M/S Bhawani Traders vs. State Of U.P. And Another

Facts

The petitioner, M/s Bhawani Traders, is challenging a penalty order dated June 17, 2023, passed by the Assistant Commissioner (In-charge), Mathura. The penalty imposed is Rs. 48,53,940/- under Section 129(1)(b) of the Goods and Services Tax Act, 2017, on the grounds that the petitioner was not treated as the owner of the goods. The goods were in transit from Kolkata to New Delhi and were accompanied by a tax invoice, e-way bill, and bilty issued in the petitioner's name as the consignor. The petitioner contends there was no intention to evade tax and that they are the rightful owner. They are willing to deposit penalty under Section 129(1)(a) for the release of the perishable goods.

Held

The Court allowed the writ petition, setting aside the impugned penalty order dated June 17, 2023, passed under Section 129(1)(b) of the Goods and Services Tax Act, 2017. The Court agreed with the petitioner and the concession made by the revenue that the presence of valid documentation, including e-way bills, in the petitioner's name indicated ownership and negated any intention to evade tax. The Court found the revenue's conclusion that the petitioner was not the owner to be patently erroneous. Consequently, the penalty proceedings should have been initiated under Section 129(1)(a) and not 129(1)(b). The Court directed Respondent No. 2 to pass a fresh order treating the petitioner as eligible for the benefit of Section 129(1)(a). The petitioner was granted liberty to avail any remedy against the assessment order if necessary.

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 valid documentation (tax invoice, e-way bill, bilty) in the petitioner's name, indicating ownership and no intention to evade tax? Petitioner's Argument: The petitioner argued that the penalty under Section 129(1)(b) was wrongly imposed as the goods were duly accompanied by tax invoice, e-way bill, and bilty in their name, establishing them as the owner and negating any intention to evade tax. They relied on the case of M/s Sahil Traders Vs. State of U.P. (Writ (Tax) No.178 of 2023). Revenue's Argument: The revenue contended that the petitioner was rightly held not to be the owner of the goods and the penalty under Section 129(1)(b) was correctly imposed. However, they conceded that an intention to evade tax is a prerequisite for penalty under Section 129 and that the e-way bills being documents of title accompanying the goods made their conclusion about the petitioner not being the owner erroneous. They also acknowledged that penalty proceedings should have been initiated under Section 129(1)(a).