Case Law Details
Hundal Traders Vs State of U.P. and another (Allahabad High Court)
Allahabad High Court is currently hearing a petition filed by Hundal Traders challenging an order passed by the State Tax Officer (STO) (Mobile Squad)-3, Saharanpur. The STO initiated proceedings under Section 20 of the Integrated Goods and Services Tax Act, 2017 (IGST Act), and Section 129 of the Central Goods and Services Tax Act, 2017 (CGST Act), ultimately imposing a penalty of ₹92,452/- under Section 129(1)(a) of the CGST Act.
Counsel for the petitioner raised two significant legal questions before the court. The first pertains to the authority to initiate proceedings under Section 129 of the CGST Act for an alleged violation of Rule 86B of the CGST Rules, 2017. The second issue concerns the jurisdiction of the STO to initiate these proceedings and pass the impugned order, especially in light of Circular No. 3/3/2017-GST dated July 5, 2017, issued by the Central Board of Excise and Customs. This circular, relied upon by the petitioner, seemingly confers the power related to Section 129(3) of the CGST Act specifically on the Deputy or Assistant Commissioner of Central Tax.
While the respondents filed a counter affidavit, the High Court noted that it failed to adequately address the legal issues raised by the petitioner. Specifically, the counter affidavit relied on an Office Order dated July 1, 2017, which pertains to powers under the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act), whereas the petitioner’s challenge is based on the CGST Act and a central government circular. Furthermore, the impugned order was passed under Section 20 of the IGST Act read with Section 129 of the CGST Act, adding complexity to the jurisdictional question.
Additionally, the petitioner questioned the applicability of Rule 86B of the CGST Rules to the specific circumstances of the case, citing proviso (d) to the rule as amended by Notification No. 94/2020 dated December 22, 2020. The court observed that the respondent’s counter affidavit provided only a cursory and factually insufficient reply to this crucial aspect of the petitioner’s argument.
Considering the unresolved legal and factual issues, the Allahabad High Court directed the respondents to file a supplementary counter affidavit. This affidavit must precisely clarify the STO’s power to initiate proceedings and pass the order under the relevant sections of the IGST and CGST Acts, taking into account the central government circular cited by the petitioner and the applicability of Rule 86B in light of the stated proviso. The court has scheduled the next hearing for May 14, 2025, by which time the supplementary counter affidavit is expected to be filed.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. This petition has been filed by the petitioner aggrieved of the action of State Tax Officer (‘STO’) (Mobile Squad)-3, Saharanpur in initiating the proceedings under Section 20 of the Integrated Goods and Services Tax Act, 2017 (for short ‘IGST Act’) and Section 129 of Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’) and passing order dated 08.10.2024 (Annexure-7) imposing penalty under Section 129(1)(a) of the CGST Act to the tune of Rs. 92,452/-.
2. Counsel for the petitioner has raised two legal questions pertaining to the power to initiate proceedings under Section 129 of the CGST Act for purported violation of Rule 86B of CGST Rules, 2017. Further issue has been raised regarding jurisdiction of STO to initiate proceedings/pass order in the light of Circular No. 3/3/2017-GST dated 05.07.2017 issued by Central Board of Excise and Customs (Annexure-10) wherein the power in relation to Section 129(3) of the CGST Act has been conferred on Deputy or Assistant Commissioner of Central Tax.
3. Though, a counter affidavit has been filed by the respondents, the same does not answer the issues raised, particularly regarding the power of STO as the relied on Office Order dated 01.07.2017 pertains to the power under UPGST Act, 2017 whereas the Circular relied on by the petitioner pertains to the power under CGST Act and the order impugned has been passed under Section 20 of IGST Act read with Section 129 of the CGST Act.
4. Further the petitioner has also questioned the applicability of Rule 86B of the Rules to the circumstances of the case in para-15 of the petition by relying on the proviso (d) to the Rule 86B of the Rules, as amended by Notification No. 94/2020 dated 22.12.2020, to which no answer has been given. Only a cursory reply to para 14 to 18 in para-10 of the counter affidavit has been given, which does not answer the factual aspect.
5. In view of the above fact situation, respondents are directed to file a supplementary counter affidavit clarifying the issues, as noticed hereinbefore, with precision.
6. Needful may be done before the next date.
7. List on 14.05.2025.
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