Court orders release of seized goods upon tax payment in GST dispute

Case Name:

IQRA Roadways (India) Thru' Its Prop. & 3 Others Vs. State of U.P. & 3 Others

Key Takeaways:

Goods can be released upon payment of the tax amount mentioned in the show cause notice during ongoing penalty proceedings.

The appellate authority should not insist on penalty deposit for hearing and admission of appeals in such cases.

Physical verification of goods is crucial when E-Way Bill details are inconsistent or expired.

Issue:

Was the seizure of goods by the Uttar Pradesh GST authorities during interstate transportation legal and justified?

Facts:

Petitioners 1 and 4 are transporters, while petitioners 2 and 3 are buyers registered under GST.

The petitioners purchased goods from sellers in Delhi for interstate transportation.

The goods were accompanied by Tax Invoices, Bilty, and E-Way Bill.

The respondent authorities detained and seized the goods under Section 129(1) of the U.P. Goods and Services Tax Act, 2017 on 25.9.2017.

The authorities also seized the vehicle transporting the goods.

A show cause notice was issued on 26.9.2017 under Section 129(3) of the U.P. GST Act, indicating a tax amount of Rs.1,11,564/-

Arguments:

Petitioners' arguments:

The seizure was illegal as the goods were accompanied by proper documents.

The value of most consignments was below Rs. 50,000/-, not requiring an E-Way Bill.

The U.P. GST authority wasn't competent to seize goods in interstate trade.

They cited Circular No. 1117 dated 16.8.2017, allowing continuation of the old E-Way Bill scheme.

Respondents' arguments:

Physical verification was necessary as the E-Way Bill had expired.

Irregularities were found in the quality and quantity of goods during verification.

Only goods without proper documents were seized.

Key Legal Precedents:

The judgment doesn't mention any specific legal precedents. However, it refers to:

Section 129(1) and 129(3) of the U.P. Goods and Services Tax Act, 2017

Rule 138 of U.P. GST Rule

Circular No. 1117 dated 16.8.2017

Judgement:

The court partially allowed the appeal.

It ordered the release of seized goods upon payment of Rs.1,11,564/- (the tax amount in the show cause notice).

The court found the penalty of over Rs.6 lakhs to be excessive.

It directed the appellate authority to decide any appeal within two months without insisting on penalty deposit.

FAQs:

Q1: What was the main issue in this case?

A1: The main issue was the legality of goods seizure by U.P. GST authorities during interstate transportation.

Q2: Why did the court order the release of goods?

A2: The court ordered the release to balance justice, as penalty proceedings were ongoing and factual disputes existed.

Q3: What amount did the court order the petitioners to pay?

A3: The court ordered payment of Rs.1,11,564/-, which was the tax amount mentioned in the show cause notice.

Q4: Did the court uphold the penalty imposed by the authorities?

A4: No, the court found the penalty of over Rs.6 lakhs to be excessive and allowed the petitioners to appeal against it.

Q5: What instructions did the court give regarding the appeal process?

A5: The court directed the appellate authority to decide any appeal within two months and not insist on penalty deposit for hearing the appeal.

Heard Shri Shubham Agrawal assisted by Miss Sanyukta Singh, learned counsel for the petitioners and Shri C.B. Tripathi, learned Special Counsel representing the respondents.

By means of the present writ petition the petitioners have sought the following relief :

"(a) Issue a Writ, Order or Direction in the nature of Certiorari quashing the seizure order dated 25.9.2017 (Annexure No. 1 to the writ petition) as well as the consequential notice dated 26.9.2017 (Annexure No. 2 to the writ petition) issued by the respondent no. 4.

(a-2) Issue a writ, order or direction in the nature of certiorari quashing the penalty order dated 26.10.17 (Annexure CA-10) not served upon the petitioner.

(b) Issue a Writ, Order or Direction in the nature of Mandamus commanding/directing the respondent no. 4 to release the goods and vehicle forthwith without demanding any security.

(c) Issue any other Writ, Order or Direction in favour of the petitioner which this Hon'ble Court deems fit in the facts and circumstances of the case.

(d) Award cost of the petition to the petitioner."

The brief facts of the case are that the petitioner

no. 1 and 4 being the transporters indulge in

carrying on the business of transportation of goods

from one place to another. The petitioner no. 2 and

3 are the buyers/purchasers and are registered

under the Goods and Services Tax Act/Rules, 2017.

The petitioner no. 2 and 3 have affected certain

purchases from different sellers situated at Delhi.

According to petitioners no. 2 and 3 since they are

duly registered under the Central Goods and

Services Tax Act, 2017 (C.G.S.T. ACT) and the

goods which are purchased by them are duly

accompanying with the requisite Tax Invoices, Bilty

as well as E-Way Bill, therefore, the action of the

respondent authorities in detaining and seizing the

goods under Section 129(1) of the U.P. Goods and

Services Tax Act, 2017 vide order dated 25.9.2017

is bad. Learned counsel for the petitioners has

submitted that even the vehicle has also been

seized by the respondent no. 4 after detention of

the goods and, therefore, the entire action of the

respondent authorities is wholly illegal, arbitrary

as well as without jurisdiction.

Learned counsel for the petitioner has further

submitted that the goods in question are duly

accompanying the Tax Invoices, Bilty and value of

consignment, except against two invoices, is

below Rs. 50,000/-, therefore, there was no

justification on the part of the respondent no. 4 to

seize the same. He has further submitted that the

respondent no. 4 was not authorized to seize the

goods as the goods were covered under the

provisions of Integrated Goods and Services Tax

Act, 2017 (I.G.S.T. Act). He has further submitted

that since the goods accompanying the documents

were in transportation in the course of interstate

trade, therefore, respondent no. 4, being the

authority under the U.P. Goods and Services Tax is

not competent to seize the goods.

Learned counsel for the petitioners heavily relied

upon Circular No. 1117 dated 16.8.2017, in which

it has been provided that the G.S.T. being the new

law, therefore, it may take some time for proper

implementation of the scheme of E-Way Bill on all

India basis. Learned counsel for the petitioner has

placed the provision of Rule 138 of U.P. G.S.T.

Rules which provides for the old E-Way Bill

scheme, which was in effect earlier, may be

continued.

We have gone through the contents of the

aforesaid circular and after hearing the parties at

length we find that certain factual disputes are

involved in the present case. At the time of

detention, the detaining authority has clearly

mentioned in the detention memo that the

necessary physical verification is required as the E-

Way Bill, which was produced, was not relevant as

the date and time mentioned have already

expired. We find that on physical verification, the

authority has found certain irregularities with

regard to quality of the goods as well as quantity.

It is further noticed that the goods which were

covered with the documents have already been

released by the respondent no. 4. However, the

goods which were not accompanied with proper

documents have been seized for which a notice

under Section 129(3) of the U.P. G.S.T. Act has

been issued on 26.9.2017 indicating therein the

value of the goods and the demanded tax which

has been calculated by the seizing authority at

different rates as per the individual items/goods

which is mentioned being Rs. 1,11,564/-.

Against the said proceedings the present writ

petition has been filed. After hearing the parties at

great length and after perusal of the documents

we find that in the instant case since the factual

disputed issues are involved and further that the

penalty proceedings are already initiated, as

intimated by the counsel for the State, therefore, it

would be proper in the interest of justice that the

seized goods be released in favour of the

petitioners on the payment of an amount of Rs.

1,11,564/- (as indicated in the show cause notice

dated 26.9.2017). We have informed that in the

penalty order an huge amount of more than Rs. 6

lacs has been fixed/demanded against the

petitioners which in our opinion is prima facie

appears to be highly excessive and since the order

of penalty is appealable before the First Appellate

Authority, it would be in the interest of justice that

the petitioners may approach the appellate

authority and file an appeal against the penalty

order and in case, if the appeal is filed by the

petitioners before the appellate authority, the

appellate authority is directed to decide the same

within a period of two months from the date of the

presentation of the appeal. The appellate authority

is directed not to insist for deposit of any penalty

amount for hearing and admission of the appeal.

In view of the aforesaid, it is hereby directed that

the goods and vehicle be released forthwith on

payment of the amount of tax as has been

indicated in the show cause notice dated

26.9.2017 being Rs. 1,11,564/-. It is made clear

that any observation of this order will not affect

any of the proceedings which is to be carried out

by the respondents.

The writ petition is, accordingly, dismissed.

Order Date :- 14.11.2017

Sunil Kr. Gupta

(Ashok Kumar, J.) (Abhinava Upadhya, J.)