2023 (1) TMI 1237 - HC - GST

Penalty under Section 129(1)(b) set aside as consignors accepted ownership; penalty recalculated per 2018 Board Circular

The HC allowed the writ petition and set aside the impugned order dated October 7, 2022, concerning seizure of goods and levy of penalty under Section ... Liability of owner under Section 129(1)(a) where owner comes forward - Levy of penalty under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017 as inapplicable where owner accepts ownership - Owner deemed to be consignor where goods are accompanied by invoices - Application of Board Circular dated 31-12-2018 for determination of ownership under Section 129(1) - Remand for fresh adjudication consistent with corrective legal principleLiability of owner under Section 129(1)(a) where owner comes forward - Levy of penalty under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017 as inapplicable where owner accepts ownership - Application of Board Circular dated 31-12-2018 for determination of ownership under Section 129(1) - Levy of penalty under Section 129(1)(b) was unjustified where consignors/consignees accepted ownership and goods were accompanied by invoices. - HELD THAT: - The court found that consignors (petitioners 1 and 2) and consignees (petitioners 3 to 5) were present and accepted ownership of the seized goods and that the consignors were registered dealers in the State of U.P. The Board's Circular dated 31-12-2018, which treats the consignor as owner where goods are accompanied by invoices, supports treating the consignors as owners for the purpose of Section 129(1). Section 129(1)(a) applies where the owner comes forward and prescribes penalty measured by reference to tax (two hundred per cent of the tax payable), whereas Section 129(1)(b) applies only when the owner does not come forward. Applying Section 129(1)(b) in the present facts was therefore incorrect; the imposition of penalty under that provision could not be justified and the penalty as imposed (measured by value rather than under Section 129(1)(a)) was inconsistent with the statutory scheme and the Board clarification. [Paras 5, 6]Impugned order imposing penalty under Section 129(1)(b) set aside; Section 129(1)(a) was the provision to be applied in light of owner acceptance and the Board Circular.Remand for fresh adjudication consistent with corrective legal principle - Levy of penalty under Section 129(1)(a) where owner accepts ownership - Matter remitted to competent authority for fresh order consistent with the court's findings. - HELD THAT: - The court annulled the impugned order and directed that the competent authority pass a fresh order within two weeks of receipt of the judgment. The fresh adjudication is to be undertaken in conformity with the court's determination that the consignors/consignees accept ownership and with the Board Circular and the applicable provision (Section 129(1)(a)) governing penalty assessment when the owner comes forward. The remand is for fresh consideration and appropriate exercise of statutory power rather than for computation alone. [Paras 7]Proceedings remitted for fresh adjudication by the competent authority within two weeks.Final Conclusion: Writ petition allowed; impugned order dated October 7, 2022 set aside and matter remitted to the competent authority to pass a fresh order within two weeks in accordance with the court's findings and the Board Circular dated 31-12-2018. Issues: Challenge to orders passed on GST MOV-06, GST MOV-07, and GST MOV-09 under U.P. Goods and Services Tax Act, 2017.Analysis:1. The petitioners challenged the order passed on GST MOV-06 where goods in transit were seized, along with the show cause notice on GST MOV-07 and the subsequent order on GST MOV-09. The petitioners argued that despite proper documentation accompanying the goods, the authorities deemed the driver as the owner, imposing a penalty under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017. 2. The petitioners contended that according to Section 129(1)(a) of the Act, if the owner of the goods steps forward, the penalty should be levied on them. They referred to a circular by the Central Board of Indirect Taxes and Customs, stating that if goods are accompanied by invoices, the consignor should be considered the owner. As the petitioners were either consignors or consignees, the penalty under Section 129(1)(b) was deemed inapplicable.3. On the other hand, the respondents argued that discrepancies were found between the goods and the invoices, justifying the penalty imposed on the petitioners. However, the Court noted that the consignors and consignees were present, accepting ownership of the goods, and being registered dealers in U.P., the penalty under Section 129(1)(b) was unjustified.4. The Court, after considering the arguments, allowed the writ petition, setting aside the order dated October 7, 2022. It was observed that the penalty levied was not in line with Section 129(1)(a) of the Act, which mandates a penalty of two hundred per cent of the tax payable when the owner steps forward, whereas in this case, the penalty was a hundred per cent of the value of the goods.5. Consequently, the impugned order was overturned, and the matter was remitted back to the competent authority for a fresh decision within two weeks from the date of receipt of the Court's order.