M/S Margo Brush INDIA And 4 Others vs. State Of U.P. And Another

Facts

The petitioners, M/s Margo Brush India and others, filed a writ petition challenging an order dated September 29, 2022, which seized goods in transit. Further proceedings included a show cause notice (GST MOV-07) and an order dated October 7, 2022, imposing a penalty of ₹4,55,548/- under Section 129(1)(b) of the Goods and Services Tax Act, 2017. The petitioners contended that the goods were accompanied by proper documents and that they, as consignors and consignees, had come forward to claim ownership. The revenue argued that the goods in transit did not match the invoices in quantity, justifying the penalty.

Held

The Court held that the impugned order dated October 7, 2022, was liable to be set aside. The reasoning was that the consignors and consignees were present and had accepted ownership of the seized goods, and they were registered dealers in Uttar Pradesh. The Court found that the levy of penalty under Section 129(1)(b) was not justified, especially in light of the clarification in the Board's Circular dated December 31, 2018. Section 129(1)(a) mandates a penalty of two hundred percent of the tax payable when the owner comes forward, whereas the impugned order imposed a penalty equivalent to one hundred percent of the value of the goods. The Court allowed the writ petition and remitted the matter back to the competent authority for passing a fresh order within two weeks.

Key Issues

1. Whether the penalty under Section 129(1)(b) of the Goods and Services Tax Act, 2017, was leviable when the owners of the goods (consignors/consignees) had come forward and accepted ownership, contrary to the condition for levying penalty under Section 129(1)(b) which applies when the owner does not come forward? Petitioner's Arguments: The petitioners argued that the goods were accompanied by proper documents. They contended that since they, as consignors and consignees, had come forward and accepted ownership, the penalty should have been levied under Section 129(1)(a) and not Section 129(1)(b). They relied on Circular dated December 31, 2018, issued by the Central Board of Indirect Taxes and Customs, which clarifies that if goods are accompanied by invoices, the consignor should be deemed the owner. They asserted that the impugned order was passed erroneously under Section 129(1)(b). Revenue's Arguments: The respondents argued that the penalty was appropriately levied because the goods in transit did not match the invoices, with quantities found to be either more or less than stated.