M/S Balaji Traders And Another vs. State Of U.P. And 2 Others

Held

The Court held that the penalty imposed under Section 129(1) of the UPGST Act was not sustainable. The Court noted that the goods were intercepted outside the railway station while the petitioner's owner was inside arranging for the railway booking and obtaining the Railway Receipt number, which was necessary for generating the e-way bill. The e-rickshaw driver had informed the authorities of this situation, but they confiscated the goods without verifying the facts or waiting. The Court found that the authorities did not observe any intention to evade tax in their orders. Citing the Supreme Court judgment in M/s Satyam Shivam Papers Private Limited, the Court emphasized that intent to evade tax is a sine qua non for proceedings under Section 129. The Court also referred to other High Court judgments that supported the view that Section 129 proceedings are not warranted without intent to evade tax, and that Section 122 might be a more appropriate provision for minor breaches. Consequently, the impugned orders were quashed, and the penalty deposited was to be refunded with interest.

Facts

M/s Balaji Traders, a registered firm dealing in cigarettes, pan-masala, and food spices, generated tax invoice no. 1406 dated 18.11.2022 for a supply order. The goods were to be transported by railway. On 18.11.2022, the goods, loaded in an e-rickshaw, were intercepted outside the railway station and confiscated by GST officials. A show cause notice was issued on 19.11.2022, proposing a penalty of Rs. 5,58,286/-. The petitioner deposited the penalty and the goods were released. The Assistant Commissioner passed an order on 25.11.2022 confirming the penalty under Section 129(1) of the UPGST Act. The petitioner's appeal was dismissed by the Additional Commissioner on 24.03.2023. The petitioner filed a writ petition challenging these orders and seeking refund of the penalty with interest.

Key Issues

1. Whether the penalty imposed under Section 129(1) of the UPGST Act is sustainable when there was no intention to evade tax, given the circumstances of technical glitch preventing e-way bill generation and the owner being present at the railway station for booking. The petitioner argued that a technical glitch prevented the generation of an e-way bill, and the owner was at the railway station to obtain the Railway Receipt number for this purpose. They contended that the authorities confiscated the goods without waiting or verifying this fact, despite the driver informing them. The petitioner asserted there was no intention to evade tax and that the authorities could have initiated proceedings under Section 122 instead of Section 129. They relied on judgments from the Supreme Court (M/s Satyam Shivam Papers Private Limited) and various High Courts (Bhawani Traders, Gobind Tobacco Manufacturing Company, Shyam Sel & Power Limited, Raghav Metals). The respondent State argued that at the time of interception, no documents were produced, justifying confiscation and subsequent penalty. They contended that the cited case laws were distinguishable as they involved cases where an intention to evade tax was absent, whereas in this case, no documents were produced at interception. They argued that if not intercepted, the petitioner would have succeeded in not entering the transaction in their books, implying an intent to evade tax.