HC quashes detention and penalty orders for arecanut goods due to valid e-way bill and misapplied GST Act section 129

The HC set aside detention and penalty orders for arecanut/betel nut goods. The court found the seizure unjustified as a valid e-way bill was generated before the earlier one expired. The authority improperly recorded contradictory statements from the truck driver about unloading destinations without supporting material. The penalty under section 129(1)(b) GST Act was wrongly applied when the goods owner came forward, as section 129(1)(a) should apply with 200% tax penalty instead of 200% goods value penalty. The petition was allowed.

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Issues Involved:
1. Legality of the detention and seizure of goods.
2. Validity of supplementary notice and additional evidence.
3. Applicability of penalty under Section 129(1)(b) of the GST Act.

Summary:

1. Legality of the Detention and Seizure of Goods:
The petitioner challenged the order dated 19.8.2021 under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017. The petitioner, a registered dealer, had purchased Areca Nuts from a registered dealer in Haryana, and the goods were accompanied by all relevant documents, including a tax invoice and e-way bill. The goods were intercepted and detained on the grounds that they were not on the regular route and the truck driver had stated that the goods were to be unloaded at Ghaziabad instead of Robertsganj. The petitioner argued that no discrepancy was found during the physical verification of the goods and that the detention was unjustified. The court noted that the initial verification did not reveal any discrepancies, and the subsequent detention based on the driver's statement was not permissible without cogent material. The court held that the seizure and detention were unjustified.

2. Validity of Supplementary Notice and Additional Evidence:
The petitioner contended that the supplementary notice issued on 17.10.2020, which alleged that the goods were processed Betul Nut (subject to a higher tax rate), was without any basis or expert report. The court found that no material evidence or expert opinion was provided to support the claim that the goods were different from those disclosed in the accompanying documents. Additionally, the court held that the acceptance of additional evidence by the first appellate authority was in violation of Rule 112 of the GST Rules, as established in previous judgments. The court concluded that the supplementary notice and the acceptance of additional evidence were not justified.

3. Applicability of Penalty under Section 129(1)(b) of the GST Act:
The petitioner argued that once the owner of the goods came forward, the penalty under Section 129(1)(b) could not be invoked, and the penalty should have been limited to 200% of the tax payable under Section 129(1)(a). The court agreed, citing previous judgments that established the same principle. The court held that the imposition of a penalty amounting to 200% of the value of the goods was unjustified and should have been limited to 200% of the tax payable.

Conclusion:
The court set aside the impugned order dated 19.8.2021 and allowed the writ petition with all consequential benefits. Any amount deposited by the petitioner during the litigation was ordered to be returned within two weeks. The case was listed for compliance after two months.

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