No penalty if goods were found with a proper tax invoice and e-way bill belonging to a person whose registration was suspended

The Hon’ble Allahabad High Court in the case of M/S LAKHDATAR TRADERS VERSUS STATE OF UP AND 2 OTHERS - 2024 (11) TMI 589 - ALLAHABAD HIGH COURT  dismissed the writ petition where goods in transit were accompanying with proper tax invoice and e-way bills were detained, imposing penalty on account of suspension of registration of owner would not sustain.

Facts:

M/s Lakhdatar Traders (“the Petitioner”) vehicle was on its way from Patna, Bihar to Gurugram, Gurgaon, which was intercepted by the Authorities (“the Respondents”) on October 04, 2024 at 23:00 hours at Mathura.

The statement of the person incharge i.e. driver was obtained in Form GST MOV-01 and physical verification was made in which, it is claimed that no discrepancy was found. However, the goods were detained by indicating movement of goods without proper documents. A notice dated October 08, 2024 was issued in Form GST-MOV-07 inter alia indicating that the registration of the Petitioner was suspended. Further several indications were made pertaining to the validity of the registration of the Petitioner.

The Petitioner questioned the validity of the notice issued on the ground of suspension of the registration and sought release of the goods, however, by order impugned dated October 16, 2024, a demand under Section 129 (1)(b) of the CGST Act to the tune of Rs.14,81,490/-was made.

The Petitioner made submissions that it is not the case of the Respondent that the vehicle was not accompanied by the requisite documents. The show cause notice simply indicates that the registration of the Petitioner was suspended based on which, the demand has been raised, which is not justified. Submissions have been made that the documents in question and that the show cause notice was issued by the jurisdictional authority at Bihar on October 03, 2024, wherein the registration has been suspended. However, apparently, the Respondent, who had no jurisdiction had recorded a finding pertaining to the registration being bogus and as a consequence to the same, penalty under Section 129 (1)(b) of the CGST Act has been imposed, which is not justified.

Issue:

Whether penalty can be charged if goods were found with a proper tax invoice and e-way bill belonging to a person whose registration was suspended?

Held:

The Hon’ble Allahabad High Court in M/S LAKHDATAR TRADERS VERSUS STATE OF UP AND 2 OTHERS - 2024 (11) TMI 589 - ALLAHABAD HIGH COURTheld as under:

• Relied on, a coordinate Bench of this Court in the case of HALDER ENTERPRISES VERSUS STATE OF U.P. AND OTHERS - 2023 (12) TMI 514 - ALLAHABAD HIGH COURT, wherein, the goods were intercepted, on October 03, 2023 and the suspension took place on October 06, 2023 w.e.f. September 18, 2023, after referring to the orders of this Court in M/S SHAHIL TRADERS VERSUS STATE OF U.P. AND ANOTHER - 2023 (6) TMI 360 - ALLAHABAD HIGH COURT and M/S SANJAY SALES AGENCY VERSUS STATE OF U.P. AND ANOTHER - 2023 (10) TMI 641 - ALLAHABAD HIGH COURT, and provisions of Section 129 of the CGST Act came to the conclusion that once the goods were found with proper tax invoice and E-way bill belonging to the Petitioner, the circular dated December 31, 2018 would apply and the Petitioner would be deemed to be owner of the goods and the same was to be released in terms of Section 129 (1) (a) of the CGST Act. In the present case also, as noticed hereinbefore 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 October 03, 2024 that the action has been initiated and the order has been passed as such the issue stands covered.
• Observed that, the facts are not in dispute that the documents in question which were accompanied the goods, were dated October 01, 2024 and at the time of interception of the vehicle, the requisites were found. The notice issued by the Respondents indicated the fact of the registration being suspended by the jurisdictional authorities at Bihar on October 03, 2024, based on which, the penalty has been imposed under provisions of Section 129(1)(b) of the CGST Act. Hence, the writ petition was allowed.

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