2024 (4) TMI 1080 - HC - GST

Undervaluation Penalty Orders Struck Down: GST Act Violation Requires Strict Procedural Compliance for Goods Detention

M/s S.K. Traders Versus Additional Commissioner Grade-2 And Another

M/s S.K. Traders Versus Additional Commissioner Grade-2 And Another - 2024 (87) G. S. T. L. 72 (All.) Issues:The issues involved in the judgment are imposition of penalty under Section 129 of the Uttar Pradesh Goods and Service Tax Act, 2017 based on the ground of goods being undervalued.Judgment Summary:Issue 1: Imposition of Penalty for UndervaluationThe petitioner filed a writ petition under Article 226 of the Constitution of India challenging the orders dated April 6, 2023, and May 16, 2023, passed by the Assistant Commissioner and Additional Commissioner, respectively, imposing penalty on the grounds of undervaluation of goods. The Court referred to a previous case where it was held that detention of goods solely on the basis of undervaluation without following the proper procedure is not valid. The Court emphasized that specific provisions under Sections 73 or 74 of the Act must be adhered to for detecting undervaluation before imposing penalties under Section 129. It was further stated that officers do not have the power to detain goods based on speculation of undervaluation and then impose penalties. The Court relied on a judgment of the Kerala High Court to support its decision. Consequently, the impugned orders were quashed and set aside, with directions for returning any deposits made by the petitioner to the authorities within four weeks.In conclusion, the writ petition was allowed, and consequential reliefs were ordered to be provided to the petitioner.