Lakhdatar Traders Vs State of Up And 2 Others (Allahabad High Court)
The Allahabad High Court, in Lakhdatar Traders Vs State of UP and 2 Others, addressed the imposition of a penalty under Section 129(1)(b) of the CGST Act, 2017. The petitioner challenged the penalty of ₹14,81,490, imposed on October 16, 2024, following the detention of goods in transit. The goods were intercepted on October 4, 2024, accompanied by a valid tax invoice and E-Way Bill. However, the authorities cited the suspension of the petitioner’s GST registration, effective October 3, 2024, as grounds for the penalty.
The petitioner argued that the interception and subsequent penalty were unjustified as the requisite documents were valid at the time of interception. It was also contended that the suspension notice was issued by the jurisdictional authority in Bihar, not the authorities in Uttar Pradesh, who lacked jurisdiction to assess the registration’s validity. The petitioner relied on prior judgments, including Halder Enterprises vs. State of UP, where similar penalties were overturned when goods were accompanied by valid documentation.
The High Court ruled in favor of the petitioner, emphasizing that the suspension of registration was subsequent to the issuance of the tax invoice and E-Way Bill. As per Section 129(1)(a) of the CGST Act, goods accompanied by valid documents cannot be detained solely on the basis of later suspension. The Court quashed the penalty order, directing authorities to proceed under Section 129(1)(a) within two weeks. This judgment reinforces that penalties under GST laws must align with procedural fairness and valid documentation at the time of interception.
