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

Held

The Court allowed the writ petition, setting aside the impugned order MOV-09 dated January 16, 2023. The Court found itself in full agreement with the view expressed by the coordinate benches in the cited cases. The reasoning was that despite the revenue's attempts to raise disputes based on ex parte inquiries and other circumstances, the revenue could not dispute that they had not formed an opinion to falsify the genuineness of the tax invoice and e-way bill produced by the petitioner. It was also not disputed that these documents were present at the time of the first detention, and the petitioner claimed ownership of the goods. Therefore, the petitioner was liable to pay security in terms of Section 129(1)(a) of the Act, rather than penalty under Section 129(1)(b). The matter was remitted back to respondent No. 2 to pass a fresh order within two weeks, treating the petitioner as eligible for the benefit of Section 129(1)(a) of the Act. No issue was expressly left undecided.

Facts

M/s Shahil Traders, a registered dealer in iron scrap, dispatched goods to M/s Harshika Steel Sales against a tax invoice and e-way bill dated January 2, 2023. The goods were transported on truck PB11-CQ-2981 from Kanpur to Ludhiana. During transit, the goods were detained by the respondent on January 4, 2023. The driver produced the tax invoice and e-way bill at the time of detention. The revenue authorities doubted the genuineness of the consignee. Subsequently, the petitioner's registration was suspended on January 5, 2023. The petitioner sought to quash the detention order (GST MOV-06 dated January 7, 2023), the order demanding penalty (MOV-09 dated January 16, 2023), and the recovery notice (GST DRC-07 dated January 16, 2023), which demanded Rs. 6,17,087/- as penalty under Section 129(1)(b) of the UPGST Act, 2012. The petitioner confined their prayer to the release of goods and vehicle under Section 129(1)(a) of the Act.

Key Issues

1. Whether the goods detained could be treated as not traceable to a registered dealer, thereby invoking penalty under Section 129(1)(b) of the UPGST Act, 2012, despite the production of a valid tax invoice and e-way bill by the petitioner? Petitioner's arguments: The petitioner argued that in the presence of a tax invoice and e-way bill produced by the driver at the time of detention, the goods should not have been treated as untraceable. They contended that at most, security could have been demanded under Section 129(1)(a) of the Act, not a penalty under Section 129(1)(b). Reliance was placed on Circular dated December 31, 2018, issued by the Government of India, and two coordinate bench judgments of the High Court: M/s Margo Brush India and Others Vs. State of U.P. and Others, and M/s Riya Traders Vs. State of U.P. and Another. Respondent's arguments: The revenue referred to averments in the counter affidavit indicating discrepancies regarding the place of origin and destination. They also highlighted that the petitioner's registration was suspended on January 5, 2023, and that the proprietor of the petitioner firm allegedly denied knowledge of the transaction in a panchnama document.