HC Validates E-way Bills as Proof of Ownership of Goods in Transit

Bhawani Traders Vs State of U.P. (Allahabad High Court)

Higher penalty cannot be imposed u/s 129(1)(b) of the CGST Act if owner of goods comes forward to pay penalty

In Bhawani Traders Pvt. Ltd. v. State of Uttar Pradesh [Writ Tax No. 854 of 2023, dated July 24, 2023], the Hon’ble Allahabad High Court ruled that the imposition of a higher penalty under section 129(1)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act) is not permissible if the owner of the goods is willing to pay the penalty for the detained goods.

Facts:

M/s. Bhawani Traders (“the Petitioner”) was the owner of the goods which were detained by the Revenue Department during the transit and subsequently, the Petitioner was served with a penalty order under section 129(1)(b) of the CGST Act by considering the Petitioner not as owner of the goods in transit. However, the Petitioner produced the valid documents such as a tax invoice, e-way bill, which were all issued in his name as the consignor.

Aggrieved by the Penalty order the Petitioner filed a writ before the Allahabad High Court and contended there was no intention to evade tax and the Petitioner was willing to deposit the penalty under protest under Section 129(1)(a) of the CGST Act, in order to release the goods.

The Respondent contended that the Petitioner was not the owner of the goods and that the penalty was rightly imposed under Section 129(1)(b) of the CGST Act.

Issue:

Whether the Revenue Department can invoke penalty under Section 129(1)(b) of the CGST Act if the owner of the goods comes forward and is willing to pay penalty?

Held:

The Hon’ble Allahabad High Court in Writ Tax No. 854 of 2023 held as under:

• Observed that, the goods were duly accompanied by the tax invoice, e-way bill and bilty issued in the name of the Petitioner which proves that the Petitioner was the owner of the goods attached during the transit.
• Noted that, the conclusion of the Revenue Department that the Petitioner was not the owner of the goods is patently erroneous. Consequently, the penalty proceedings were liable to be initiated under section 129(1)(a) and not 129(1)(b) of the CGST Act.
• Set aside the penalty order under section 129(1)(b) of the CGST Act and directed the Revenue to pass a fresh order treating.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

Heard Sri Shubham Agarwal, learned counsel for the petitioner, Sri Ankur Agarwal, learned counsel representing the Respondent No.2 and learned Standing Counsel, who has accepted notice on behalf of the State Respondent No.1.

The writ petition is aggrieved by the penalty order dated 17.06.2023 passed by the Assistant Commissioner (In-charge) Mathura, Respondent No.2 in Form MOU-09 under Section 129(1) (b) of the Goods and Services Tax Act, 2017 whereby and whereunder penalty of Rs.48,53,940/- has been levied upon the petitioner by not treating the petitioner to be the owner of goods. Admittedly, the goods were duly accompanied by the tax invoice, e-way bill and bilty issued in the name of the petitioner as the consignor and the goods were in transit through the State of U.P. during its movement from Kolkata to New Delhi and as such, there was no intention to evade tax. It is further contended that the petitioner is the owner of the goods and is ready and willing to deposit penalty under protest under Section 129(1) (a) to get the goods released considering the perishable nature of the goods and diminishing of its value substantially with the onset of monsoons. Strong reliance has been placed upon the decision of this Court in Writ (Tax) No.178 of 2023 (M/s Sahil Traders Vs. State of U.P.) decided on 25.05.2023 which applies squarely to the case at hand.

Sri Ankur Agarwal, learned counsel representing the revenue has vehemently opposed the writ petition by submitting that the petitioner has rightly been held not the owner of the goods and the penalty has rightly been imposed upon the petitioner under Section 129(1) (b). He, however, could not dispute the fact that intention to evade tax is a per-requisite for imposition of penalty under Section 129 of the Act. The E-way Bills being the documents of title to the goods were accompanying the goods hence, the conclusion of the revenue that the petitioner was not the owner of the goods is patently erroneous. Consequently, the penalty proceedings were liable to be initiated under Section 129(1)(a) and not 129(1)(b) as has been done in the present case.

In view of the above, expressing our full agreement with the view expressed by the Coordinate Bench of this Court in the case of M/s Sahil Traders (Supra) we set aside the impugned penalty order dated 17.06.2023 passed in Form MOU-09 under Section 129(1) (b) of the Goods and Services Tax Act, 2017. The writ petition is allowed. The Respondent No.2 is directed to pass fresh order treating the petitioner to be eligible to the benefit of Section 129(1) (a) of the Act.

Sri Ankur Agarwal, learned counsel for the petitioner submits that the Respondent No.2 has already passed an order of assessment treating the petitioner to be entitled to benefit under Section 129(1) (a).

Be that as it may, the writ petitioner shall be at liberty to avail any remedy available to it to assail the assessment order.

Order Date :- 24.7.2023

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