No GST Penalty If Deficiency in SCN Is Rectified Before Detention Order

Agarwal Steels Vs Additional Commissioner Grade 2 And Another (Allahabad High Court)

The Allahabad High Court ruled in favor of Agarwal Steels, holding that the absence of an e-tax invoice due to a technical glitch in the GST portal does not automatically indicate tax evasion. The case arose when the petitioner, engaged in the iron scrap business, transported goods from Uttar Pradesh to Punjab with a valid tax invoice, e-way bill, and other transit documents. However, the vehicle was intercepted, and the goods were seized solely due to the absence of an e-tax invoice. Despite the petitioner later providing the missing invoice, tax authorities imposed a penalty under Section 129 of the GST Act. The petitioner’s appeal against this order was also dismissed.

The petitioner argued that the tax authorities failed to establish any intent to evade taxes, as all relevant documents, except for the e-invoice, were in order. Citing a 2018 Finance Ministry notification, which clarified that tax proceedings should not be initiated if specified documents are presented, the petitioner contended that the penalty was unjustified. The petitioner also relied on judicial precedents, including Shyam Sel & Power Limited vs. State of U.P. and Galaxy Enterprises vs. State of U.P., which held that if documentation deficiencies are rectified before a seizure order is passed, penalties cannot be imposed.