In a significant ruling, the Hon’ble Allahabad High Court in the case of M/s. Gopi Chand Batra Traders v. State of Uttar Pradesh [Writ Tax No. 1632 of 2018 dated February 23, 2024], quashed the Penalty Order and Appellate Order. The court held that the search and seizure of a godown cannot result in penalty proceedings under Section 129 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). This judgment has important implications for businesses and the interpretation of the CGST Act.
Facts:
M/s. Gopi Chand Batra Traders (“the Petitioner”) conducted the business of transportation of goods or stored goods while they were in transit. The business premises of the Petitioner were searched by the Proper Officer (“the Respondent”). Consequently, the proceedings under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (“the UPGST Act”) were initiated and a Penalty Order dated March 21, 2018 (“the Impugned Order”) was passed by the Respondent.
The Petitioner filed an appeal against the aforesaid Impugned Order. However, an adverse Order dated August 31, 2018 (“the Impugned Order”) was passed by the Appellate Authority appeal under Section 107 of the UPGST Act.
Hence, aggrieved by the Impugned Orders, the Petitioner filed the present writ petition.
Issue:
Whether the Search and Seizure of a godown lead to penalty?
Held:
The Hon’ble Allahabad High Court in Writ Tax No. 1632 of 2018 held as under:
- Relied on, the Coordinated Bench of the Allahabad High Court in the case of Mahavir Polyplast Pvt. Ltd. v. State of U.P. and 2 others (2022 U.P.T.C. [VOL.112] – 1514) where it was held that search and seizure of the godown cannot result in penalty proceedings under Section 129 of the CGST Act.
- Directed the Respondent to refund the amount of tax and penalty deposited by the Petitioners.
- Held that, the proceedings were not justified, and accordingly the Impugned Orders were quashed and set aside.
Our Comments:
Section 129 of the CGST Act talks about “Detention, seizure, and release of goods and conveyances in transit”. As per Section 129(3) of the CGST Act, the proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).
Conclusion: The Allahabad High Court’s ruling in M/s. Gopi Chand Batra Traders v. State of Uttar Pradesh sets a critical precedent, clarifying that search and seizure of a godown alone do not warrant penalty proceedings under Section 129 of the CGST Act. This decision safeguards businesses from unjust penalty actions and underscores the importance of adhering to the precise legal provisions of the CGST Act. Businesses and legal practitioners should note this judgment as a reference for similar cases in the future.
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