M/S Kumar Brothers vs. Additional Commissioner Grade -2 (Appeal), Commercial Tax, Judicial Division, Basti And 2 Others

Held

The Court held that the impugned orders were unjustified. It noted that while the goods were accompanied by requisite documents, the authorities sought verification from the Delhi GST Authority regarding the purchaser's genuineness. Although no business activity was found at the disclosed premises during inspection, the petitioner provided substantial evidence, including the purchaser's valid registration certificate and electronic credit ledger statements for the period November 1, 2020, to January 31, 2021, demonstrating ongoing business activities. The Court found that once the material on record clearly showed the purchaser was a functional and active business entity, the appellate and assessing authorities were not justified in imposing security and levying penalty under Section 129(3) of the Act. The appellate authority's rejection of documents as an afterthought was also found to be erroneous. Consequently, the orders of seizure and the appellate order confirming it were quashed. The writ petition was allowed with consequential benefits.

Facts

The petitioner, M/s Kumar Brothers, a proprietorship firm registered under the AGST Act, is challenging orders passed by the Assistant Commissioner, Commercial Tax, Mobile Squad, Basti, and the Additional Commissioner, Grade-2 (Appeal), Commercial Tax, Basti. The petitioner sold goods to M/s Shlok Brothers, Delhi, and transported them with valid e-way bills and GR documents. The goods were intercepted on November 3, 2020, and a detention order was issued on November 11, 2020, alleging intent to evade tax due to unverified documents. Subsequently, goods were seized, and security and penalty were imposed. The appeal against this order was rejected. The petitioner contends that genuine documents accompanied the goods, the purchaser is a registered firm filing returns, and its business activities are verifiable. The revenue argued that at the time of detention, the purchaser was not conducting business and the documents were an afterthought.

Key Issues

1. Whether the detention and seizure of goods under Section 129 of the CGST Act were justified, considering the genuineness of the accompanying documents and the business status of the purchaser? (Mixed question of law and fact, concerning Section 129 of the CGST Act). Petitioner's Arguments: The petitioner argued that the goods were transported with genuine and prescribed documents. They asserted that the purchaser, M/s Shlok Brothers, Delhi, is a registered firm that regularly files returns and conducts business, evidenced by its registration certificate and electronic credit ledger. The petitioner claimed the authorities harassed them by seizing the goods without considering this material, leading to an illegal order. Revenue's Arguments: The revenue contended that the proceedings were rightly initiated. They argued that at the time of detention and seizure, the purchaser in Delhi was not conducting any business, and the documents subsequently filed were an afterthought. Therefore, they prayed for the dismissal of the writ petition.