M/S Shaad Enterprises And Another vs. State Of U.P. And 3 Others

Facts

M/s Shaad Enterprises, a registered iron scrap dealer, purchased iron scrap on August 8, 2021. When the goods were intercepted on the same date, the tax invoice and E-way Bill were not accompanying them. A detention memo was issued the following day. The petitioner claims the driver of the vehicle fell ill and could not inform the petitioner of the detention. On August 19, 2021, the driver appeared before the revenue authorities and was informed about the detention proceedings. The next day, an order under Section 129(3) of the CGST Act was passed. The petitioner challenged this order before the First Appeal Authority, which upheld the order on November 17, 2021. The present writ petition was filed challenging the order of the First Appeal Authority.

Held

The Court held that while the proceedings appeared ex-parte, the facts did not indicate blameworthy conduct by the revenue authorities. The difficulties claimed by the petitioner, such as the driver falling ill, were internal to the petitioner and not caused by the revenue. However, to grant the petitioner an opportunity of hearing to establish the genuineness of the transaction, the Court set aside the impugned orders dated November 17, 2021, and August 20, 2021. This was made conditional upon the petitioner depositing 100% of the value of the goods as determined in the impugned order within two weeks. Upon compliance, the petitioner could submit their reply with supporting evidence. The respondent authorities were directed to pass fresh orders without prejudice to their earlier findings. Any amount already deposited by the petitioner would be adjusted against the fresh deposit. The Court expressly left undecided any further demands or release of goods, which would abide by the fresh orders.

Key Issues

1. Whether the petitioner was denied a proper opportunity of hearing before the impugned orders were passed, thereby violating principles of natural justice, under Section 129(3) of the Central Goods and Services Tax Act, 2017? The petitioner argued that they were not granted a proper opportunity of hearing to establish the genuineness of the transaction. They contended that the proceedings were ex-parte and that the illness of the driver prevented them from participating effectively. The petitioner asserted that one opportunity of hearing should have been granted to them. The respondent revenue authorities did not present any arguments recorded in the judgment. However, the Court noted that the facts did not suggest blameworthy conduct on the part of the revenue authorities, as the difficulties faced by the petitioner were not created by them.