The Hon’ble High Court of Allahabad vide its order dated 19.10.2022 in the matter of Bharti Airtel Ltd. Thru. D.G.M. Purna Pratap Dwivedi Vs. State of U.P. Thru. Secy. Tax and Registration LKO. and Ors. in Writ – C No. – 6620 of 2021, held that in the instant matter, the proceedings have been initiated and concluded only under Section 129 and the owner of goods has not come forward for payment of such penalty determined, the entire action of the determining the tax and penalty under Section 129 (1) by Revenue is not legally substitutable.  The tax due can be determined only by taking recourse to the provisions of Section 73 or 74 of the CGST Act, 2017.  Hence, the impugned order is not sustainable and liable to be set aside.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the order dated 17.10.2018 allegedly passed under Section 129 of the CGST Act as well as the order dated 31.10.2020, whereby the appeal preferred by the petitioner has been dismissed.

Facts: –

• That the petitioner company is a company incorporated under the Companies Act and has a warehouse situated at Lucknow as well as at Haryana Gurgaon. The company for the purposes of transportation of the goods from Lucknow to Haryana hired a transporter for transporting the said goods on which a bilty tax invoice and Part-A of the e-way bill were generated, however, mistakenly Part – B of the e-way bill was not generated prior to commencement of the transport of goods.  However, the tax as required under the IGST Act was paid by the Petitioner.
• That the driver commenced the journey on 24.09.2018 at 9.30 pm from the warehouse of the petitioner company and was intercepted on 25.09.2018 at 4.43 am.
• That against the said detention, the petitioner approached this court by filing a Writ Petition Misc. Bench No.33276 of 2018, which was disposed of on 16.11.2018, with the directions to release of the goods on the petitioner furnishing the security in terms of section 129 read with section 67 of the CGST Act 2017. It is stated that in terms of the said order, the goods were released on the petitioner furnishing a bank guarantee to the respondents on 07.12.2018 amounting to Rs.1,25,49,539/-.
• That prior to release of goods, a show cause notice under Section 129 (3) was issued to the petitioner on 29.09.2018, whereby the petitioner was called upon to show cause as to why the proposed tax and the penalty may not be levied against the petitioner.
• The petitioner submitted a detailed reply to the show cause notice and prayed that the show cause notice be dropped mainly on the ground that the tax was duly paid as was required under the Act and the Part-B of the e-way bill was also uploaded prior to the passing of the detention order.
• However, despite the aforesaid submissions, the department without considering the same imposed a tax liability of Rs.62,74,769.40 and levied an equal penalty of Rs.62,74,769.40 by means of an order dated 17.10.2018.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that though the Part-B of the e-way bill was not generated, which was applicable to the transporter, however, before the goods were actually seized, the e-way bill was generated at about 7.34 am in the morning on the next date i.e., 25.09.2018. Even then the respondent authority proceeded to pass a detention order on 29.09.2018 mainly on the ground that till 4.43 a.m. on 25.09.2018, the Part-B of the e-way bill had not been generated.
• That the petitioner was never served with the copy of the order dated 17.10.2018, due to which it could not prefer the appeal within the prescribed time, as a result the respondent authority has threatened to encash the bank guarantee. Therefore, to avoid the same, the petitioner paid the amount determined against it vide order dated 17.10.2018.  The petitioner thereafter, preferred an appeal no.3 of 2019 which too has been dismissed by means of the order dated 31.10.2020.
• It was submitted that the appeal was wrongly dismissed agreeing with the findings recorded by the assessing authority which in turn had passed the order against the petitioner solely placing reliance on the judgment of the High Court of Madhya Pradesh which was passed placing reliance on the judgment in the case of VSL Alloys (India) Pvt. Ltd. vs. State of U.P and others reported in 2018 (67) NTN-DX 1.
• It was submitted that it is clear from the plain reading of Section 129 of the Act, that goods detained are to be released on the owner of the goods or any other person coming forward and offering to pay the amount as indicated in clause-a, clause-b and clause-c of Section 129(1) of the Act. Further the proper officer is empowered under clause (a), (b) & (c) of Section 129(1) of the Act, however, there is no power to determine the penalty payable which can be done only in terms of mandate of Section 122 of the CGST Act.  Therefore, the order imposing tax liability as well as the appellate order are bad in law and contrary to the mandate of the provisions of the CGST Act.
• It was argued that no proceedings under Section 73 or 74 of the CGST Act or under Section 122 was initiated to determine the penalty or to determine the tax outstanding. Further it was submitted that in any event, it was never in dispute that the tax required to be paid for transport of goods was not paid.  Thus, it was the submission on the behalf of the petitioner that in terms of the mandate of section 129, the proper officer is neither authorized nor justified in determining the tax or imposing the penalty as has been done by means of the impugned orders and thus, the impugned orders are liable to be set aside and the amount deposited by the petitioner is liable to be set aside.
• Lastly, reliance was placed on the judgments passed by this Court in Writ Tax No.763 of 2018 decided on 09.05.2018 (Modern Traders vs. State of U.P.); the judgment in Writ Tax No.344 of 2018 decided on 07.02.2020 (Skipper Limited vs. Union of India); the judgment in Writ Tax No.360 of 2020 decided on 17.12.2020 (Metenere Ltd. vs. Union of India and others).

Respondent Submissions: –

• On the other hand, it was submitted on the behalf of the respondent that admittedly Part – B of the e-way bill was not uploaded by the petitioner prior to commencement of the transport, which is a mandatory requirement under Rule 138 of the CGST rules, and once it is admitted by the petitioner that Part – B of the e-way bill was not uploaded, no error can be found with the orders passed by the authority in exercising of the power under section 129 of the Act.
• It was further argued that it is duty of the petitioner to upload the Part -B of the e-way bill, which has not been discharged by the petitioner. Therefore, it was submitted that the petition lacks merit and is liable to be dismissed.
• To support its contentions, reliance was placed on the judgment of the M.P. High Court in the case of Gati Kintetsu Express Ltd. vs. Commercial Tax of M.P. and others decided on 05.07.2018 reported at (2018) 56 GSTR 114 and on the judgment of Madras High Court in Writ Petition No.1431 of 2020 (M/s Ideal Movers Private Limited vs. The State Tax Officer (ENF), Roving Squad, Vellore) decided on 24.01.2020.

Held: –

• The Hon’ble Court after considering the submissions, facts of the case and law applicable, found that Chapter III of the said Act provides for levy and collection of the tax. Chapter IV concerns with the time and value of the supply. Chapter X of the Act provides for liability of the payment of tax. Chapter XV of the Act in question, with which we are concern, provides for manner and demands or recovery.
• The Hon’ble Court taking note of the law stated in Section 73, 74, found that these sections deal with the situations of determination of tax in case of non-payment for any reason other than fraud or wilful misstatement OR for the reasons of fraud or wilful misstatement or suppression of facts respectively.
• Further on perusal of Section 122 (Penalty for certain offences), it was found that this Section provides for the quantum of penalty leviable in the event of a taxable person falling on the grounds mentioned under section 122(1) clause (i) to clause (xxi). The quantum of penalty is also specified under section 122 (1) of the Act.
• Thereafter, taking note of law stated in Section 129 (Detention, seizure and release of goods and conveyances in transit), it was found that the power of inspection, search and seizure can be carried out under Chapter XIV or in case of goods in transit under section 129. From the perusal of section 129, it is clear that this section can be equated with an alternative dispute redressal mechanism and provides an opportunity to the owner of the goods or any other person to pay amounts as specified under section 129 (1)(a) or (b) or (c) of the said Act.
• That on perusal of clause 129 (1) (a) & Section 129 (3), it was found that under the scheme of the Act, the procedure for determination of tax and penalty is contained in Chapter XV read with section 122, 123, 125, 126, 127 and 128 of the Act and a parallel procedure is prescribed under section 129 of the Act in case of goods, which are in transit.
• That Section 129, can be invoked by the department with regard to the goods in transit and the goods can be released only in the event the owner of the goods comes forward for payment of penalty as specified in clause (a) or (b) or (c) of Section 129 (1) of the Act and on payment of the said amount, the intent is to settle the issue and avoid unnecessary litigation.
• However, if the owner does not come forward for payment as prescribed under clause (a), (b), (c) of Section 129 (1) of the Act, the department is well equipped to initiate proceedings by taking recourse to Section 73, 74, 75 of the Act read with section 122 for determination of tax and the penalty leviable which, subject to the appeal would govern the issues in between the department and the assessee.
• That in the present case, the department has determined the tax liability as well as the penalty only under Section 129 of the Act, and there is no provision under section 129 for determination of tax due, which can be done only by taking recourse to the provisions of Section 73 or 74 of the CGST Act, as the case may be.
• That in the instant matter the proceedings have been initiated and concluded only under Section 129 and the owner of the goods has not come forward for payment of such penalty as has been determined, the entire action of determining the tax and penalty under section 129(1) has been done by means of the impugned order and upheld in the appellate proceedings.

The Hon’ble Court with the above findings, allowed the writ petition.  It was held that the order passed on 17.10.2018 and as upheld by the order dated 31.10.2020 are not legally substitutable and are accordingly set aside.  Further the amount paid by the petitioner for release of the goods shall be refunded to the petitioner with all expedition preferably within a period of two months from today.