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 goods were intercepted during transportation using pre-used tax invoices. The court found insufficient grounds for detention and emphasized that tax and penalty cannot be based on mere presumption. The writ petition was dismissed, allowing the department to pursue alternative legal remedies under Chapter 15 and Section 122.

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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.

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