2025 (7) TMI 789 - HC - GST

Penalty under Section 129(3) UP GST Act quashed when goods had proper documents and only classification disputed

M/s Tirupati Agro Commodities Versus State of U.P. And 2 Others

The HC allowed the petition challenging penalty imposed under Section 129(3) of UP GST Act, 2017. The goods were accompanied by proper documents including ... Levy of penalty u/s 129(3) of Uttar Pradesh Goods and Service Tax Act, 2017 - classification of goods - HELD THAT:- In the present case, the goods were accompanied by the relevant documents such as the invoice and e-way bill etc. and there is no dispute with regard to the value of the goods. The only dispute is with regard to classification of the goods. The imposed penalty in the present case is without any basis in law - the impugned order passed by respondent no. 2, is quashed and set aside - petition allowed. The Allahabad High Court, in an application under Article 226 of the Constitution, quashed the penalty imposed under section 129(3) of the Uttar Pradesh Goods and Service Tax Act, 2017, for misclassification of goods. Citing the precedent in Shamhu Saran Agarwal and Company v. Additional Commissioner Grade ([2024] 160 Taxmann.com 151), the Court held that 'penalty under section 129... cannot be imposed on mere speculation,' and that proceedings under sections 73 or 74 are appropriate for valuation disputes. Here, since the dispute concerned classification-not valuation-and relevant documents like invoice and e-way bill were undisputed, the penalty was found 'without any basis in law.' The Court set aside the impugned order dated 08.05.2025 and directed refund of any penalty deposited within eight weeks, allowing the writ petition.