The Hon’ble High Court of Allahabad vide its order dated 06.12.2022 in the matter of M/s Ganpati Battery Traders Vs. State of U.P. And 2 Others in Writ Tax No. 1138 of 2022, set aside the orders detaining the truck on the ground that the ‘description of goods’ is mentioned in the invoice on the basis of ‘number of pieces’ and ‘not on the basis of weight.’  It was found by the Hon’ble Court that the Adjudicating Authority as well as the Appellate Authority have failed to record any finding as to how they arrived to the conclusion that the trade practice required the battery to be sold on the basis of weight and not on the basis of per piece.

The Petitioner filed the writ petition challenging the order dated 30.04.2022 passed by the Additional Commissioner, Grade – 2 (Appeal) Second, Commercial Tax Department, Kanpur.

Facts of the Case: –

• The petitioner is engaged in the business of sale and purchase of old batteries. That on 18.02.2022, 793 pieces of large damaged battery and 7538 pieces of small damaged battery were sold to M/s Shanti Prakash Power Private Limited at Gwalior through tax invoice.
• The goods were being sent through Truck No. UP79- T-5059 and when the goods were on the way towards destination, the vehicle carrying the goods was intercepted by Mobile Squad near Unnao on 23.02.2022 and the truck was detained for verification under Section 20 of the IGST Act, 2017 read with Section 68(3) of the CGST Act, 2017.
• Thereafter, on physical verification and inspection of goods, on the very same day i.e., 26.02.2022, a notice was issued upon the driver of the truck under Section 20 of the IGST Act read with Section 129 (3) of the CGTST Act, 2017, granting five days’ time for filing reply.
• The reply to the aforesaid notice was duly filed by the petitioner. Pursuant to which, the Assistant Commissioner (Mobile Squad), Unnao vide order dated 01.03.2022 imposed a penalty of Rs. 9,70,542/- and directed for deposit of amount in terms of Section 129(1)(a) or Section 129 (1)(b) of the CGST Act, 2017.
• That in pursuance of the order, the petitioner deposited the whole amount, and the truck along with goods were released on 01.03.2022.
• Subsequent to the release of goods, the petitioner against the said order of Assistant Commissioner preferred an appeal before the Additional Commissioner, Grade-2 (Appeal) Second, Commercial Tax Department, Kanpur, however, the said appeal was also rejected vide order dated 30.04.2022, served upon the petitioner on 06.06.2022. The Petitioner being aggrieved has moved the present writ petition.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the Appellate Authority was not correct in upholding the order passed by the Assistant Commissioner, whereby the penalty was imposed on the petitioner on the ground that goods were sold on the basis of number of pieces and not according to weight.
• It was contended that the petitioner purchased old and damaged batteries only by pieces and not by weight, and further sold according to battery per piece. The batteries were completely redundant and cannot be re-sold after repair.
• Further, there was no concealment on the part of the petitioner/assessee as correct description was given in the truck invoice differentiating the goods between large damaged battery and small damaged battery.

On the other hand, supporting the impugned orders, it was submitted on the behalf of the respondents that the petitioner was trying to evade payment of tax and the battery was sold on the basis of per piece and not according to the weight.  Further, it was submitted that rule 46 of the CGST rules, 2017 would be applicable in the present case.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and material on record, found that the petitioner/assessee is dealing in the business of sale and purchase of old batteries, and tax invoice dated 18.02.2022 gives a complete detail of the batteries which were sold to M/s Shanti Prakash Power Private Limited at Gwalior. Further in the tax invoice the description of batteries is given under two heads i.e., large damaged battery and small damaged battery.
• It was found by the Hon’ble Court that in the reply furnished, the petitioner very specifically stated in para 3 that the battery is purchased and sold on the basis of per piece and not on the basis of weight. Moreover, the adjudicating authority while passing the impugned order dated 01.03.2022 has not recorded as to how the explanation given by the petitioner cannot be accepted and trade practice of purchase and sale of battery is according to weight and not per piece.
• That the first Appellate Authority also failed to record any finding as to how it arrived at the conclusion while upholding the adjudication order that the trade practice required the battery to be sold is according to the weight and not per piece, when the specific case of the petitioner was that he was purchasing and selling the battery on the basis of per piece and was maintaining the Books of Account, which has not been denied by the Taxing Authority.
• It was found by the Hon’ble Court that the description in tax invoice, and consignment note also clearly mentions damaged batteries, large and small, which were being transported to Gwalior. Further, rule 46 as referred and relied by the respondents, also does not provide for the stand taken by the State and only provides the description which the seller is to give while the goods are sold, which, in the present case, has been done by the petitioner.
• Thereafter, the Hon’ble Court considering the facts and circumstances of the case, found that the Assistant Commissioner had wrongly detained the truck along with goods and imposed penalty of Rs. 9,70,542/-. Therefore, the adjudication order dated 01.03.2022 and the appellate order dated 30.04.2022 have no legs to stand as no reasoning has been stated by either of the authorities in consonance with the law so as to hold that the old and damaged batteries are to be sold according to the weight and not per piece.

The Hon’ble Court with the above findings, allowed the writ petition by setting aside the impugned orders dated 01.03.2022 and 30.04.2022.  The authorities are directed to refund the amount of penalty charged from the petitioner within a period of one month from today.