2018 (4) TMI 1074 - HC - GST

Trader Wins Challenge Against Tax Seizure, Highlighting Procedural Fairness and Absence of Deliberate Tax Evasion Intent

HC quashed seizure and penalty orders against trader transporting computer parts inter-state. Despite temporary TDF absence, court found no evidence of ... Seizure of goods in transit - penalty for absence of Transit Declaration Form - mere technical breach - intention to evade tax - inter-state stock transfer - requirement of Transit Declaration Form in transit - release of seized goods without furnishing securitySeizure of goods in transit - penalty for absence of Transit Declaration Form - mere technical breach - intention to evade tax - inter-state stock transfer - Validity of seizure and penalty imposed for absence of Transit Declaration Form where goods were carried in inter-state stock transfer and accompanying tax documents were otherwise in order. - HELD THAT: - The Court found that the goods were being transported by the petitioner by way of stock transfer from Chennai to Dehradun and were merely passing through the State of U.P. No defect was alleged in the Tax Invoice or Goods Receipt accompanying the consignment. The Transit Declaration Form (TDF) was downloaded by the petitioner on 15.11.2017 and produced in reply, and the penalty order did not record any factual satisfaction or establish that the petitioner had the requisite intention to evade tax; at best the proceedings rested on the absence of the TDF. The impugned orders amounted to action based on a technical breach without the authority being satisfied of an intention to evade tax or any other substantive defect in the transactional documents. In those circumstances the seizure and penalty were held to be unsustainable.Seizure order and penalty order quashed; goods and vehicle ordered released forthwith without furnishing any security; writ petition allowed.Final Conclusion: Seizure and penalty founded solely on the absence of the Transit Declaration Form in respect of an inter state stock transfer, without any satisfaction of intention to evade tax or defect in statutory invoices, were quashed and the goods along with the vehicle were directed to be released immediately without security. Issues:Challenge to seizure order and penalty order under Section 129(1) and 129(3) of the U.P. GST Act.Interpretation of the requirement of Transit Declaration Form (TDF) in inter-state trade transactions.Determining whether the absence of TDF justifies seizure and penalty imposition.Analysis:The petitioner, a trader in computer parts registered in Tamil Nadu and Uttarakhand, challenged a seizure order dated 16.11.2017 and a penalty order dated 23.11.2017 under Section 129(1) and 129(3) of the U.P. GST Act. The petitioner was transporting computer parts from Chennai to Dehradun by stock transfer when the goods were detained in U.P. on 15.11.2017 for lacking a Transit Declaration Form (TDF), despite having valid tax invoices and goods receipts. The petitioner downloaded and submitted the TDF on the same day but the goods were seized the next day, leading to a penalty notice. The penalty was imposed solely for the absence of TDF, without alleging tax evasion or defects in accompanying documents.The petitioner argued that the seizure and penalty were based on a technical breach without establishing intent to evade tax, especially since inter-state trade under the CGST Act did not mandate TDF. The Standing Counsel contended that the TDF was submitted only after the seizure, but acknowledged its download by the petitioner before the penalty notice. The Standing Counsel failed to demonstrate how the authority inferred tax evasion intent from the situation.The Court found that the seizure and penalty were unjustified as they were solely due to the absence of TDF, without evidence of tax evasion intent. The petitioner's claim of goods passing through U.P. in an inter-state transfer without intent to unload within the state was undisputed. Consequently, the Court quashed the seizure and penalty orders, directing immediate release of goods and the truck without any security requirement. The writ petition was allowed with no costs imposed.