M/S. R.G. Group vs. Union Of INDIA And Others

Facts

The petitioner, M/s R. G. Group, had a consignment of electrical goods detained on July 9, 2024, by the Inspector of State Taxes due to allegedly expired E-Way Bills and a mismatch with the vehicle. A physical verification on July 10, 2024, found no discrepancies. Despite this, the Superintendent of State Taxes issued a detention order under Section 129 of the CGST Act and a show cause notice proposing a penalty of Rs. 4,96,850. The petitioner objected, citing the lack of EWB 03 Part A and B upload and the favorable physical verification report. The petitioner paid the penalty on July 26, 2024, to secure the release of goods and the vehicle, under protest and with the intention to challenge the order. No final order under Section 129(3) was passed by the authorities.

Held

The Court held that the levy and collection of penalty under Section 129(1) of the CGST Act, 2017, on the petitioner was without authority of law and violated Articles 14, 19(1)(g), 265, and 300-A of the Constitution of India. The Court reasoned that the payment of penalty by the petitioner was made under economic duress to secure the release of goods and vehicle, and not as a voluntary acceptance of liability. The respondents failed to pass a final order under Section 129(3) of the CGST Act, 2017, justifying the imposition of penalty after considering the petitioner's representation. This failure to pass a reasoned order, despite the statutory mandate, rendered the entire penalty collection illegal. The Court directed the respondents to refund the entire penalty amount paid by the petitioner with interest at 9% per annum within two months. Additionally, the Superintendent of State Taxes was ordered to pay costs of Rs. 25,000 to the petitioner for compelling the payment of penalty and failing to comply with statutory provisions. The conduct of the Superintendent was to be reviewed by the Commissioner for disciplinary action.

Key Issues

1. Whether the levy and collection of penalty under Section 129(1) of the CGST Act, 2017, is valid in the absence of a final order passed by the proper officer under Section 129(3) of the said Act, justifying the imposition of penalty after considering the petitioner's representation? Petitioner's arguments: The petitioner contended that the physical verification report (MOV-04) found no discrepancies, rendering the detention and subsequent penalty proceedings illegal. They argued that the penalty was paid under economic duress to secure the release of goods and vehicle, and not as a voluntary acceptance of liability. The petitioner emphasized that the authorities failed to pass a reasoned order under Section 129(3) within the stipulated time, despite their request to do so to enable an appeal. They relied on the fact that EWB 03 Part A and B were not uploaded due to a technical glitch. Revenue's arguments: The respondents argued that since the petitioner paid the penalty voluntarily, the goods were released, and no order under Section 129(3) was required to be passed. They stated that a similar reply was given to the petitioner on August 14, 2024.