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 129(1)(b). The consignors and consignees accepted ownership, and as registered dealers, the penalty levied was unjustified per the Board's Circular dated 2018. The penalty imposed was 100% of the goods' value, whereas Section 129(1)(a) mandates 200% of the tax payable if the owner pays. The matter was remitted to the competent authority to pass a fresh order within two weeks.

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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.

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