M/S S. V. Brothers vs. State Of U.P. And Another

Held

The Court held that the order rejecting the petitioner's prayer for release of goods could not be sustained and was quashed to that extent. The Court reasoned that it was undisputed that the seized goods were accompanied by an invoice and e-way bill, both clearly disclosing the petitioner as the consignee. Furthermore, the physical verification report did not reveal any anomaly between the documents and the goods seized. The Court noted that the department's Circular dated 31.12.2018 clarifies that where such documents accompany the consignment, the consignee would be deemed the owner for purposes of Section 129(1)(a). The Court distinguished the cited case of Amil & Another, where the consignor was found to be a non-existent firm, which was not the case here. The Court concluded that while undervaluation or intent to evade tax might justify seizure and penalty, it should not be a ground to deny treating the petitioner as the owner, especially when the department's own circular should have been followed. The respondent was directed to reconsider the release of goods in light of the circular and the accompanying documents. Other issues were left open for the petitioner to pursue through appeal.

Facts

The petitioner, M/s S.V. Brothers, a Delhi-registered entity, challenged the seizure and penalty orders passed by respondent no. 2 under the Central Goods and Services Tax Act, 2017. The respondent intercepted a consignment of Areca Nuts, with the petitioner listed as the consignee on the bilty, invoice, and e-way bill. The petitioner applied for temporary registration and sought release of goods under Section 129(1)(a) by paying 200% of the tax. However, respondent no. 2 declined release, classifying the case under Section 129(1)(b) and citing variations in the description of goods, thus questioning the petitioner's ownership. The petitioner argued that the seizure memo and physical verification confirmed the goods matched the documents and that their registration was valid at the time of interception. The respondent contended the order was rightly passed under Section 129(1)(b).

Key Issues

1. Whether the petitioner, as the consignee named in the accompanying invoice and e-way bill, should be treated as the owner of the seized goods for the purpose of release under Section 129(1)(a) of the CGST Act, 2017, in light of the department's Circular dated 31.12.2018? Petitioner's Arguments: The petitioner contended that the seizure memo and physical verification report confirmed that the goods found in the vehicle tallied with the invoice and e-way bill, which clearly identified the petitioner as the consignee. They argued that, as per the department's Circular dated 31.12.2018, when an invoice or specified document accompanies the consignment, the consignee should be treated as the owner. They also submitted that their registration was valid at the time of interception and was cancelled subsequently. Respondent's Arguments: The respondent argued that the order was rightly passed under Clause (b) of sub-section (1) of Section 129 of the Act, treating the petitioner not as the owner. They relied on a Single Judge judgment in Writ Tax No. 1014 of 2022 (Amil & Another vs. State of U.P. & Ors.) to support their contention that the petitioner was rightly not treated as the owner.