Penalty under SGST Act for confiscation of goods: absence of intent to evade tax prompts quashing of seizure orders

Penalty under the SGST regime: a purposive construction requires an intent to evade tax as a precondition for initiation of seizure and confiscation proceedings; where the owner was located at the railway station to obtain the railway receipt, no evidence of intention to evade tax or substantive mismatch was found, and administrative authorities failed to consider these circumstances, the confiscation and related orders cannot be sustained and were quashed with a small costs award. Reliance was placed on precedent recognising a mens rea requirement for proceedings under the seizure provisions, rendering the impugned orders unlawful.

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Issues Involved:

1. Constitution of GST Tribunal in Uttar Pradesh.
2. Validity of Penalty Order under Section 129(1) of the UPGST Act.
3. Intention to Evade Tax.
4. Refund of Penalty Amount with Interest.

Summary:

1. Constitution of GST Tribunal in Uttar Pradesh:
The writ petition was entertained due to the absence of a constituted GST Tribunal in Uttar Pradesh as per the Central Government notification dated 14.09.2023.

2. Validity of Penalty Order under Section 129(1) of the UPGST Act:
The petitioner challenged the penalty order dated 25.11.2022 and the subsequent appeal rejection on 24.03.2023. The penalty was imposed following the interception and confiscation of goods on 18.11.2022 outside the railway station. The petitioner argued that the e-way bill could not be generated due to a technical glitch and that the goods were detained without waiting for the necessary documents to be produced.

3. Intention to Evade Tax:
The petitioner contended there was no intention to evade tax, as evidenced by the immediate attempt to show documents and the detailed reply provided. The authorities did not consider these facts and imposed the penalty without any observation of intent to evade tax. The court noted that the authorities failed to cross-check the petitioner's claim that the owner was arranging the Railway Receipt for generating the e-way bill.

4. Refund of Penalty Amount with Interest:
The court referenced several judgments, including those from the Apex Court and Division Bench, indicating that intent to evade tax is mandatory for imposing penalties under Section 129. The court found that the authorities did not establish such intent and thus, the penalty proceedings were inappropriate. Consequently, the impugned orders were quashed.

Conclusion:
The writ petition was allowed, quashing the impugned orders dated 25.11.2022 and 24.03.2023. The court ordered the respondents to refund the penalty amount within 15 days, failing which interest at 9% per annum would apply. Additionally, a cost of Rs. 1,000 was imposed on the respondents, to be recovered from the erring officer. The matter was listed for compliance after a month.

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