25.01.2023: Order Imposing Tax And Penalty On Detention Under Section 129 Without Specifying The Defect In The Documents Not Valid – E-way Bill – Delhi High Court

The Hon’ble High Court of Delhi vide its order dated 19.01.2023 in the matter of Ram Prakash Chauhan Vs. Commissioner of Delhi (Goods and Service Tax) & Anr. in WP (C) No. 6924/2022, set aside the orders dated 23.10.2020 and the Appellate Authority Order 31.12.2021, whereby the goods along with vehicle of the petitioner was detained under Section 129(3) and demand of tax along with equivalent penalty was made.  It was found by the Hon’ble Court that the goods were detained for the reason “prima facie, the documents tendered are found to be defective”, however, no specific defect in the documents was mentioned and it is apparent that neither the show cause notice nor the order of demand clearly states the reason for imposing tax and penalty.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the order dated 23rd October, 2020, whereby the petitioner has been made liable to pay GST amounting to Rs. 2,78,129 along with equivalent penalty.  Further the challenge has also been made to Appellate Authority Order dated 31.12.2021 dismissing the appeal of the petitioner filed against the said order dated 23.10.2020.

Facts of the Case: –

  • The Petitioner carries on the business of trading in steel/iron bars as a sole proprietor of a concern named Shri Ram Enterprises.
  • The Petitioner purchased Steel from M/s Mahendra Steels (GSTIN 07ABBFM3857D1ZE) and had sold the same to M/s S.K. Integrated Consultants (GSTIN07AAQFSS059PIZ8). When the said goods were being transported from M/s Mahendra Steels to M/s S.K. Integrated Consultants, the consignment was intercepted and detained on the ground that the documents found were defective.
  • Pursuant to which, the said goods were detained by a detention order dated 23.10.2020 and on the same date notice under Section 129(3) of the GST was issued, which stated reason for detention as “prima facie, the documents tendered are found to be defective.”
  • Further on the same date i.e., 23.10.2020, and order raising the demand of tax of Rs. 2,78,129/- along with equivalent penalty was passed. As the petitioner required the goods urgently, he paid the tax and penalty demand for release of goods.
  • Thereafter, the Petitioner against the said order dated 23.10.2020, filed an appeal before the Appellate Authority. The said appeal was dismissed by the Appellate Authority by an order dated 31.12.2021, finding that ‘on perusal of the grounds raised by the Appellant, it is found that the Proper Officer has issued the detailed/speaking order after complying with the provisions as envisaged under the DGST Act and the rules made therein under.  The Proper Officer has categorically pointed the discrepancy in form of Mis-Match between the E-Way Bill and goods in Movement in the order which formed the basis for penalizing the Appellant and passed the impugned order accordingly.  Moreover, the Appellant himself has admitted the liability and paid the same with penalty.  Therefore, the Proper Officer was legally justified in raising the impugned demands towards tax and penalty in MOV-09.’

Petitioner’s Submissions: –

  • It was submitted on the behalf of the petitioner that the concerned GST Authorities had not mentioned any specific reason for detaining the goods, raising the demand of tax or levy of penalty in any of the orders passed by the said authorities. Further the notice dated 23.10.2020 merely indicates that the documents tendered are found to be defective; it does not mention any specific defect found by the concerned GST Authorities as well as the Order passed on the same date also does not specify any reason why the documents accompanying the goods were found to be defective.
  • It is also very clear from Paragraph 11 of the order passed by the Appellate Authority that it does not disclose the discrepancy or mismatch between the E-Way Bill and the goods.
  • It was submitted that admittedly, there has been no mismatch in the quantity of the goods found in the vehicle and the invoice produced. However, as stated in the counter-affidavit that ‘the goods were not accompanied by an E-way Bill’, the said fact does not find any mention in the order of demand dated 23.10.2020 or in the Appellate Order dated 31.12.2021.
  • It was brought to the Knowledge of the Court that there is an error in the E-Way Bill as it does not reflect the name of the consignee but merely mentions the petitioner’s GSTIN number. That the E-way Bill is required to be read with the two invoices, one invoice raised by M/s Mahendra Steels addressed to the petitioner and the second raised by the petitioner in the name of S.K. Integrated Consultants, and the documents need to be read in conjunction with one another, it would be clear that the error in the documents is only a minor error and the petitioner cannot be penalised by imposition of tax on the goods as well as penalty of equivalent amount.

On the other hand, it was submitted on the behalf of the respondents that the order dated 23.10.2020, raising a demand of tax and penalty, is a consent order and therefore, the concerned GST Officer was not required to give detailed reasons.

Responding to the submissions made on the behalf of the respondents, it was submitted by the petitioner that he had no other option but to pay the amount of tax and penalty as the goods had been detained and the petitioner required their release.

Held: –

  • The Hon’ble High Court, after considering the submissions made and facts of the case, was unable to accept that the order of demand and penalty is a consent order and the petitioner was precluded from challenging the same. It was found that the goods were detained and it is not disputed that the same would not have been released unless the tax and penalty was paid.  Therefore, it was accepted by the Hon’ble Court that the said payment of tax and penalty was not voluntary.
  • It was found by the Hon’ble Court that from the above, it is quite evident that neither the show cause notice nor the order of demand clearly sets out the reason for imposing the tax liability as well as penalty.
  • Lastly, it was found by the Hon’ble Court that in the facts and circumstances of the case, it would be appropriate to remand the matter to the concerned GST Officer to decide afresh after giving the petitioner full opportunity to address the allegation against him.

The Hon’ble Court with the above findings, set aside the orders dated 23.10.2020 and the Appellate Authority order dated 31.12.2021.  The matter is restored to the file of the concerned GST Officer. He shall issue a fresh show cause notice within a period of two weeks from today and pass an appropriate order after affording a reasonable opportunity to the petitioner to be heard.


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