M/S Vacmet INDIA LTD. vs. Additional Commissioner Grade -2 (Appeal) And Another

Held

The Court held that the impugned orders could not be sustained. The Court noted that the goods were being transferred as a stock transfer from one unit to another within the State of Uttar Pradesh. The petitioner had raised a specific ground before the authorities that there was no intention to evade tax as it was a stock transfer and not a sale, and therefore, no tax liability arose. The Court found that the respondents failed to point out any provision under the GST Act that mandates charging tax on stock transfers within the State from one unit to another. Furthermore, the Court observed that the discrepancy in Part B of the e-way bill was rectified before the seizure order was passed, and the authorities ought to have taken a lenient view. Citing its own judgment in Shyam Sel & Power Limited and the Telangana High Court's judgment in M/s Same Deutzfahr India P Limited, the Court reiterated that an intent to evade tax is a sine qua non for invoking proceedings under Section 129 and Section 130 of the CGST Act. Since no intention to evade tax was established, the entire proceedings were vitiated and liable to be set aside. The Court quashed the orders and directed the refund of any deposited penalty with interest.

Facts

The petitioner, M/s Vacmet India Ltd., a manufacturer of various films and paper, is challenging orders passed by the Assistant Commissioner and Additional Commissioner (Appeals) under the UPGST Act. On May 14, 2018, a vehicle transporting goods from the petitioner's Agra unit to its Kosi Kalan, Mathura unit was intercepted. A detention order was issued because Part B of the e-way bill was not filled. A show cause notice was issued proposing tax and penalty of Rs. 1,82,000/- each on an estimated value of Rs. 6,50,000/-. The petitioner contended that the omission was a transporter's mistake, which was rectified immediately. The Assistant Commissioner passed a penalty order on May 16, 2018, which was affirmed by the Additional Commissioner (Appeals) on February 23, 2019. The petitioner argues no tax evasion was intended as it was a stock transfer between its own units.

Key Issues

1. Whether the imposition of tax and penalty under Section 129(3) of the UPGST Act is justified when the goods were being transported as a stock transfer between two units of the same entity within the State, and the discrepancy in the e-way bill (Part B not filled) was rectified promptly upon notice, with no intention to evade tax? (Mixed question of law and fact, turning on Section 129 and Section 130 of the UPGST Act). Petitioner's Arguments: - The goods were a stock transfer between petitioner's own units, thus not liable for tax. - There was no intention to evade tax. - The omission in Part B of the e-way bill was a technical breach by the transporter, which was rectified. - Proceedings under Section 129 were inappropriate when there was no intent to evade tax; Section 122 might have been applicable. - Relied on judgments in Shyam Sel & Power Limited Vs. State of U.P. and M/s Same Deutzfahr India P Limited Vs. State of Telangana. Respondent's Arguments: - Genuine documents were not produced at the time of interception as Part B of the e-way bill was not filled. - Proceedings were rightly initiated under Section 129(1) of the UPGST Act. - If goods were not detained, the petitioner might have succeeded in not disclosing the goods in its accounts.