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

Facts

The petitioner, M/s Satyam Traders, filed a writ petition challenging a penalty order (MOV-09) dated March 6, 2025, and a detention order (MOV-06) dated March 2, 2025. These orders were passed under Section 129(3) and Section 129(1) of the Central Goods and Services Tax Act, 2017, respectively, by respondent no. 3. The grounds for detention were the absence of the original invoice (only a photocopy was present) and a weight discrepancy of 270 kilograms (approximately 1%) between the truck's weighed weight two days after detention and the weight stated in the invoice. The petitioner contended that the e-way bill was present, a photocopy of the invoice was sufficient, and the weight increase was due to rain. The authorities could not establish any intention to evade tax.

Held

The Court held that the penalty imposed under Section 129(3) of the Central Goods and Services Tax Act, 2017, is invalid in the absence of any established intention to evade tax. The Court noted that while the original invoice was not present, a photocopy of the invoice along with the e-way bill was available and matched. The discrepancy in weight, stated to be approximately 1%, was accepted as potentially caused by external factors like rain after detention. The Court emphasized that numerous judgments from this Court and other High Courts have consistently held that penalties under Section 129(3) must be predicated on an intention to evade tax. Since the authorities failed to demonstrate any such intention and the explanation provided by the petitioner regarding the weight difference was not dislodged, the detention and penalty orders were deemed arbitrary and invalid. Consequently, the impugned orders dated March 2, 2025, and March 6, 2025, were quashed and set aside.

Key Issues

1. Whether the penalty imposed under Section 129(3) of the Central Goods and Services Tax Act, 2017, is valid when the original invoice was not physically present with the goods, but a photocopy and e-way bill were, and the weight difference was negligible (approximately 1%). Petitioner's Arguments: The petitioner argued that the presence of the e-way bill and a photocopy of the invoice, which matched the e-way bill, satisfied the legal requirements. They further contended that the slight increase in the truck's weight was attributable to rain after detention and that this difference was negligible, amounting to only 1%. Reliance was placed on the Apex Court judgment in Assistant Commissioner (ST) And Others vs. Satyam Shivam Papers Private Limited And Another and a coordinate bench judgment in M/s Gobind Tabacco Manufacturing Co. & Another vs. State of U.P. & 2 Others, which emphasize that penalty under Section 129(3) must be based on an intention to evade tax. Respondent's Arguments: The respondent authorities, represented by the learned counsel, could not point out any specific ground demonstrating an intention to evade tax by the petitioner.