High Court Nullifies GST Penalty Order, Mandates Fair Hearing and Provides Provisional Goods Release Mechanism

HC upheld petitioner's challenge to GST penalty, finding a breach of natural justice. The court set aside the impugned order due to lack of prior opportunity for response and directed respondents to initiate fresh proceedings. Petitioner was permitted to execute a bank guarantee for provisional release of goods, with specific conditions on its invocation.

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Issues Involved:
Challenge to order on breach of principles of natural justice in relation to GST penalty imposition on consignee without prior opportunity.

Detailed Analysis:

1. Background and Facts:
The petitioner, a subsidiary of a company specializing in bio-CNG production, faced a penalty imposition under GST laws due to the interception of goods while being transported from Gujarat to Chennai. The goods were procured by an entity called CEID from Power Hydrotech, with the petitioner listed as the consignee on the tax invoice.

2. Petitioner's Contentions:
The petitioner argued that the impugned order was issued without providing any prior opportunity to respond, which constitutes a breach of principles of natural justice. Referring to applicable GST statutes, the petitioner contended that penalties cannot be imposed on the consignee and that the invoice for goods should be issued upon delivery to the consignee.

3. Respondent's Argument:
The Additional Government Pleader representing the respondent referred to Section 31 of GST statutes, stating that the invoice should have been issued when the goods were transported from the seller to the buyer. As the goods were transported directly to the petitioner, the invoice should have accompanied the goods.

4. Court's Findings and Decision:
The court observed that the tax invoice was raised on a "Bill To Ship To" basis, clearly specifying the petitioner as the consignee. However, the notices issued at the time of detention did not contain the petitioner's name, leading to a breach of natural justice in issuing the impugned order directly to the petitioner without prior opportunity.

5. Order and Relief Granted:
The court set aside the impugned order dated 27.05.2024, allowing the respondents to initiate fresh proceedings in accordance with the law. The petitioner was permitted to execute a bank guarantee as per Section 129(1)(c) of GST enactments for the provisional release of goods. The bank guarantee was required to be maintained for one month after the conclusion of fresh proceedings, with a restraint on invoking it until then.

6. Conclusion:
The Writ Petition was disposed of with no order as to costs, and connected miscellaneous petitions were closed accordingly. The judgment emphasized the importance of adhering to principles of natural justice and proper procedures in imposing penalties under GST laws, ensuring fairness and due process for all parties involved.

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