M/S Jaitron Communication PVT. LTD. vs. State Of U. P. And 2 Others

Held

The Court held that the Proper Authority and the first appellate authority had failed to examine the petitioner's claim on merits regarding the transportation of the machine for job work. The Court noted that the petitioner had admitted that the E-way bill with the vehicle at the time of detention did not contain the correct description of the transaction. However, the petitioner's specific case was that the machine was being transported for performance of job work, and no tax liability had arisen as the contract of service was yet to be performed and no payment received. The Court found that the orders passed by the authorities did not consider or provide any finding on this specific defence set up by the petitioner. The Court reasoned that the Proper Officer was expected to examine the defence and consequently determine the tax liability before determining the penalty. Since this exercise was not performed in accordance with the law, the impugned orders dated January 28, 2020, and February 6, 2020, were quashed. The petitioner was directed to appear before the Proper Officer on October 5, 2020, to furnish details substantiating its plea, and the Proper Officer was requested to examine the defence and determine the liability, if any, within four weeks. The Court explicitly stated that it had not determined the liability on merits and all factual issues were left open for examination by the Proper Officer.

Facts

M/s Jaitron Communication Pvt. Ltd. (Petitioner) filed a writ petition challenging orders passed by the Proper Authority and the first appellate authority under Section 129 of the CGST Act, 2017. The petitioner's vehicle, transporting a drilling machine valued at Rs. 41,30,000/- (including tax), was detained on January 9, 2020, as the driver possessed an E-way bill that did not accurately reflect the transaction. The E-way bill indicated transit from Maharashtra to Ghaziabad, but the petitioner claimed it was for job work to Jharkhand. The authorities determined a tax liability of Rs. 6,30,000/- and imposed a 100% penalty. The petitioner argued that the E-way bill was mistakenly generated and that the machine was being sent for job work, for which no tax was yet payable. The orders of the Proper Authority and the first appellate authority were affirmed, leading to the present writ petition.

Key Issues

1. Whether the Proper Authority and the first appellate authority failed to examine the petitioner's claim on merits regarding the transportation of the machine for job work and the consequential tax and penalty liability, thereby violating the principles of natural justice? (Mixed question of law and fact, concerning Section 129(3) of the CGST Act, 2017). Petitioner's Arguments: - The authorities did not properly examine the petitioner's claim that the machine was being transported for job work, a service yet to be performed, and thus no tax was payable. - The E-way bill available at the time of detention was incorrect, and a correct E-way bill for job work had been generated. - The tax invoice relied upon for determining liability was from 2018, and the tax on purchase was already paid, with no indication of a sale. - The authorities failed to determine the actual tax and penalty payable after considering the petitioner's defence. Respondent's Arguments: - The authorities correctly assessed the tax and penalty liability based on the admitted materials, and the orders were not illegal.