M/S Diginx Trader vs. State Of U.P. And Another

Facts

The petitioner, M/s Diginx Trader, is aggrieved by a penalty order dated August 5, 2023, passed by the Assistant Commissioner-Rampur under Section 129(1)(b) of the Goods and Services Tax Act, 2017. A penalty of Rs. 72,76,500/- was levied for not treating the petitioner as the owner of the goods. The goods were in transit from Patna to New Delhi, accompanied by a tax invoice, e-way bill, and bilty issued in the petitioner's name as consignee. The petitioner contended that there was no intention to evade tax, that they were the owners of the goods, and sought release of the goods by depositing penalty under Section 129(1)(a) due to the perishable nature of the goods. Reliance was placed on a previous High Court decision in M/s Sahil Traders Vs. State of U.P.

Held

The Court allowed the writ petition, setting aside the impugned penalty order dated August 5, 2023, passed under Section 129(1)(b) of the Goods and Services Tax Act, 2017. The Court held that the revenue's conclusion that the petitioner was not the owner of the goods was patently erroneous, especially since the e-way bills, which are documents of title, accompanied the goods. The Court agreed with the petitioner that the penalty proceedings should have been initiated under Section 129(1)(a) and not 129(1)(b), as the presence of proper documentation indicated no intention to evade tax. The Court directed the Respondent No.2 to pass a fresh order treating the petitioner as eligible for the benefit of Section 129(1)(a) of the Act. The petitioner was granted liberty to pursue remedies against the assessment order. The ratio decidendi is that proper documentation accompanying goods, naming the petitioner as consignee, negates the presumption of intent to evade tax and necessitates proceedings under Section 129(1)(a) rather than 129(1)(b).

Key Issues

1. Whether the penalty imposed under Section 129(1)(b) of the Goods and Services Tax Act, 2017, is sustainable when the goods were accompanied by proper documentation (tax invoice, e-way bill, bilty) in the petitioner's name as consignee, indicating no intention to evade tax? 2. Whether the petitioner, as the consignee named in the documentation, should be treated as the owner of the goods for the purpose of penalty proceedings under Section 129 of the Act? Petitioner's Arguments: The petitioner argued that the penalty was wrongly imposed under Section 129(1)(b) as there was no intention to evade tax. They asserted ownership of the goods, evidenced by the documentation, and contended that the penalty should have been initiated under Section 129(1)(a). They relied on the precedent set in M/s Sahil Traders Vs. State of U.P. Revenue's Arguments: The revenue opposed the petition, arguing that the petitioner was rightly held not to be the owner of the goods and that the penalty under Section 129(1)(b) was correctly imposed. However, the revenue conceded that an intention to evade tax is a prerequisite for penalty under Section 129 and could not dispute that the e-way bills, being documents of title, accompanied the goods.