M/S. Neptune Sales Corporation vs. Additional Commissioner Gr-2 Appeal- Iv Lucknow, Addl. Commr. Lucknow & Ors.

Facts

M/s. Neptune Sales Corporation (appellant) filed an appeal against an order of the Additional Commissioner Grade-II (Appeal) which upheld a demand of Rs. 2,51,196/-. This demand arose from the detention of goods on January 14, 2024, under Section 129 of the UPGST Act, 2017. The department alleged that the goods were being re-transported using previously used documents, citing an earlier verification of the e-way bill at Banthara Bazaar and the vehicle's subsequent location in Lucknow on the same day. The appellant contended that the goods were accompanied by valid tax invoice, e-invoice, and e-way bill, and no evidence of contravention or intent to evade tax was established.

Held

The Court held that the department failed to establish that the goods were being transported in contravention of the GST Act or Rules, or that the e-way bill was being reused. The Court found that the material on record did not establish any discrepancy in the description, quantity, value, or ownership of the goods. The allegation of 're-transportation' was based on inference from the earlier verification/location of the e-way bill, but no independent and cogent evidence was produced to prove that the same goods had completed an earlier journey or been delivered. The Court reiterated that intention to evade tax cannot be presumed from suspicion or inference, and a presumption of tax evasion cannot replace proof, citing precedents like Assistant Commissioner (ST) & Ors. v. M/s Satyam Shivam Papers Pvt. Ltd. The Court set aside the appellate and original orders and directed the refund of the deposited amount of Rs. 2,51,196/-.

Key Issues

1. Whether the detention of goods and imposition of tax and penalty under Section 129 of the UPGST Act, 2017, were sustainable on the allegation of re-transportation using a previously utilized E-Way Bill, when the goods were accompanied by valid tax documents and the alleged reuse and intention to evade tax were not established by independent and cogent evidence? Appellant's arguments: The appellant argued that the goods were transported with valid tax documents (invoice, e-invoice, e-way bill) and that the department lacked evidence of contravention of law. They asserted that the detention and penalty were based on presumption and surmises, lacking mens rea, and that the show cause notice should have been quashed due to insufficient material. They relied on various High Court and Supreme Court precedents, including M/s. Satyam Shivam Papers Pvt. Ltd. and M/s Shri Surya Traders, emphasizing that suspicion cannot substitute proof. Revenue's arguments: The revenue, represented by the Assistant Commissioner, SGST, contested the grounds of appeal and emphasized the legality and propriety of the original and appellate orders, stating they called for no interference.