GST detention penalty cannot rest on mere electronic reply or absence of business activity; circular protection applies.

Penalty under Section 129(1)(b) of the CGST Act could not rest on mere electronic submission of the reply or on the absence of business activity at the stated premises. The High Court held that no adverse inference could be drawn solely from those facts to conclude that the invoice was fake or that the petitioner was not the owner of the goods. As the petitioner's name appeared in the invoice and it sought release of the goods, Clause 6 of Circular No. 76/50/2018-GST dated 31.12.2018 was applicable. The penalty order was quashed and the matter was remitted for fresh consideration in accordance with law.

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Issues: Whether the penalty imposed under Section 129(1)(b) of the Central Goods and Services Tax Act, 2017 was sustainable and whether the petitioner was entitled to the benefit of Circular No. 76/50/2018-GST dated 31.12.2018 treating it as the owner of the goods.

Analysis: The impugned order proceeded on the basis that the petitioner's reply through the registered email and the absence of business activity at the principal place of business established that the petitioner was not the owner of the goods. The Court held that no adverse inference could be drawn merely because the reply was sent electronically and not by personal appearance, and that absence of activity at the business premises by itself could not justify a presumption that the invoice was fake or that the petitioner was not the owner. Since the petitioner's name appeared in the invoice and the petitioner sought release of the goods, Clause 6 of Circular No. 76/50/2018-GST dated 31.12.2018 was held applicable.

Conclusion: The penalty order under Section 129(1)(b) of the Central Goods and Services Tax Act, 2017 was quashed and the matter was remitted for a fresh hearing and a reasoned decision in accordance with law, keeping in view the applicable circular and the earlier decision referred to by the Court.

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