2025 (11) TMI 1424 - HC - GST

Proceedings Against Transporter Quashed for Lack of Tax Evasion Evidence and Human Error Explaining Discrepancy in Loaded Goods

M/s Anish Transport Company Versus State of U.P. and 2 others

HC held that where seized goods were found to belong to the consignor and were released to it, and no finding existed that the petitioner-transporter was ... Seizure of goods - mismatch in the details of actual goods carried with that mentioned in the E-way bill - intent to evade tax present or not - HELD THAT:- The authority found that the goods belong to the consignor and the same have been released in their favour. The records shows that the authorities below have not recorded any finding against the petitioner, who is a transporter. No finding has been recorded that the transporter, i.e., the petitioner, is engaged in the business of purchase and sale of any goods. Once the consignor come forward with the case that due to human error of the labourer, less goods were loaded at night, the evasion of tax cannot be attributed to the petitioner, who is a transporter. Moreover, once the goods have been released to the consignor and in absence of any adverse material being brought on record against the transporter, the vehicle in question cannot be seized and no proceeding can be initiated against the petitioner. The impugned order cannot be sustained in the eyes of law. The same is hereby quashed - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether proceedings and seizure under section 129(3) could be sustained against a transporter where the goods were in transit, accompanying documents were produced, and the authorities subsequently released the goods to the consignor after accepting that shortfall arose from human error. 2. Whether a transporter can be held liable for tax evasion or treated as owner/dealer where no finding was recorded that the transporter was engaged in purchase and sale of goods or had intent to evade tax. 3. Whether amounts deposited pursuant to impugned seizure/detention orders must be refunded where those orders are quashed and no adverse material was brought against the transporter. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of proceedings and seizure under section 129(3) against the transporter where goods were released to consignor after finding shortfall attributable to human error. Legal framework: Section 129(3) permits detention and confiscation of goods/vehicle where tax evasion or contravention is established; authorities may seize goods in transit and pass appropriate orders following physical verification and show-cause proceedings. Precedent Treatment: No specific prior judicial precedents are referenced or applied in the judgment; the Court considered facts and statutory scheme as presented in the record. Interpretation and reasoning: The record shows that the vehicle and goods were intercepted in transit, documents were produced, and physical verification revealed a shortfall between cartons/boxes declared and those found on inspection. Authorities initially seized goods and vehicle and issued a detention order leading to an order under section 129(3). Subsequent proceedings resulted in release of the seized goods to the consignor after the consignor explained the shortfall as human error of labourers and the goods were released on payment equivalent to market price. The authorities recorded a categorical finding in the release order that the goods belonged to the owner/consignor. Ratio vs. Obiter: Ratio - where authorities, after inspection and proceedings, accept the consignor's explanation and release the goods to the consignor with a finding of ownership, maintaining seizure proceedings against the transporter without any adverse finding against the transporter is unsustainable. Obiter - observations about the causes of shortfall (human error) are factual findings here and support the ratio but are not generalized dicta beyond the case facts. Conclusions: In the absence of any recorded finding that the transporter participated in or intended to effect tax evasion, and where authorities themselves released the goods to the consignor recognizing ownership, continuing to sustain seizure/proceedings against the transporter under section 129(3) cannot be upheld. The impugned order initiating or upholding such proceedings is liable to be quashed. Issue 2: Liability of transporter absent finding of involvement in purchase/sale or intent to evade tax. Legal framework: Liability under GST enforcement provisions against carriers/transporters ordinarily requires material linking the transporter to the alleged offence - e.g., participation in sale/purchase, ownership, or intent to evade tax; mere carriage for remuneration with proper documents does not automatically convert a transporter into owner/dealer. Precedent Treatment: The Court did not rely on specific precedents; it applied statutory principles and fact-based scrutiny of the record to determine the absence of adverse material against the transporter. Interpretation and reasoning: The record contains no finding that the transporter was engaged in purchase and sale of goods or had intent to evade tax. All documents were produced; the petitioner was a registered GST transporter charging transportation charges. The shortfall was explained by the consignor as a loading error. Given that authorities accepted the consignor's claim and released goods to the consignor, no adverse inference can be drawn against the transporter in the absence of independent incriminating evidence. Ratio vs. Obiter: Ratio - a transporter who merely carries goods for consideration and produces requisite documents cannot be made liable for evasion where there is no recorded finding or material indicating he is a dealer/owner or had intent to evade. Obiter - implications for broader enforcement practice where simultaneous adverse findings against carriers are made without supporting material; such observations are not necessary to decide narrower factual dispute here but are indicated by the Court. Conclusions: Proceedings against the transporter are unsustainable where the authorities themselves recognise ownership of goods in favour of consignor and no material is brought on record linking the transporter to tax evasion or trade in the goods. The vehicle cannot be lawfully seized and proceedings cannot be maintained against the transporter in such circumstances. Issue 3: Refund of amounts deposited pursuant to impugned seizure/detention orders. Legal framework: When enforcement orders are quashed as unsustainable, amounts deposited pursuant to those orders are ordinarily refundable in accordance with law; refund remedies follow from quashing of invalid seizures/detention orders. Precedent Treatment: No precedents cited; Court applied normal restitution principles tied to quashing of impugned orders. Interpretation and reasoning: The Court quashed the impugned order against the transporter on the ground that no adverse material was recorded against him and the goods were released to the consignor. Given the quashing, there is no subsisting basis to retain amounts paid under the impugned order. Ratio vs. Obiter: Ratio - amounts deposited pursuant to quashed seizure/detention orders are to be refunded in accordance with law. Obiter - none relevant beyond application of ordinary restitution principles. Conclusions: Any amount deposited by the petitioner pursuant to the impugned orders shall be refunded in accordance with law. Cross-references and Interrelation of Issues The disposition of Issues 1 and 2 are interdependent: the acceptance by authorities of the consignor's explanation and release of goods to the consignor (Issue 1) eliminates the factual predicate for holding the transporter liable (Issue 2). Issue 3 flows directly from the conclusions on Issues 1 and 2 - quashing of the impugned order mandates refund of deposits.