HC Strikes Down GST Penalty Orders for Denying Natural Justice and Procedural Fairness to Taxpayer

The HC allowed writ petitions challenging GST penalty and seizure orders due to procedural irregularities. The court found violations of natural justice, as the petitioner was not given an opportunity to contest adverse inferences regarding weight discrepancies in e-way bills. The matter was remanded to the Additional Commissioner for a fresh decision within three months, ensuring proper hearing and compliance with legal principles.

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Issues involved: Constitution of GST Tribunal in Uttar Pradesh, Challenge against penalty and seizure orders based on incorrect weight mentioned in e-way bill.

Constitution of GST Tribunal in Uttar Pradesh:
The High Court entertained the Writ Petitions due to the absence of a GST Tribunal in Uttar Pradesh as per the notification of the Central Government. The issues in both petitions were similar, hence decided by a common order.

Challenge against penalty and seizure orders:
The petitioner, a Proprietorship concern, challenged penalty orders imposed for incorrect weight mentioned in the e-way bill during the transit of goods. The petitioner claimed that the mistake in weight was rectified before the movement of goods, and correct documents were produced before detention. The Additional Chief Standing Counsel argued that the petitioner generated a new tax invoice with corrected weight after detention, indicating an intention to evade tax.

The Court observed discrepancies in the weight mentioned in the e-way bill compared to the actual weight during interception. It emphasized that no adverse inference could be drawn if the e-way bill showed more weight than the actual. The Court also noted that producing correct documents before the seizure order is passed should not lead to adverse inferences, as done by the authorities in this case.

The Court found that while rejecting the appeal, an adverse inference was made without giving the petitioner an opportunity to rebut. It held that the principles of natural justice were violated as the petitioner was not informed or given a chance to contest the adverse view. Consequently, the penalty and seizure orders were quashed and deemed unsustainable in the eyes of the law.

The writ petitions were allowed, and the matter was remanded back to the Additional Commissioner for a fresh decision after providing a full opportunity for all stakeholders to be heard, in compliance with the law, within three months from the date of the order. The petitioner was directed to serve a certified copy of the order within three weeks.

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