2023 (2) TMI 542 - HC - GST

Detention of goods alongwith the vehicle - undervaluation of goods (roughly one-tenth of the value arrived by the detaining authority) to avoid download of E-way bill - transporting huge quantity of Pan Masala and Tobacco showing negligible value of goods - monetary limit for requirement of E-way bill. Whether in the garb of certain protection given under Rule 138 dispensing requirement of E-Way bill for goods valuing below Rs.50,000/-, a dealer who is a manufacturer, can be allowed to send his goods to different consignees undervaluing the goods and the Tax Authorities not to proceed taking action under the Act? HELD THAT - 60 Cartoons of Pan Masala contained 3,84,000 pouches. The printed price on each pouch is Rs.4/-. Accordingly, the total value of goods is Rs.15,36,000/-. The detaining authority, after giving discount of 25% and deducting the tax and Cess, arrived at the basic value at Rs.6,12,766/-. If the argument of petitioner's counsel is taken to be correct that the dealer was new in the business and to survive and establish, he was giving heavy discount, then it cannot be assumed and expected that the value of Pan Masala for 60 Cartoons, as disclosed by the dealer, would be Rs.69,600/- i.e. roughly one-tenth of the value arrived by the detaining authority on the basis of declaration made on the pouch of each Pan Masala. This Court finds that it is a case of grossly undervaluing the 3,84,000 pouches of Pan Masala being sent by the dealer disclosing its price as Rs.69,600/-. The only conclusion, which can be drawn is that to avoid downloading E-Way bill and brining the transaction on record that the goods were undervalued to such an extent. Moreover, the Taxing Authorities have also found that one of the consignee situated at Jharkhand was actually registered with the Taxing Authorities disclosing his nature of business as Works Contract and Suppliers of Services and not in the business of trading. These actions of the dealer lead to the only conclusion that the transactions being not recorded with the Revenue so as to escape payment of due tax in the garb that E-Way bill is only required in case value of goods is more than Rs.50,000/- - Thus, it can be safely said that the action of the State Authorities in detaining the goods and imposing tax and penalty, which have been affirmed by the first Appellate Authority, needs no interference of this Court as the dealer cannot be permitted to take shelter of the fact that no E-Way bill is required in case of goods valued less than Rs.50,000/-. It is clear case of undervaluation of goods by the dealer who was transporting huge quantity of Pan Masala and Tobacco showing negligible value of goods - petition dismissed.

Summary

Issues:
Challenge to detention of goods and vehicle under GST Act of 2017 based on undervaluation and lack of E-Way bill.

Analysis:
1. The petitioner, a registered dealer under the GST Act of 2017, challenged the detention of goods and vehicle by the authorities. The goods, Pan Masala and Chewing Tobacco, were being sent to dealers in Jharkhand. However, discrepancies were found during inspection, including undervaluation and missing tax invoices for the Tobacco.

2. The authorities imposed tax and penalty under Section 129(3) of the Central GST Act, 2017, for undervaluation and non-compliance with E-Way bill requirements. The petitioner argued that State Taxing Officers lacked authority to detain the goods and that E-Way bill was not mandatory for goods below Rs.50,000.

3. The Court examined the details of the transactions, revealing deliberate undervaluation by the petitioner to avoid E-Way bill requirements. The authorities found that the disclosed values were significantly lower than the actual value of the goods being transported, leading to tax evasion suspicions.

4. The Court emphasized that the purpose of E-Way bill is to ensure transparency in transactions and prevent tax evasion. Allowing undervaluation to bypass E-Way bill requirements would defeat the purpose of the GST Act, promoting a parallel economy and hindering transparency.

5. The Court rejected the petitioner's argument of offering heavy discounts due to being new in the business, as the undervaluation was substantial and aimed at evading tax obligations. The actions of the petitioner indicated a pattern of non-compliance and attempts to avoid tax liabilities.

6. Rulings from other High Courts were distinguished, highlighting the unique circumstances of the case. The Court concluded that the undervaluation of goods, especially Pan Masala and Tobacco in large quantities, was a clear attempt to evade tax obligations and bypass regulatory requirements.

7. Ultimately, the Court upheld the decision of the authorities to detain the goods and impose tax and penalty, emphasizing that the petitioner's actions of undervaluation for significant quantities of goods cannot be justified under the guise of E-Way bill exemptions for lower value transactions.

8. The writ petition was dismissed, affirming the authorities' actions in detaining the goods and imposing penalties due to the petitioner's deliberate undervaluation practices to evade tax liabilities and regulatory requirements.