2024 (12) TMI 1006 - HC - GST

Detention of goods and vehicle upheld under Section 129 WBGST Act despite procedural irregularities claims

Ashok Sharma Versus The State of West Benal & Ors.

Calcutta HC upheld detention of goods and vehicle under Section 129 of WBGST Act. Court found significant discrepancies between declared goods description ... Legality of the detention of goods and vehicle under Section 129 of the WBGST Act - challenge to SCN and summary SCN - discrepancies between the declared description of goods and the physical verification report - HELD THAT:- Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court finds the detention of goods and the vehicle under Section 129 of the WBGST Act to be lawful. The petitioner’s claim of procedural violations, including an unsigned MOV-01 form and errors in other documentation, was noted. However, this Court holds that these irregularities did not render the detention and subsequent proceedings invalid, as the core findings of the case remained unaffected. The Court observed that the discrepancies between the declared description of goods and the physical verification report were significant. While the petitioner argued that the differences were minor trade variations, this Court concluded that the mismatch, coupled with a substantial gap between the declared and verified valuation, indicated a deliberate misrepresentation. Such discrepancies undermined the accuracy of the petitioner’s declarations, which are crucial for determining tax liability, justifying the imposition of penalties under the GST framework. The petitioner’s failure to maintain consistent and transparent inventory records further supported the inference of intent to evade taxes. This Court emphasized that under the GST laws, the burden of proof lies on the taxpayer to demonstrate compliance with statutory provisions. In this case, the petitioner failed to substantiate claims of legitimate trade practices or demonstrate that the valuation applied by the authorities was unreasonable. This Court upheld the orders passed by the adjudicating and appellate authorities, noting that they were based on substantial evidence and a proper application of legal principles. The appellate authority’s reliance on market valuation and the evidence presented was deemed reasonable and the petitioner failed to establish any procedural or legal infirmities in these orders - the petitioner’s invocation of Article 19 (1) (g) of the Constitution, claiming that the actions of the tax authorities infringed upon the fundamental right to carry on trade, is rejected as regulatory measures under the GST laws are necessary to ensure compliance and prevent tax evasion and do not constitute a violation of fundamental rights. This Court dismissed the writ petition, affirming the validity of the detention order, the tax demand as well as the penalties imposed under the WBGST and CGST Acts - application disposed off. Issues Involved:1. Legality of the detention of goods and vehicle under Section 129 of the WBGST Act.2. Validity of the show cause notice and subsequent tax and penalty orders.3. Allegations of tax evasion and discrepancies in the description and valuation of goods.4. Compliance with GST documentation requirements and procedural irregularities.5. Invocation of Article 19(1)(g) of the Constitution regarding the right to trade.Detailed Analysis:1. Legality of the Detention of Goods and Vehicle:The petitioners challenged the detention of goods and vehicle under Section 129 of the WBGST Act, asserting that the goods were accompanied by valid invoices and e-way bills, and there was no violation of GST rules. The Court, however, found the detention lawful, noting that despite procedural irregularities such as an unsigned MOV-01 form, the core findings of the case remained unaffected. The discrepancies between the declared description of goods and the physical verification report were significant, supporting the detention.2. Validity of the Show Cause Notice and Subsequent Tax and Penalty Orders:The petitioners sought the quashing of the show cause notice and subsequent tax and penalty orders, arguing that they were issued without proper application of mind and were based on incorrect assertions. The Court upheld the orders, stating that they were based on substantial evidence and a proper application of legal principles. The discrepancies in the description and valuation of goods justified the imposition of penalties under the GST framework.3. Allegations of Tax Evasion and Discrepancies in Description and Valuation:The petitioner contended that the discrepancies in the description of goods were minor trade variations and did not indicate an intention to evade taxes. However, the Court observed that the mismatch, coupled with a substantial gap between the declared and verified valuation, indicated a deliberate misrepresentation. The failure to maintain consistent and transparent inventory records further supported the inference of intent to evade taxes.4. Compliance with GST Documentation Requirements and Procedural Irregularities:The petitioner argued that all required documents, including tax invoices and e-way bills, were presented at the time of interception, ensuring compliance with the law. The Court acknowledged procedural irregularities but concluded that they did not invalidate the detention and subsequent proceedings. The burden of proof lies on the taxpayer to demonstrate compliance, which the petitioner failed to substantiate.5. Invocation of Article 19(1)(g) of the Constitution:The petitioner invoked Article 19(1)(g) of the Constitution, claiming that the actions of the tax authorities infringed upon the fundamental right to carry on trade. The Court rejected this argument, emphasizing that regulatory measures under the GST laws are necessary to ensure compliance and prevent tax evasion, and do not constitute a violation of fundamental rights.Conclusion:The Court dismissed the writ petition, affirming the validity of the detention order, the tax demand, and the penalties imposed under the WBGST and CGST Acts. The appellate authority's decision was deemed justified, and the petitioner's claims were found to lack substantive merit. All pending applications were disposed of, and no order as to costs was made.