M/S D And D Construction And Developers Company vs. Additional Commissioner And 2 Others

Facts

The petitioner, M/s D And D Construction And Developers Company, is challenging an order dated April 8, 2022, passed by the Additional Commissioner (Appeals) and a penalty order dated March 20, 2020, passed by another respondent authority. The petitioner, a construction and developers company, transferred an old Compactor Machine from its head office in Jodhpur, Rajasthan, to its branch location in Auraiya, Uttar Pradesh, for a work order on the Bundelkhand Expressway. The truck carrying the machine was intercepted on March 16, 2020, on the grounds of lacking an invoice/bilty and E-way Bill. The petitioner claims that all necessary documents, including a delivery challan and E-way Bill, were presented before the seizure and penalty orders were issued. They argue that this was a transfer of machinery for own use, not a sale, and therefore, proceedings under Section 129 of the Act were wrongly initiated.

Held

The Court held that the impugned orders could not be sustained in law. The record indicated that the goods were intercepted for lacking necessary documents, but all required documents, including a delivery challan and E-way bill, were produced before the seizure and penalty orders were passed. The Court found that the compactor machine was transported from the head office in Rajasthan to the work site in Uttar Pradesh for completion of work, and the delivery challan clearly showed this transfer. Crucially, the Court determined that there was no element of sale involved in the transaction, and therefore, no tax evasion could be attributed to the petitioner. The Court further noted that there is no provision under the Act for charging tax on such stock transfers between units. The respondent authorities failed to prove any intent of tax evasion. Citing judgments from this Court and the Apex Court, the Court emphasized that an intent to evade tax is a sine qua non for initiating proceedings under Section 129 and 130 of the CGST Act. As no such intent was observed, proceedings under Section 129 were unwarranted. The impugned orders were quashed, and any deposited penalty was to be refunded.

Key Issues

1. Whether the transfer of a Compactor Machine from the petitioner's head office in Rajasthan to its branch in Uttar Pradesh for its own use constitutes a transaction liable for proceedings under Section 129 of the CGST Act, particularly when the petitioner contends there was no element of sale involved and all documents were subsequently produced. Petitioner's arguments: The petitioner argues that the transaction was a mere transfer of machinery for its own use at a branch location and not a sale. Therefore, no tax evasion could be attributed, and proceedings under Section 129 of the CGST Act were inappropriate. They rely on the judgment in M/s Vacmet India Ltd. Vs. Additional Commissioner, Grade -2 and others. Respondent's arguments: The learned ACSC supported the impugned order, implying that the interception and subsequent proceedings were justified.