2024 (5) TMI 1428 - HC - GST

Seizure and Penalty Orders Quashed Due to Lack of Intent; Court Orders Refund to Petitioner Within Six Weeks.

M/s Ace Manufacturing Systems Limited Versus State of UP And 3 Others

M/s Ace Manufacturing Systems Limited Versus State of UP And 3 Others - TMI Issues:Challenge to seizure order, penalty order, and appellate orders based on classification of goods as Over Dimensional Cargo (ODC) due to speed of transportation.Analysis:The petitioner contested the seizure order, penalty order, and appellate orders, arguing that the cargo was correctly classified as Over Dimensional Cargo (ODC) as it was 13.9 feet above the ground. The petitioner relied on a circular stating that a vehicle with a height exceeding 3.8 meters is classified as ODC. The height of the goods in question was 13.8 feet, higher than the threshold mentioned in the circular. The authorities contended that the speed of transportation indicated that the vehicle cannot be categorized as ODC, but the circular explicitly stated that speed is not a criterion for classification. Additionally, all relevant documents matched the goods, and the only reason for the penalty was the fast speed of transportation, contrary to the departmental circular.The court found that the imposition of the penalty was based on surmises and conjectures, going against the departmental circular, which does not consider the speed of transportation as a valid ground for classification. The court emphasized the necessity of mens rea, or the presence of intent to evade tax, for penalty imposition, citing previous judgments. The penalties lacked a substantive basis or findings indicating an intention to evade tax, rendering them arbitrary and unjustified.The court highlighted the significance of mens rea in penalty imposition, serving as a safeguard against arbitrary governmental actions and ensuring procedural fairness. The reliance on speculative reasoning and conjectural assumptions to justify penalties was deemed unfair and contrary to the principles of equity and fairness. The absence of concrete evidence of wilful misconduct undermines the credibility of the tax administration system and erodes public trust in governmental actions.The court emphasized that the mens rea requirement distinguishes between inadvertent errors and intentional misconduct, preserving the integrity of the legal system. Penalties should be reserved for deliberate violators of the law to maintain public confidence in the tax regime. The judgment allowed the writ petition, quashing the orders and directing the return of the security and penalty amount to the petitioner within six weeks, with no costs imposed.