Athiyan Exports vs. State Tax Officer(Adjudication And Legal)

Held

The Court held that the petitioner had indeed violated the conditions prescribed under Section 129 of the respective GST enactments and was liable to be proceeded against. However, the Court considered the principle that a lesser penalty can be imposed. Citing its own decision in Pulkit Metals Private Ltd. vs. The State Tax Officer-II, the Court noted the scope of Section 129, which allows for detention, seizure, and release upon payment of penalty. The Court found that the petitioner had exported the goods and that the breach was technical and venial. Relying on the Supreme Court's decision in Hindustan Steel Ltd vs. State of Orissa, the Court held that export incentives cannot be denied for such breaches. While acknowledging the alternate remedy under Section 107, the Court found no point in relegating the petitioner to the appellate authority. The Court directed that Rs. 25,000/- be appropriated from the amount already paid by the petitioner, and the balance amount be allowed to be adjusted against future tax liability. The Court expressly left undecided the question of whether the respondents' contention regarding Section 129(5) and estoppel was valid, as it granted relief on other grounds.

Facts

M/s. Athiyan Exports, a proprietor, filed a writ petition challenging an order dated 09.05.2025, which confirmed a penalty of Rs. 2,71,458/-. The petitioner, an exporter of coir products, transported goods for export to China without generating an E-Invoice and E-Way Bill, relying solely on a commercial invoice. One consignment was intercepted by the respondents under Section 129 of the GST enactments. The petitioner subsequently paid the penalty voluntarily via DRC-03 on 09.05.2025, leading to the release of goods. The petitioner argued that the penalty wiped off export incentives and that there was no intention to evade tax, as evidenced by two other consignments reaching the port and a subsequent shipping bill for the remaining goods. The respondents contended that the petitioner had an alternate remedy under Section 107 and that Section 129(5) created an estoppel.

Key Issues

1. Whether the impugned order dated 09.05.2025, confirming the penalty of Rs. 2,71,458/- under Section 129(3) of the respective GST enactments, is liable to be quashed, and the penalty amount refunded, considering the petitioner's voluntary payment and the nature of the breach. (Question of law and fact) Petitioner's arguments: The petitioner argued that while they committed a technical and venial breach of Section 129 by not generating an E-Invoice and E-Way Bill, the penalty imposed effectively denied export incentives, making them illusory. They contended that their intention was to export, not evade tax, as shown by the successful export of other consignments and a subsequent shipping bill. They relied on the principle that export incentives should not be denied for minor breaches, citing Hindustan Steel Ltd vs. State of Orissa. Respondents' arguments: The respondents argued that the petitioner had an alternate remedy under Section 107 of the respective GST enactments. They also contended that Section 129(5) of the respective GST enactments created an estoppel against the petitioner, as they had accepted the penalty by voluntarily paying it after seizure. They cited two previous High Court decisions: Pulkit Metals Private Ltd. vs. The State Tax Officer-II and M/s. Aqua Excel vs. The State Tax Officer.