Case Law Details
Goverdhan Oil Mill Vs Additional Commissioner And Another (Allahabad High Court)
The Allahabad High Court has nullified a penalty imposed on Goverdhan Oil Mill under Section 129(3) of the Uttar Pradesh Goods and Services Act, 2017 (UPGST Act). The court’s decision, delivered on February 8, 2024, by respondent No.1 and June 28, 2023, by respondent No.2, centered on a discrepancy in the Harmonized System of Nomenclature (HSN) code in a tax invoice related to a stock transfer.
Goverdhan Oil Mill, the petitioner, argued that the case involved a stock transfer, a fact not disputed by the tax authorities. Consequently, the mill contended there was no intention to evade tax, a prerequisite for imposing penalties under the said section. The petitioner cited two previous judgments from coordinate benches of the same court to support its stance: M/s Vacmet India Ltd. v. Additional Commissioner Grade-2 (Appeals) and another (Writ Tax No.687 of 2019, decided on October 17, 2023) and M/s Anchor Health and Beauty Care Pvt. Ltd., Kanpur v. State of U.P. and others (Writ Tax No.78 of 2022, decided on February 6, 2024). Both precedents, according to the petitioner, established that penalties under Section 129(3) cannot be levied in cases of stock transfer.
Conversely, the State counsel maintained that the discrepancy between the tax invoice and the actual goods in transit constituted a contravention of rules, thereby justifying the penalty.
Upon reviewing the arguments and the judicial precedents, the High Court concluded that no tax liability arises from stock transfers. This absence of tax liability, the court reasoned, negates any intention to evade tax. Given that the authorities did not dispute the nature of the goods movement as a stock transfer, the penalty imposed was deemed to be without legal foundation.
Accordingly, the impugned orders dated February 8, 2024, and June 28, 2023, were quashed. The writ petition was allowed, and any amount previously deposited by Goverdhan Oil Mill towards the fine or penalty is to be refunded within four weeks.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1.Heard Sri Aditya Pandey, learned counsel for the petitioner and Sri Ravi Shanker Pandey, learned Additional Chief Standing Counsel for the State.
2. This is a writ petition under Article 226 of the Constitution of India wherein the petitioner is aggrieved by the order dated February 8, 2024 passed in appeal by respondent No.1 and the order dated June 28, 2023 passed by the respondent No.2.
3. Case of the petitioner is that only discrepancy was in relation to the HSN qualification described in the tax invoice. Counsel for the petitioner submits that since this is a case of stock transfer and the same is not disputed by the authorities, there was no question of any intention to evade tax. He relies upon two judgments of coordinate Bench of this Court in M/s Vacmet India Ltd. v. Additional Commissioner Grade-2 (Appeals) and another (Writ Tax No.687 of 2019 decided on October 17, 2023) and M/s Anchor Health and Beauty Care Pvt. Ltd., Kanpur v. State of U.P. and others (Writ Tax No.78 of 2022 decided on February 6, 2024) to buttress his argument that in the case of stock transfer, penalty under Section 129(3) of the Uttar Pradesh Goods and Services Act, 2017 (hereinafter referred to as “the Act”) cannot be imposed.
4. Per contra, counsel for the State submits that since there was discrepancy in the tax invoice and the goods did not match with the goods in the truck, the same amounted to contravention of the rules, and accordingly, the authorities are justified in imposing the penalty under the Act.
5. Upon perusal of the judgments cited above by the petitioner, I am of the view that in the case of stock transfer, there is no liability of any payment of tax. Accordingly, there can be no intention to evade tax whatsoever. In the present case, the authorities did not dispute the fact that the movement of the goods was in relation to stock transfer. Accordingly, penalty imposed under Section 129(3) of the Act is without any basis in law and is liable to be set aside.
6. Accordingly, impugned orders dated February 8, 2024 and June 28, 2023 are quashed and set aside. The writ petiton is allowed. Consequential relief to follow. Any amount that has been deposited by the petitioner towards fine/penalty be returned to the petitioner within four weeks from date.
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