Court quashes penalty for missing Transit Declaration Form, citing lack of evidence of tax evasion intent

Case Name:

M/s. Zebronics India Private Limited vs. State of U.P. & 3 Others

Key Takeaways:

Mere absence of a Transit Declaration Form doesn't justify seizure and penalty if there's no evidence of tax evasion intent.

Authorities must establish clear grounds for suspecting tax evasion before imposing penalties.

Inter-state stock transfers require proper documentation, but technical breaches alone may not warrant severe action.

Issue:

Was the seizure of goods and imposition of penalty justified solely based on the absence of a Transit Declaration Form, without any evidence of intention to evade tax?

Facts:

The petitioner, M/S. Zebronics India Private Limited, is a trader in computer parts registered in Chennai and Dehradun.

On 15.11.2017, the company was transporting computer parts from Chennai to Dehradun via Uttar Pradesh.

The goods were being transported on a truck (registration no. HR-38-U-9095) with a tax invoice, bilty, and goods receipts.

The goods were detained by the Assistant Commissioner, State Tax Authority, Mobile Squad-10, Agra, citing the absence of a Transit Declaration Form (TDF).

The company downloaded the TDF on the same day (15.11.2017) at 10:39 pm and submitted it with their reply.

Despite this, a seizure order was passed on 16.11.2017 under Section 129(1) of the U.P. GST Act.

A penalty order was subsequently passed on 23.11.2017 under Section 129(3) of the Act.

Arguments:

Petitioner's arguments:

The seizure and penalty were imposed for a mere technical breach.

The authorities weren't satisfied about any intention to evade tax.

Being an inter-state trade transaction, there was no requirement under the CGST Act for goods to be accompanied by a TDF.

Respondent's arguments:

The TDF wasn't submitted at the seizure stage but only at the penalty stage.

(The Standing Counsel couldn't show how the intention to evade tax was inferred from the penalty order)

Key Legal Precedents:

The judgment doesn't mention any specific legal precedents. However, it refers to Sections 129(1) and 129(3) of the U.P. GST Act, which deal with seizure and penalty provisions.

Judgement:

The court ruled in favor of the petitioner, finding that:

The goods were detained, seized, and penalized merely due to the absence of the TDF.

The proper officer wasn't satisfied about any intention to evade tax.

There was nothing to dispute the company's claim of effecting a stock transfer from Chennai to Dehradun.

No allegation or intention to unload goods within Uttar Pradesh was established.

The court quashed both the seizure order and the penalty order, deeming them "wholly unsustainable." It ordered the immediate release of the goods and truck without requiring any security.

FAQs:

Q1: Was the company required to have a Transit Declaration Form?

A1: While the form was required by Uttar Pradesh, its absence alone wasn't enough to justify seizure and penalty without evidence of tax evasion intent.

Q2: Did the company eventually provide the Transit Declaration Form?

A2: Yes, the company downloaded and submitted the TDF on the same day (15.11.2017) that the goods were detained.

Q3: Why did the court rule in favor of the company?

A3: The court found no evidence of intention to evade tax, and the penalty order didn't establish any defects in the accompanying documents or allege any tax evasion attempt.

Q4: What's the significance of this judgment for businesses?

A4: It highlights that authorities need to establish clear grounds for suspecting tax evasion before imposing penalties, especially in cases of inter-state movements of goods.

Q5: Does this mean businesses don't need to worry about Transit Declaration Forms?

A5: No, businesses should still comply with all required documentation. This case emphasizes that minor technical breaches alone may not justify severe actions like seizure and penalties.

Heard Shri Shubham Agrawal along with Shri Lokesh Mittal, learned counsel for the petitioner and Shri C.B.Tripathi, learned Standing Counsel for the department.

This writ petition has been filed by the petitioner

to challenge the seizure order dated 16.11.2017

passed by the respondent no.4, Assistant

Commissioner, State Tax/State Tax Authority,

Mobile Squad-10, Agra under Section 129(1) of

the U.P. GST Act(hereinafter referred to as the

'Act) and the penalty order dated 23.11.2017

passed under Section 129(3) of the Act.

The petitioner is a trader in computer parts. It

claims to be registered both at Chennai in the

State of Tamil Nadu and Dehradun in the State of

Uttarakhand.

In respect to present dispute, the petitioner had

disclosed that it was transporting computer parts

from Chennai to Dehradun by way of stock

transfer. These goods were being transported on a

truck bearing registration no. HR-38-U-9095

against tax invoice, Bilty and goods receipts. The

said goods entered the State of U.P. on

15.11.2017 when the same were detained by the

respondent no.4 on the solitary allegation of

absence of Transit Declaration Form (hereinafter

referred to as the 'TDF'). However, no defect was

noticed or alleged with respect to the Tax Invoice

and the Goods Receipt and the facts disclosed

therein.

The petitioner further alleges that it downloaded

the TDF on the same day i.e. on 15.11.2017 (A

copy of the same has also been annexed with the

writ petition) and filed its reply along with the

TDF but the goods were seized on 16.11.2017.

Subsequently, a penalty notice was also issued to

the petitioner in response to which the petitioner

again reiterated his stand of the goods being

transported from Chennai to Dehradun by way of

stock transfer against valid Tax Invoice, Goods

Receipt and also it relied on the TDF downloaded

by it.

By the impugned penalty order dated 23.11.2017,

the penalty has been imposed solely for reason of

absence of TDF. However, the penalty order

does not record any defect either in the document

found accompanying the goods nor does it

establish any allegation or intention to evade

payment of tax by the petitioner. Only in the

printed proforma of the order a sentence appears

as to the existence of intention to evade tax.

In the above facts, learned counsel for the

petitioner submits that the seizure has been made

and the penalty has been imposed on a mere

technical breach and not upon the authority being

satisfied as to the intention of the petitioner to

evade tax. Even otherwise it is submitted that this

being a transaction of inter-state trade, and there

being no requirement under the CGST Act for the

goods to be accompanied with the TDF, the

breach alleged is mere technical.

Opposing the aforesaid prayer Shri C.B. Tripathi,

learned Standing Counsel submits that in the first

place the TDF had not been submitted by the

petitioner at the stage of seizure but only at the

stage of penalty in reply to the penalty notice.

However, learned Standing Counsel does not

dispute the fact that the TDF was downloaded by

the petitioner on 15.11.2017 at 10.39 pm. Also he

is unable to show from the penalty order how the

respondent no.4 has inferred the intention to

evade tax.

It is clear that the goods have been detained,

seized and penalty has been imposed merely

because of TDF was absent and the proper officer

was himself not satisfied as to the intention to

evade tax being present in the facts of the case.

There is nothing to dispute the claim made by the

assessee that it was effecting the stock transfer of

goods from Chennai to Dehradun and therefore,

the goods were only passing through the State of

U.P.. There is no allegation or intention on the

part of the assessee to unload the goods within

the State of U.P.

In view of facts, we find that the seizure order as

also the penalty order are wholly unsustainable

and are hereby quashed. The goods along with

the truck may be released forthwith without

furnishing any security. Writ petition is allowed.

No order as to costs.

Order Date :- 4.12.2017