2024 (2) TMI 240 - HC - GST

Key Suspect Cleared: GST Detention Order Quashed Due to Lack of Direct Evidence of Fraud

Fairdeal Metals Limited Versus Asst. Commissioner Of Revenue, State Tax, Bureau Of Investigation (Nb), Alipurduar Zone And Ors.

HC ruled in favor of petitioner, quashing detention order and penalty related to alleged GST irregularities. The Court found insufficient evidence linking ... Seeking cancellation of the impugned detention order - specific contention of the petitioner is that the petitioner was not supposed to know the antecedents of the supplier Company - HELD THAT:- As the supplier Company was a registered taxable person in the State of Assam, the petitioner did not have any information or did not have any mechanism to verify the details of the supplier Company - There is no allegation of tax evasion against the petitioner. In such a situation, it was absolutely improper for the respondent authority to direct payment of penalty by the petitioner. It appears that though there was an allegation of non existence of the supplier Company leading to non-deposit of the input tax credit but later on 30.12.2023, that is prior to issuing of the show cause notice on 31.12.2023 the supplier Company already deposited the input tax - Assuming there was an intention to evade tax on the part of the supplier, but later on by way of payment of tax, the allegation of intention to evade tax falls flat. The supplier Company appears to have been registered by the registered authority in Assam. Had there been any deficiency on the part of the supplier Company in production of relevant documents, registration ought not to have been issued. After registration has been issued and tax paid by the supplier Company, the allegation made against the supplier Company does not stand. The petitioner being no way connected with any of the allegations that has been levelled against the supplier Company, cannot be made liable to pay penalty as has been assessed. The order of detention and the subsequent order imposing penalty are liable to be set aside and quashed. The same are, accordingly, set aside and quashed - respondent no. 1 is directed to forthwith take steps to release the vehicle and the goods in favour of the petitioner at the earliest, but positively within a period of 48 hours from the date of production of the server copy of this order duly downloaded from the official website of the High Court - The writ petition stands disposed of. Issues involved:The petitioner prays for cancellation of the impugned detention order, show cause notice, and subsequent order. The petitioner argues lack of allegation against them, as the allegations are directed towards the supplier. The authority raised concerns regarding the goods' transportation, discrepancies in returns, and suspicion of circulating bogus ITC. The petitioner claims ignorance of the supplier's antecedents and reliance on the supplier's registration status. The respondent authorities justify the detention and penalty, citing dubious supplier documents and fraud SOPs. The Court deliberates on the supplier's tax payment, registration validity, and the petitioner's liability for penalty.Details of the Judgment:Issue 1: Allegations against the supplierThe petitioner contends that the allegations are solely against the supplier, M/S. Navaraj Trading Company, for irregularities in GST registration, suspicious goods movement, and bogus ITC circulation. The petitioner asserts no involvement in tax evasion and reliance on the supplier's registration status in Assam.Issue 2: Detention and Penalty ImpositionThe respondent authorities defend the detention and penalty imposition, claiming the supplier was set up by the petitioner for fraudulent activities. They refer to a fraud SOP highlighting fake invoices and dummy firms in GST frauds. However, the Court notes the supplier's tax payment before the show cause notice and questions the validity of the allegations against the supplier post-registration.Issue 3: Petitioner's LiabilityThe Court rules in favor of the petitioner, emphasizing the lack of connection between the petitioner and the supplier's alleged fraudulent activities. The Court sets aside the detention order and penalty imposition, directing the release of the vehicle and goods to the petitioner within 48 hours.ConclusionThe Court quashes the detention order and penalty, citing the supplier's registration validity and tax payment. The petitioner is absolved of liability due to the supplier's actions. The respondent is instructed to release the vehicle and goods promptly. The writ petition is disposed of, ensuring expeditious delivery of the order copy to the parties upon request.