M/S Pioneer Industries Through Its Proprietor Shri Sarfaraz vs. State Of U.P. And 2 Others

Facts

The petitioner, M/s Pioneer Industries, challenged an order dated January 7, 2023, seizing goods in transit, and subsequent proceedings including a show cause notice (GST MOV-07) and an order dated January 11, 2023 (GST MOV-09). The petitioner contended that the goods were accompanied by proper documents and that the owners (consignors or consignees) were present and accepted ownership. Despite this, the authorities levied a penalty of ₹4,01,672/- under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017, deeming the driver as the owner. The petitioner argued that Section 129(1)(b) is applicable only when the owner does not come forward, and cited a circular clarifying that consignors should be deemed owners if goods are accompanied by invoices. The respondents argued that the penalty was justified because the goods in transit did not match the invoices in quantity.

Held

The Court held that the impugned order dated January 11, 2023, was liable to be set aside. The primary reasoning was that the consignors and consignees were present and accepted ownership of the seized goods, and the consignors were registered dealers in Uttar Pradesh. This fact, coupled with the clarification in the Board's Circular dated December 31, 2018, rendered the levy of penalty under Section 129(1)(b) unjustified. Section 129(1)(a) provides for a penalty of two hundred percent of the tax payable when the owner comes forward, whereas the impugned order levied a penalty of one hundred percent of the value of the goods. The Court found that the conditions for invoking Section 129(1)(b) were not met. The matter was remitted back to the competent authority for passing a fresh order within two weeks.

Key Issues

1. Whether the penalty levied under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017, was justified when the owners of the goods (consignors/consignees) came forward and accepted ownership, and the goods were accompanied by proper documentation, contrary to the condition for invoking Section 129(1)(b) which applies when the owner does not come forward? Petitioner's arguments: The petitioner argued that the penalty was wrongly levied under Section 129(1)(b) because the owners, identified as consignors and consignees, were present and accepted ownership. They relied on Section 129(1)(a) which stipulates that if the owner comes forward, the penalty is to be levied upon them. Furthermore, they cited a Circular dated December 31, 2018, from the Central Board of Indirect Taxes and Customs, which clarifies that if goods are accompanied by invoices, the consignor should be deemed the owner. Respondents' arguments: The respondents contended that the penalty was appropriately levied because the goods in transit did not match the invoices, with discrepancies in quantity.