therefore it is proposed to levy the above said turnover at the rate of 28% as such supply should have fallen under HSN 8708 for the tax period July-2017 to March-2018. Moreover, since you are an automobile industry you cannot claim that you genuinely classify your product with right HSN code. To suppress the tax payable to Government treasury you willingly reduce the tax rate from 28% to 18% with intention to suppress the fact that you are manufacturing commodity of 28% that is why section 74 has been involved here. Hence, you are requested to pay the difference amount.”

It further stated that

“You are requested to pay the amount of tax as ascertained above along with the amount of aforesaid interest and penalty under section 74 of the TNGST Act 2017 and also submit objection if any against the proposals in DRC01 within 30 days from the date of receipt of this notice and you may also avail the opportunity of personal hearing on 5-3-2024 at 11.00 AM before the undersigned.”

The Court thus held that the above extract was prima facie indicative of pre-judgment in as much as the assessee had been called upon to pay the quantified sum and not show cause as to why the said amounts were not payable. The Court further observed that the petitioner had placed on record the notes under section XVII, which dealt with chapter 85. He had also
placed on record the HSN Explanatory notes. In multiple judgments of the Court and the Supreme Court, the HSN Explanatory notes have been referred to and relied upon as an authoritative guide to issues relating to classification. The petitioner had also placed for consideration Instruction No. 1/2022, which referred to several judgments of the Supreme Court. If the petitioner/assessee placed this material before the assessing officer, the assessing officer was under an obligation to consider this material with an open mind in an objective manner before concluding the assessment. Therefore, the writ petitions were disposed of by directing the petitioner to make the submissions and the assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter conclude assessments by taking note of observations.

The Court was of the view that when report of Irrigation and Waterways Directorate formed the foundation of the adjudication, it was incumbent upon the Revenue to supply a copy thereof to the writ petitioner so that he could effectively address the substance of the report. In view of that non-compliance with the principles of natural justice in this matter, the order dated April 13, 2023 passed by respondent no. 2 was set aside and direction was given to provide the copy of the report. The appellate authority was directed to conclude the entire exercise.

“The dealers reply and conclusion of the proper officer:
The dealer had given the detailed reply on: 21-12-2023 against SCN issued in DRC-01 regarding this aspect, thus the dealer have refused the defects raised by the proper officer and is not acceptable. Hence, the proposed levy of tax, interest, and penalty is confirmed.”

The Court held that the above extract revealed that the assessing officer merely referred to the reply dated 21-12-2023 to the show cause notice and recorded that the reply was not acceptable. On that basis, the proposed levy of tax, interest and penalty was confirmed.

It was held that the said findings clearly do not contain any reasons for rejecting the petitioner’s reply and for confirming the proposed levy of tax, interest and penalty notwithstanding such reply. Therefore, the impugned order, which was completely unreasoned quashed and remitted back for fresh consideration.

Equally the order of attachment of the bank account of the appellant cannot also be effective any longer on account of it having lapsed since the period of one year had elapsed.

The Court also relied upon the judgement wherein direction was issued to the competent authority to lift the attachment over the bank account wherein the period of one year had elapsed. In the present case the same principle has to be applied to the appellant. The writ petition was disposed off with a direction to the authority concerned to lift the garnishee order dated 20th July, 2022 by addressing the Indian Oil Corporation and also lift the attachment over the appellant’s bank account by addressing his bankers.

The Court observed that the appeal filed by the appellant was presented before the appellate authority on 25th May, 2022 and the appeal was taken up for hearing after one year and on the very first date, namely, 29.05.2023 the appeal has been disposed of. Since there was a delay of one year in taking up the appeal, the appellate authority could have granted one more opportunity to the appellant by issuing a fresh notice of hearing. Furthermore, none of the grounds raised by the appellant in the appeal petition which is about 38 pages have been considered or dealt with. Therefore, the court was convinced that the appeal has to be heard out on merits and fresh orders have to be passed by the statutory appellate authority.

The Court relying upon its judgement condoned the delay wherein it was held that since provisions of Section 5 of the Act of 1963 have not been expressly or impliedly excluded by Section 107 of the Act of 2017 by virtue of Section 29(2) of the Act of 1963, Section 5 of the Act of 1963 stands attracted. The prescribed period of 30 days from the date of communication of the adjudication order and the discretionary period of 30 days thereafter, aggregating to 60 days is not final and that, in given facts and circumstances of a case, the period for filing the appeal can be extended by the Appellate Authority. The Court further observed that the appellate authority has violated the principle of natural justice by not affording an opportunity of hearing to the petitioner. Therefore, it was directed that the appellate authority shall give personal hearing to the petitioner and his appeal shall be decided on merits.

Also, even if a statute does not prescribe the time within which the Order is required to be passed by the Appellate Authority, such an Order must be passed within a reasonable period of time. In the present case, the said Appeals have been filed by the Petitioner in 2019, 2020 and 2021. Even considering the disruption caused by the COVID-19 Pandemic, Appellate Authority ought to have passed Orders in the said Appeals by now. Failure to pass orders in the said Appeals within a reasonable period of time would cause prejudice to the Petitioner. Further, it would also affect the right of the Petitioner to carry on business, which is guaranteed to it under Article 19(1)(g) of the Constitution of India. For these reasons, as sought by the Petitioner, Appellate Authority was directed to decide the said Appeals within a fixed period of time.

The Court allowed the writ petition by stating that the burden of proof lies on the petitioner in certain cases to show that there was no evasion of tax. However, when the error in the documents is only that of a clerical or typographical error, the initial burden of proof lies on the department to show there was intention to evade tax. The Court observed that in the present case, department failed to do so and infact not even tried to do so. The documents produced by the petitioner at the time of the interception itself indicated that the goods have been transported from a SEZ Unit to the DTA after payment of custom duty and payment of IGST. This fact was not discredited by the department in any manner whatsoever. Infact the court observed that there was a complete silence with regard to the fact whether the petitioner had made the payment as indicated in the invoices and the bill of entry. The department has accordingly failed to shift the burden of proof on the petitioner as the only error found by the department was that the vehicle number was incorrect. Apart from this one error in the e-way bill, nothing was shown by the department to justify the imposition of penalty under section 129(3) of the Act. The impugned order also failed to take into account the document produced by the petitioner of the transporter wherein the explanation was given with regard to the reason for the mistake of the vehicle number in the e-way bill.

In the instant case, goods were loaded for two destinations i.e. Adoni (Andra Pradesh) and Hyderabad (Telangana). It was contended by department that to go to Adoni, Andhra Pradesh, the conveyance has to first pass Hyderabad, Telangana and the goods destined to the petitioner in Hyderabad should be delivered to the petitioner first, and then only the goods vehicle/conveyance should have proceeded to Adoni subsequently for delivery. As per their logic since Hyderabad comes first and not Adoni, when the vehicle comes from Dadra and Nagar Haveli, the consignment of 14.30 tonnes would be offloaded at Hyderabad, and then 2.01 tonnes consignment should proceed towards Adoni; and the vehicle was therefore rightly detained by him when it was more than 100 kms from Hyderabad and carrying the full load of 16.31 tonnes.

The High Court did not accept the plea of department that even if the goods meant to be delivered at Adoni were loaded on top of the conveyance, the said goods should have been unloaded and then reloaded after unloading the goods intended for the petitioner at Hyderabad. Such view, in the opinion of the High Court was utterly perverse and cannot be accepted and thus held that department had acted mechanically without application of mind to the operational convenience of the transporter. It was also held that for the bonafide action of the transporter, department cannot mulct the petitioner with tax and penalty and petitioner cannot be said to have any intention to evade tax if any mistake is, for the sake of argument without conceding it, has been committed by the transporter.

The Court relied upon the judgement and observed that mens rea to evade tax is essential for imposition of penalty. The factual aspect in the present case clearly did not indicate any mens rea whatsoever for evasion of tax. The goods were accompanied by the relevant documents and the explanation of the petitioner with regard to slow movement of the goods coupled with GPS tracking system clearly indicate that the truck was moving slowly due to mechanical fault in the engine of the vehicle. The breach committed by the petitioner with respect to not extending time period of the e-way bill is only a technical breach and it cannot be the sole ground for penalty order being passed under section 129(3) of Act and thus the finding of the authorities with regard to intention to evade tax was not supported by the factual matrix of the case, and accordingly, the impugned orders dated April 6, 2022 and June 22, 2022 were quashed and set aside.

The Court stated that in its view, it was not a valid ground for detaining the goods as the officer concerned was not competent to carry out such detention. In the event of under valuation, appropriate notice under Sections 73 or 74 of the Uttar Pradesh Goods and Service Tax Act, 2017 (hereinafter referred to as “the Act”) is required to be issued as per the procedure provided therein. If the Court holds such a detention to be valid, it would be open to the authorities to carry out detention on their whims and fancies. The detention of the goods in such a scenario is not envisaged under the Act and the officers have not been vested with such a power to detain the goods and thereafter impose penalty under Section 129 of the Act. Specific provisions have been provided for detection of under valuation and the GST officials have to adhere to the same. It is to be noted that only after issuance of notice under Sections 73 or 74 of the Act, if the goods are found under valued, penalty can be imposed. Accordingly, imposition of penalty under Section 129 of the Act on the speculation that the goods are under-valued cannot be allowed.

The court relied upon judgements and taking note of the law and the subject as well as the facts of the case, the court held that it was a fit case where directions be issued to the authorities to enable the appellants to rectify the mistake and submit GST TRAN-1 under heading 7B of Table 7(a) of Form GST TRAN-1 and the appellants were directed to comply with the same within three weeks from the date of receipt of the server copy of this order after which the adjudicating authority was directed to verify the same and if admissible, extend the transitional credit to the appellants.

The Court relied upon the Judgement and allowed the writ petition by holding that since error made by the Petitioner is a bonafide error, therefore Department was directed to permit Petitioner to rectify the said error

The Court relied upon its earlier judgement and observed that though Section 169(d) of TNGST Act 2017, enables the respondent to issue notice through the common portal, other modes are also made available to the respondent under Section 169 of the TNGST Act 2017. In this case, the petitioner was a Timber Trader and was not an educated person and he was not acquainted in following the notices uploaded through the common portal. Thus the writ petition was allowed by setting aside the impugned order passed by the respondent dated 23.02.2023 and the remitted the matter back to the respondent for fresh consideration.