M/S Galaxy Enterprises vs. State Of U.P. And 2 Others

Held

The Court held that the authorities below lost sight of the fact that the discrepancies were cured before the detention or seizure order could be passed. Once the rectifying documents were produced before the passing of the detention/seizure order, the authorities ought not to have proceeded further. The Court relied on the Division Bench judgments in M/s Axpress Logistics India Pvt. Ltd. and M/s Bhumika Enterprises, which specifically decided similar issues. The Court found the impugned order unjustified because the documents were produced before the detention and seizure order was passed. Consequently, the writ petition was allowed, and the impugned orders were set aside. The matter was remanded to the first appellate authority for a fresh order in accordance with the law.

Facts

The petitioner, M/s Galaxy Enterprises, engaged in manufacturing and selling laminated papers, dispatched goods from Muzaffarnagar to Rajasthan. During transit on January 25, 2022, the goods were intercepted. Initially, Form GST MOV-2 was issued, followed by Form GST MOV-04, citing discrepancies between the goods and accompanying documents. A show cause notice was issued on January 27, 2022, and subsequently, a penalty order was passed by the Assistant Commissioner, Mobile Squad, State Goods and Services Tax. The petitioner's appeal against this order was dismissed by the Additional Commissioner, Grade-2 (Appeal). The petitioner contends that a rectifying tax invoice and e-way bill were produced before the detention/seizure order was finalized, explaining a clerical error.

Key Issues

1. Whether the authorities below were justified in initiating proceedings and imposing penalty when a rectifying tax invoice and e-way bill were produced before the passing of the detention/seizure order, thereby curing a clerical error? (Mixed question of law and fact, turning on Section 129 of the CGST Act and Rule 31(1) of the UP GST Rules). Petitioner's arguments: The petitioner argued that once a genuine tax invoice and e-way bill were produced before the issuance of the show cause notice or passing of the detention/seizure order, the proceedings should not have been initiated. They relied on the Division Bench judgments in M/s Axpress Logistics India Pvt. Ltd. Vs. Union of India and others and M/s Bhumika Enterprises Vs. State of UP and others, which held that proceedings are not justified if tax invoices and e-way bills are produced before seizure/detention orders. Respondent's arguments: The State-respondent supported the impugned orders, arguing that at the time of interception, the goods were found to be different from the accompanying documents, and the subsequent tax invoice constituted a clear breach of Rule 31(1) of the UP GST Rules, preventing tax evasion.