Penalty for Goods Detention Quashed: No Show Cause Notice uploaded on GST Portal or Served Physically
Summary in Key Points:
- Issue: Was the penalty imposed for the detention of goods and a vehicle valid when there was a valid e-way bill, no show cause notice, and no justification for detention?
- Facts: The assessee’s vehicle carrying MS scrap was detained despite having a valid e-way bill. A penalty was imposed without a show cause notice or hearing. The Physical Verification Report lacked reasons justifying detention under Section 129(1).
- Decision: The court held that the penalty order violated principles of natural justice and lacked justification. The order was quashed, and the penalty amount was directed to be adjusted against the assessee’s tax liability.
Important Note: This decision highlights the importance of adhering to principles of natural justice and providing justification for actions taken under Section 129. Detaining goods despite a valid e-way bill and imposing a penalty without a show cause notice or hearing is clearly unjust. The lack of justification in the Physical Verification Report further weakens the revenue’s case. The court’s decision emphasizes the need for proper procedure and reasonable grounds when detaining goods and imposing penalties.
HIGH COURT OF MADRAS
Rnyn Steel
v.
Assistant Commissioner (ST)
C. Saravanan, J.
W.P.No.18398 of 2022
DECEMBER 19, 2024
S. Arunkumar for the Petitioner. Mrs. K. Vasanthamala, Govt. Adv. for the Respondent.
ORDER
1. With the consent of both sides, this writ petition is taken up for final disposal.
2. In the present writ petition, the petitioner has challenged the impugned order of demand of tax and penalty in Form GST MOV-09 dated 21.04.2022 (Order No.40/2022-23/ADJ) passed by the respondent herein.
3. The case of the petitioner is that the petitioner had placed a purchase order with its supplier viz., Tvl.NAV DURGA STEEL ZONE located at Ernavoor, Chennai – 600 057 for supply of goods (MS Scrap), pursuant to which, on 20.04.2022, at about 2.28 p.m., its supplier has delivered the consignment of MS Scrap to the petitioner’s go-down in Ambattur along with the e-way bill dated 20.04.2022 containing the details of delivery destination and vehicles in which the goods were loaded were declared. The said e-way bill was valid upto 21.04.2022.
4. After receiving the goods (MS Scrap) from Tvl.NAV DURGA STEEL ZONE, the petitioner had engaged the same transporter who had delivered the goods (MS Scrap) from supplier, for delivering the very same goods (MS Scrap) to its buyer viz., MAA MAHAMAYA INDUSTRIAL LTD. located at Andhra Pradesh. For transition of goods (MS Scrap), the petitioner had generated the e-way bill on 20.04.2022 at about 3.24 p.m which was valid upto 25.04.2022.
5. On 20.04.2022, when the goods (MS Scrap) were being transported from the petitioner’s godown to its buyer MAA MAHAMAYA INDUSTRIAL LTD., the vehicle in which the goods were being transported was intercepted and inspected by a Squad Officer at Redhills around 5.50 p.m. During the inspection, the driver of the vehicle presented all the supporting documents and e-way bill to the Squad Officer, however, the Squad Officer had detained the vehicle along with goods (MS Scrap).
6. Thereafter, the respondent passed the impugned order dated 21.04.2022, stating that on verification, it was found that as per the e-way bill, the petitioner has purchased the goods from Tvl.NAV DURGA STEEL ZONE and sold the same to MAA MAHAMAYA INDUSTRIAL LTD., but, actually, the goods were loaded in Ambattur and weighment made in Ambattur. Hence, the respondent demanded the petitioner to pay the penalty of Rs.5,11,928/-. The petitioner has also paid the said penalty on 21.04.2024 and after the payment of penalty amount, the detained goods were released by the respondent. Both the show cause notice and impugned order were neither served physically to the petitioner nor updated on Online GST portal. Hence, the aggrieved petitioner has filed the present writ petition.
7. The learned counsel for the petitioner submitted that prior to the issuance of impugned order, the respondent had neither issued any notice to the petitioner nor given any opportunity of hearing to the petitioner. The respondent has issued the detention order, show cause notice, impugned order and release order to the petitioner, only after the penalty was paid by the petitioner. Hence, the impugned order is liable to be quashed.
8. On the other hand, the learned counsel for the respondent submitted that the statement of one J.Thiruvengadam (driver of the subject vehicle bearing Conveyance No.AP 26 TE 3222) confirming that the goods were loaded only at the petitioner’s place of business at Ambattur and not from the place of petitioner’s supplier located at Ernavoor. She further submitted that the penalty was paid by the petitioner and the issue deemed to have been attained finality. Therefore, the petitioner has no case to interfere with the impugned order.
9. Heard the learned counsel for the petitioner as well as the learned Government Advocate appearing for the respondent.
10. I have perused the affidavit, counter affidavit, rejoinder and other documents including Physical Verification Report in FORM GST MOV-04 dated 20.04.2022 bearing the signature of driver of the subject vehicle.
11. A reading of the aforesaid Physical Verification Report clearly indicates that there are no reasons justifying either seizure of the subject vehicle or detaining of the goods warrants interference under Section 129(1) r/w. sub-section 3 of Section 129 of the Central Goods and Services Tax Act, 2017. As such, the impugned order passed by the respondent is without any merits and therefore, the same is liable to be quashed.
12. Accordingly, the impugned order dated 21.04.2022 passed by the respondent is quashed. The penalty amount paid by the petitioner for releasing the goods shall be allowed to be adjusted towards the tax liability of the petitioner in the regular returns.
13. In the result, this writ petition stands disposed of in the above terms. No costs.