M/S G M R Enterprise vs. State Of U.P. And 2 Others
Original PDF →Facts
The petitioner, M/s G M R Enterprise, a registered dealer in arecanut, had goods intercepted during transportation in Uttar Pradesh. The petitioner claims the goods were accompanied by tax invoices and e-way bills, indicating their ownership. However, the department issued notices in the driver's name and passed orders determining tax liability, asserting the consignee had not accepted the goods, thus treating them as not traceable to a registered dealer. The petitioner argues the department failed to consider the ownership of the goods, relying on a departmental circular dated 13.03.2019, which states that if an invoice accompanies goods, either the consignor or consignee should be deemed the owner. The department's demand was twice the value of the goods plus taxes, which the petitioner contends is excessive given the tax rate and penalty limits.
Held
The Court held that the authorities below had failed to apply their mind to the crucial question of the petitioner's ownership of the goods in transit. Prima facie, the goods were accompanied by a tax invoice and e-way bill indicating the petitioner's ownership. The Court found that the departmental circular dated 13.03.2019 clearly stipulated that in such circumstances, either the consignor or consignee should be deemed the owner, or the proper officer must determine ownership. The impugned order lacked this essential consideration. Citing a previous Division Bench judgment, the Court emphasized that ownership must be determined before levying penalties. Therefore, the Court quashed the impugned order and directed the third respondent to re-examine the petitioner's claim of ownership in accordance with the applicable circular and law, affording the petitioner an opportunity of hearing before proceeding afresh. The issue of whether the petitioner is the owner of the goods was expressly addressed and found to be lacking consideration by the authorities.
Key Issues
1. Whether the authorities below have failed to consider the ownership of the goods in transit, as required by the departmental circular dated 13.03.2019, before determining tax liability and imposing penalties? (Question of law and fact, concerning the interpretation and application of the circular and the provisions related to ownership of goods in transit). Petitioner's Arguments: - The goods were accompanied by tax invoices and e-way bills, clearly indicating the petitioner's ownership. - The departmental circular dated 13.03.2019 clarifies that if an invoice accompanies goods, either the consignor or consignee is deemed the owner. - The department failed to consider the petitioner's ownership claim and wrongly treated the goods as not belonging to a registered dealer. - The demand of twice the value of goods along with taxes is unjustified as the tax payable is 5% and penalty cannot exceed 10% of the goods' value. - Relied on the departmental circular dated 13.03.2019 and a previous judgment of the High Court in Writ Tax No. 178 of 2023. Respondent's Arguments: - The petitioner has an alternative remedy of preferring an appeal under Section 107 of the GST Act against the determination of tax demand.
Sections Cited
Section 107
AI-generated summary — verify with the full judgment below
Neutral Citation No. - 2023:AHC:141614-DB Court No. - 46 Case :- WRIT TAX No. - 803 of 2023 Petitioner :- M/S G M R Enterprise Respondent :- State Of U.P. And 2 Others Counsel for Petitioner :- Shubham Agrawal Counsel for Respondent :- C.S.C. Hon'ble Ashwani Kumar Mishra,J. Hon'ble Syed Aftab Husain Rizvi,J. (Civil Misc. Amendment Application No. 2 of 2023) Heard. Petitioner is permitted to incorporate the amendment during the course of the day. Application stands allowed. Order on Writ Petition Petitioner claims to be a registered dealer engaged in sale and purchase of arecanut. It appears that certain goods were intercepted during transportation within the state of U.P. Petitioner alleges that such goods were accompanied by tax invoices and e- way bill, which clearly indicates the ownership of petitioner over the goods in transit. The department nevertheless proceeded to issue notices in the name of the driver and subsequently orders determining liability of tax have been passed on the premise that the consignee has not accepted the goods to have been purchased by it. The department, therefore, has treated the goods to be not traceable to a registered dealer. Learned counsel for the petitioner places reliance upon a circular issued by the department, dated 13.03.2019, which contains a clarification that if an invoice or any other specified document is accompanying the consignee goods, then either the consignor or the consignee should be deemed to be the owner. The circular also provides that if an invoice or any other specified document is not accompanying the goods, then in such cases, the proper officer would determine as to who should be declared as owner of the goods.
Learned counsel for the petitioner submits that the tax payable on the transit of goods is merely 5% and even if penalty is imposed the demand cannot exceed 10% of the total value of goods, but the department has treated the goods not to be owned by a registered dealer and has, therefore, demanded twice the value of goods alongwith taxes. Submission is that the question as to whether petitioner is the owner of the goods in transit, or not, is not bestowed any consideration by the department. On behalf of the respondents, it is submitted that against the determination of demand of tax, the petitioner has the remedy of preferring an appeal, in accordance with Section 107 of the GST Act.
We have heard learned counsel for the parties and have perused the materials on record. Prima facie it is shown to the Court that while the goods were in transit it accompanied the tax invoice and e-way bill which indicated the goods to be owned by the petitioner. The petitioner has otherwise raised a claim before the authorities regarding the ownership of goods in question. The order passed by the authorities, however, in no manner reflects application of mind on the question as to whether the petitioner is the owner of the goods in question or not? The circular of the department dated 13.03.2019 clearly stipulates that, in such an eventuality, if the goods are accompanied with the invoices then either the consignor or the consignee ought to be deemed to be the owner of the goods. Otherwise, the proper officer is required to determine as to who should be declared as owner of the goods. In the facts of the case, such consideration on the question as to who is the owner of the goods is clearly lacking. The department, therefore, would not be justified in proceeding to hold the goods not to belong to a registered dealer without dealing with the question of ownership of such goods in transit. A Division Bench of this Court in Writ Tax No. 178 of 2023 after referring to previous judgments of this Court has observed that the question with regard to ownership of the goods be determined before levying penalty etc. In view of the deliberations and discussions held above, this petition succeeds and is allowed. The third respondent is directed to examine the petitioner's claim of ownership of goods, in accordance with the applicable circular and the provisions in law, and thereafter proceed afresh to determine the issue after affording opportunity of hearing to the petitioner. In order to facilitate fresh consideration of the petitioner's claim in terms of above directions, the order impugned is quashed. Order Date :- 17.7.2023 RA RAZIQ ALI High Court of Judicature at Allahabad
Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.