2017 (12) TMI 342 - HC - GST

Court overturns seizure and penalty orders, citing lack of opportunity for petitioner.

The Court set aside the seizure and penalty orders due to the lack of opportunity for the petitioner to explain the tax value discrepancies, ruling that ... Seizure without opportunity to show cause - Right to be heard / audi alteram partem - Seizure and penalty under Section 129 U.P. GST Act - Transit Declaration Form (TDF) and transit goods - Remand for fresh adjudicationSeizure without opportunity to show cause - Right to be heard / audi alteram partem - Seizure and penalty under Section 129 U.P. GST Act - Seizure order dated 28.10.2017 and penalty order dated 31.10.2017 were vitiated for lack of opportunity to explain discrepancies and were liable to be set aside. - HELD THAT: - The Court found that at the time of initial detention the petitioner was informed only of absence of a Transit Declaration Form (TDF). Subsequent orders inferred an intention to evade tax by comparing IGST and compensation cess figures in the tax invoice found with the goods and a copy filed by the petitioner. However, the seizure order alleged that the petitioner had not been given any opportunity to explain the discrepancy. Given that no opportunity to show cause on the specific allegation of invoice discrepancy was afforded before passing the seizure and penalty orders, the principles of fair hearing and audi alteram partem were not complied with. For that reason the impugned orders could not be sustained.Orders dated 28.10.2017 and 31.10.2017 set aside for failure to afford opportunity to the petitioner to explain the alleged discrepancy; seizure and penalty orders quashed.Remand for fresh adjudication - Transit Declaration Form (TDF) and transit goods - Matter remitted to respondent no. 4 to treat the seizure order as a show-cause notice and to afford the petitioner an opportunity to reply, with directions for further proceedings and interim release of the vehicle. - HELD THAT: - Rather than deciding the merits of whether the tax was sought to be evaded or whether the invoice was genuine, the Court directed that the seizure order itself be treated as a show-cause notice. The petitioner was directed to file a reply within one week, and respondent no. 4 was given one week thereafter to pass a fresh order in accordance with law after considering the reply. As there was no allegation against the vehicle, the Court ordered its release in the meantime without any security. These directions effect a remand for fresh consideration while preserving the parties' right to be heard.Matter remitted to respondent no. 4 for fresh adjudication on merits after giving the petitioner a defined opportunity to reply; petitioner to file reply within one week and respondent no. 4 to decide within one week thereafter; vehicle released in the interim without security.Final Conclusion: The seizure and penalty orders were set aside for breach of the right to be heard; the matter is remitted for fresh adjudication with short, time-bound directions to treat the seizure order as a show-cause notice, receive the petitioner's reply and pass a fresh order, while the vehicle is released in the interim. Issues:Challenge to order under Section 129(1) U.P. GST Act and penalty order under Section 129(3) of the Act based on discrepancy in tax values in Tax Invoices.Analysis:The petitioner, involved in transporting 'Panmasala' from Delhi to Jharkhand through Uttar Pradesh, faced detention of goods on 27.10.2017 due to the absence of a Transit Declaration Form (TDF). The seizing authority, while passing the seizure order on 28.10.2017, noted a significant discrepancy in the IGST and compensation cess values between the Tax Invoice accompanying the goods and the copy filed by the petitioner. This led to an inference of an intention to evade tax against the petitioner, resulting in a penalty order on 31.10.2017.The petitioner contended that the detention and seizure were solely due to the absence of the TDF form, with no other grounds disclosed initially. However, the respondent argued that the seizure was justified as the tax evasion intention was evident from the contradictory tax values in the two Tax Invoices. The Court observed that the petitioner was not given an opportunity to explain the discrepancy before the seizure order was passed, violating the principles of natural justice.Consequently, the Court set aside the orders dated 28.10.2017 and 31.10.2017, remitting the matter to respondent no. 4. The petitioner was directed to treat the seizure order as a show cause notice and provide a reply within one week. Respondent no. 4 was instructed to pass a fresh order based on the reply within a week thereafter. Notably, the vehicle involved was to be released without any security since there were no allegations against it.In conclusion, the writ petition challenging the orders under Sections 129(1) and 129(3) of the U.P. GST Act was disposed of, emphasizing the importance of providing an opportunity to be heard before adverse actions are taken based on allegations of tax evasion.