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

HC quashed penalty orders under GST Act for undervaluation of goods. Court held that detention of goods solely on undervaluation grounds without following proper legal procedure is invalid. Specific statutory provisions must be followed before imposing penalties. Impugned orders were set aside, with directions to return deposits made by petitioner within four weeks.

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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 Undervaluation
The 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.

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