2022 (10) TMI 999 - HC - GST

Tax Demand Invalidated: Pre-Used Invoices Insufficient Grounds for Goods Detention Under CGST Act Section 129(3)

In this SC case involving tax and penalty under CGST Act Section 129(3), the court upheld the appellate authority's order setting aside tax demand. The ... Section 129 of the CGST Act - detention and seizure of goods during transit - levy of tax and penalty cannot be based on presumption - e-way bill requirement for goods in transit - alternate mode of release on payment under Section 129 - Chapter 19 of the CGST Act - recourse to Chapter 15 and Section 122 for assessment and penaltySection 129 of the CGST Act - detention and seizure of goods during transit - levy of tax and penalty cannot be based on presumption - Validity of the appellate authority's setting aside of the detention, seizure and the order under Section 129(3) on the ground that there was no material to justify detention and that levy could not rest on presumption. - HELD THAT: - The appellate authority found absence of material justifying detention and seizure of the goods intercepted in transit and held that the tax and penalty levied under Section 129(3) could not be sustained on a presumption. The High Court noted that Chapter 19, including Section 129, prescribes the conditions and procedure for detention and provides an alternate route for release on payment. Given that the appellate authority concluded the foundational material for initiating proceedings was non-existent, the Court declined to interfere with that factual and legal conclusion. The Court observed that the alternate machinery under Section 129 is voluntary for the assessee and, if not availed, the department may proceed under Chapter 15 read with Section 122; however, that prospect did not negate the appellate authority's finding of lack of material for detention in the present case.The appellate authority's order setting aside the detention, seizure and the demand under Section 129(3) was upheld; no interference was warranted.E-way bill requirement for goods in transit - alternate mode of release on payment under Section 129 - recourse to Chapter 15 and Section 122 for assessment and penalty - Whether the requirement of accompanying E-way bills and the availability of Section 129's release mechanism affected the appellate authority's decision and the Court's willingness to interfere. - HELD THAT: - The Court acknowledged the statutory requirement that goods in transit be accompanied by E-way bills under the Rules framed under the CGST Act and reiterated that Section 129 provides an alternate, self-help mechanism for release of intercepted goods on payment of tax and penalty as quantified under Section 129(3). In the present matter, however, there was no material on record showing non-compliance in a manner that justified detention, nor was there any basis to upset the appellate authority's conclusion. The Court further noted that non-availment of Section 129 remedies by the assessee does not preclude the department from resorting to assessment and penalty proceedings under Chapter 15 and Section 122, but that consequential possibility did not supply a ground to set aside the appellate finding.The Court declined to disturb the appellate authority's reliance on the absence of material regarding E-way bills and affirmed that the Section 129 scheme and alternative departmental remedies did not warrant interference with the impugned order.Final Conclusion: Writ petition dismissed and the interim order vacated; the High Court upheld the appellate authority's finding that there was no material to justify detention and seizure or to sustain the demand under Section 129(3), and refused to interfere with the release direction made by the appellate authority. Issues:Challenge to order setting aside tax and penalty under Section 129(3) of the CGST Act based on intercepted goods transported on pre-used tax invoices.Analysis:The case involves a challenge to an order passed by the appellate authority setting aside the demand of tax and penalty imposed under Section 129(3) of the CGST Act. The goods being transported by the respondent were intercepted based on intelligence that they were being transported on pre-used tax invoices. The authorities passed an order directing the respondent to pay tax and cess on the goods. The appellate authority set aside this order, stating that there was no material for detention and seizure of the goods under Section 129. The appellate authority emphasized that the levy of tax and penalty cannot be based on presumption alone.The petitioner argued that the goods were being transported twice over on the same set of invoices, but the court found this argument not acceptable. The court highlighted that goods must be accompanied by E-way bills as per Section 138 of the CGST Act rules, which was not considered in the assessment order. The court noted that the provisions in Chapter 19, including Section 129, provide for the release of intercepted goods during transportation, giving the assessee an opportunity to pay the required amounts for release. The power under Section 129(3) determines the penalty to be paid, offering an alternate mode for assessees to avoid future litigation by paying the amount.Since the respondent did not avail the benefit under Section 129 and the appellate authority found the basis for proceedings to be non-existent, the court declined to interfere with the appellate authority's order. The court emphasized that if the assessee does not utilize the benefits under Section 129, the department can take steps under Chapter 15 and Section 122 of the CGST Act to determine tax liability and penalty. Consequently, the writ petition was dismissed, and the interim order was vacated.