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

Facts

The petitioner, M/s Riya Traders, a registered dealer and consignor, filed a writ petition challenging an order passed under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017. The order was passed against the driver of the vehicle carrying the goods, treating him as the owner. The goods were accompanied by an invoice and e-Way Bill, clearly identifying the petitioner as the consignor. The petitioner argued that they were not afforded an opportunity of hearing and that the order should have been passed under Section 129(1)(a) as they are the owner. A survey conducted at the petitioner's premises found no discrepancies. The respondents contended that since the petitioner did not come forward in response to a notice for assessment, the penalty was correctly levied under Section 129(1)(b).

Held

The Court held that the order imposing penalty under Section 129(1)(b) of the Act deserved to be set aside. It was undisputed that the goods were accompanied by an invoice and e-Way Bill, naming the petitioner as the consignor, and that the petitioner was a registered dealer. The Court reasoned that once the documents clearly established the consignor's identity, proceedings should have been initiated against the owner of the firm, not the driver, to allow for a response. The Court found that the provisions of Section 129(1)(b) could not be invoked for imposing penalty when the petitioner, as the consignor, claimed ownership of the goods. Consequently, the impugned order dated December 15, 2022, was set aside. The petitioner was granted liberty to pass a fresh order in accordance with the law after affording an opportunity of hearing to the petitioner within two weeks.

Key Issues

1. Whether the order imposing penalty under Section 129(1)(b) of the U.P. Goods and Services Tax Act, 2017, is sustainable when the goods were accompanied by an invoice and e-Way Bill clearly identifying the consignor, a registered dealer, and the consignor was not afforded an opportunity of hearing. Petitioner's Arguments: The petitioner contended that the order was wrongly passed against the driver by treating him as the owner, whereas the invoice and e-Way Bill identified the petitioner as the consignor. They relied on a CBIC Circular dated December 31, 2018, clarifying that in such cases, either the consignor or consignee should be deemed the owner. The petitioner also argued that since a survey at their premises revealed no issues, the goods should be released on assessment under Section 129(1)(a). Respondents' Arguments: The respondents argued that the penalty was correctly levied under Section 129(1)(b) because the petitioner failed to respond to the notice issued for assessment of the amount. They maintained that Section 129(1)(a) would only apply if the owner of the goods came forward.