2024 (6) TMI 1073 - HC - GST

Business Premises Search Leads to Quashing of GST Penalty Orders Under Section 129(3), Mandating Tax Refund Within Four Weeks

HC quashed penalty orders under Section 129(3) of UP GST Act following search of business premises. Relying on precedent, the court found no justification ... Search and seizure of premises - penalty under Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 - prohibition on initiating penalty proceedings following search and seizure - refund of tax and penalty depositedSearch and seizure of premises - penalty under Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 - prohibition on initiating penalty proceedings following search and seizure - Whether penalty proceedings under Section 129 could be validly initiated subsequent to search and seizure of the assessee's business premises - HELD THAT: - The Court, applying the binding reasoning of a coordinate Bench in Mahavir Polyplast Pvt. Ltd. v. State of U.P. and 2 others, held that search and seizure of the godown cannot result in initiation of penalty proceedings under Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017. On that basis the impugned penalty order dated March 21, 2018 and the appellate order dated August 31, 2018 were found to be unjustified and were quashed and set aside. The Court's conclusion rests on the principle that proceedings under Section 129 are not permissible merely because a search and seizure has taken place, and consequently the penalty imposed could not be sustained. [Paras 4, 5]Impugned orders under Section 129 and the consequent appellate order quashed and set aside.Refund of tax and penalty deposited - Whether amounts deposited by the petitioner pursuant to the impugned orders are to be refunded - HELD THAT: - Having quashed the penalty and appellate orders, the Court directed the respondents to refund the amount of tax and penalty deposited by the petitioner. The refund was ordered to be effected within four weeks from the date of the judgment, with consequential reliefs to follow as necessary. [Paras 7, 9]Respondents directed to refund the deposited amounts within four weeks.Final Conclusion: Writ petition allowed: penalty and appellate orders under Section 129 quashed; respondents directed to refund tax and penalty deposited by the petitioner within four weeks; consequential reliefs granted. Issues:Penalty order under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017; Validity of penalty order post search of business premises; Interpretation of penalty proceedings under Section 129 of the Act; Refund of tax and penalty amount deposited by the petitioner.Analysis:The High Court judgment, delivered by Hon'ble Shekhar B. Saraf, J., addressed the penalty order issued under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017, along with the subsequent appeal order under Section 107 of the Act. The case stemmed from proceedings initiated post a search of the petitioner's business premises. The Court referred to a prior ruling in Mahavir Polyplast Pvt. Ltd. Vs. State of U.P., emphasizing that a mere search and seizure of premises do not warrant penalty proceedings under Section 129 of the Act. Consequently, the Court deemed the penalty orders dated March 21, 2018, and August 31, 2018 unjustified, leading to their quashing and setting aside.The Court, in its verdict, directed the respondents to refund the tax and penalty amounts deposited by the petitioner within four weeks from the date of the judgment. The writ petition was allowed with the specified terms, ensuring consequential reliefs. Notably, any sum deposited by the petitioner was mandated to be refunded within the stipulated four-week period. The judgment, therefore, provided a clear interpretation of the law regarding penalty proceedings post premises search and highlighted the necessity for justified actions in such cases, ultimately leading to the refund of the petitioner's deposited amounts.