2021 (6) TMI 378 - HC - GST

Court orders refund with interest for arbitrary actions by 2nd respondent.

The court allowed the writ petition, set aside the impugned order, and directed the refund of the collected amount with interest and costs. The court ... Detention of goods and levy of tax and penalty for expiry of e-way bill - extension of e-way bill validity under Rule 138 - requirement to consider representations before confiscation and demand - unlawful taking of physical custody and storage at private premises - arbitrariness and violation of Article 14 of the Constitution - refund with interest for unlawful collectionDetention of goods and levy of tax and penalty for expiry of e-way bill - extension of e-way bill validity under Rule 138 - Whether detention of the petitioner's goods and levy of tax and penalty solely because the e-way bill was not extended amounted to lawful exercise of power. - HELD THAT: - The Court found that the petitioner dispatched goods with a tax invoice and an e-way bill for a 36 km movement but delivery was delayed due to an acknowledged political rally and resulting traffic blockage. The checking officer detained the vehicle on 06.01.2020 alleging expiry of the e-way bill and evasion of tax. The officer did not record any material showing an attempt to sell goods elsewhere or other evidence of tax evasion, nor did he adequately consider the petitioner's explanations that the delay was caused by the rally and non-working day. The mere lapse in e-way bill validity, without evidence of evasion or dishonest intent, did not suffice to justify treating the incident as evasion of tax. Reliance on non-extension under Rule 138 without assessing the bona fides of the delay rendered the detention and demand arbitrary. The Court therefore held the levy of tax and penalty in the circumstances to be unlawful. [Paras 36, 41, 42, 45]Detention and levy of tax and penalty on the ground of expired e-way bill were unlawful in the absence of evidence of evasion and without proper consideration of the petitioner's explanations.Requirement to consider representations before confiscation and demand - arbitrariness and violation of Article 14 of the Constitution - Whether the 2nd respondent complied with the obligation to consider the petitioner's representations before passing the release/demand order. - HELD THAT: - The petitioner submitted representations explaining the disruption caused by the rally and sought release; these representations were not addressed in the impugned order. The order treated the petitioner as having admitted liability, contrary to the record. The counter-affidavit failed to explain why the explanations were not considered and merely asserted evasion without material. The failure to consider the submissions and to record reasons amounted to arbitrary action and infringement of Article 14. [Paras 40, 41, 45]The authority failed to consider the petitioner's representations and thereby acted arbitrarily; the order based on such failure is unsustainable.Unlawful taking of physical custody and storage at private premises - Whether keeping the detained goods in a private premises (relative's house of the officer) for an extended period was permissible. - HELD THAT: - The record shows goods were kept at a private premises in Marredpally for sixteen days. The Court expressed inability to understand why the goods were stored at a relative's house rather than in any designated public or official custody and observed this conduct as irregular. Such storage in a private premises without satisfactory explanation contributes to the conclusion of abuse of power. [Paras 18, 43]Storage of goods at the officer's relative's private premises for an extended period was improper and indicative of abuse of authority.Refund with interest for unlawful collection - Relief to be granted for unlawful collection of tax and penalty. - HELD THAT: - Having held the detention, demand and storage to be unlawful and arbitrary, the Court directed setting aside of the Form GST MOV-09 order and ordered refund of the amounts collected with interest from the date of collection until repayment. The Court also awarded costs to the petitioner for the consequences of the unlawful action. [Paras 44, 46]The impugned order is set aside; respondents directed to refund the amounts collected with interest and to pay costs to the petitioner.Final Conclusion: Writ petition allowed. The order dated 22.01.2020 passed in Form GST MOV-09 and the demand of tax and penalty collected from the petitioner were set aside as arbitrary and unlawful; respondents directed to refund the collected amount with interest from the date of collection and to pay costs to the petitioner. Issues Involved:1. Detention of goods due to expiry of e-way bill.2. Alleged illegal actions by the Deputy State Tax Officer.3. Non-consideration of petitioner's representations.4. Alleged evasion of tax by the petitioner.5. Validity of the order passed by the Senior Assistant.6. Refund of tax and penalty paid by the petitioner.Issue-wise Detailed Analysis:1. Detention of Goods Due to Expiry of E-way Bill:The petitioner, a Private Limited Company, dispatched goods on 04.01.2020 with a valid e-way bill and tax invoice. Due to a political rally blocking traffic, the goods could not be delivered on time, and the e-way bill expired. On 06.01.2020, the goods were detained by the Deputy State Tax Officer (2nd respondent) for the expired e-way bill. The petitioner contended that the delay was due to circumstances beyond their control, and the e-way bill could have been extended.2. Alleged Illegal Actions by the Deputy State Tax Officer:The petitioner alleged that the 2nd respondent unloaded the goods at a private residence without providing an acknowledgment, which was arbitrary and illegal. The 2nd respondent justified his actions by stating the goods were kept in a known person’s premises due to rain and non-cooperation from the drivers. The court found this action to be a blatant abuse of power.3. Non-consideration of Petitioner’s Representations:The petitioner submitted representations on 07.01.2020 and 08.01.2020 explaining the delay and referring to the Allahabad High Court decision. The 2nd respondent did not acknowledge these representations and proceeded to issue a detention notice and demand for tax and penalty. The court held that the 2nd respondent failed to consider the explanations provided by the petitioner, which was arbitrary and illegal.4. Alleged Evasion of Tax by the Petitioner:The 2nd respondent claimed that the expired e-way bill indicated tax evasion. The court found no evidence supporting this claim and noted that the mere expiration of the e-way bill did not imply an intention to evade tax. The court emphasized that the 2nd respondent did not provide any material evidence of tax evasion.5. Validity of the Order Passed by the Senior Assistant:The order demanding tax and penalty was signed by the Senior Assistant, not the 2nd respondent, which the petitioner argued was unauthorized. The court agreed, noting that the Senior Assistant was not authorized to pass such an order, and the 2nd respondent's failure to address the petitioner’s representations was improper.6. Refund of Tax and Penalty Paid by the Petitioner:The court concluded that the petitioner was compelled to pay Rs. 69,000/- under duress and without proper consideration of their explanations. The order dated 22.01.2020 was set aside, and the respondents were directed to refund the amount with interest at 6% per annum from 20.01.2020 until repayment. Additionally, the 2nd respondent was ordered to pay costs of Rs. 10,000 to the petitioner.Conclusion:The court allowed the writ petition, set aside the impugned order, and directed the refund of the collected amount with interest and costs. The court condemned the 2nd respondent's actions as arbitrary, illegal, and a blatant abuse of power.