2024 (6) TMI 228 - HC - GST

Initaition of proceedings u/s 129 of CGST Act - Levy of penalty - violation of Rule 55 of CGST Rules - whether minor discrepancy of not mentioning existence of Kundan stones in the Delivery Challan could not have been made the basis to impose the penalty? - mismatch between the goods and discrepancy shown in the Delivery Challan - HELD THAT - A perusal of the material on record including the impugned order and the Delivery Challan will indicate that except for non-disclosure of Kundan stones in the Delivery Challan, all other requirements of Rule 55 of the CGST Rules have been complied with by the petitioner as can be seen from the Delivery Challan itself. A perusal of the impugned order will also indicate that both authorities have committed an error in proceeding on the erroneous presumption / assumption that the gold was not being sent for sample purpose but was being transported for the purpose of sale and since the names of the prospective purchaser were not mentioned in the Delivery Challan, petitioner would be liable to pay penalty as directed in the impugned order. However, the said reasoning of the Authorities and findings recorded by it is clearly contrary to the material on record, which establishes that there is no basis to come to the conclusion that gold ornaments were meant for sale in favour of the prospective purchasers and not for sample as indicated in the Delivery Challan. The order passed by the Original Authority at Annexure H dated 15.07.2022 as well as the impugned order passed by the Appellate Authority at Annexure M dated 15.12.2022 deserve to be quashed and penalty of Rs. 14,50,560/- deserves to be refunded back to the petitioner and to grant liberty in favour of the respondents to proceed against the petitioner for alleged mismatch/discrepancy of the Kundan stones, which are not shown in the Delivery Challan. Petition allowed.

Summary

Issues involved: Quashing of impugned order, violation of Rule 55 of CGST Rules, imposition of penalty, discrepancy in Delivery Challan, appeal dismissal by Appellate Authority.

Violation of Rule 55 of CGST Rules:
The petitioner transported gold jewellery from Mumbai to Bengaluru, and an order for vehicle verification was issued leading to penalty imposition under Section 129(3) of the CGST Act. The petitioner contended that there was no violation of Rule 55 of the CGST Rules as per the Delivery Challan and minor discrepancies should not warrant penalty imposition. The Authorities erroneously invoked Rule 55 without appreciating that the non-disclosure of Kundan stones in the Delivery Challan did not constitute a violation.

Discrepancy in Delivery Challan:
The petitioner complied with all requirements of Rule 55 except for not mentioning Kundan stones in the Delivery Challan. The Authorities wrongly concluded that there was a mismatch between the goods and the Delivery Challan, leading to the imposition of a penalty. It was argued that the gold ornaments were meant for sample purposes, not for sale, as indicated in the Delivery Challan, and the penalty was unjustified.

Quashing of Impugned Order:
The High Court quashed the impugned order passed by the Original Authority and the Appellate Authority, directing the refund of the penalty amount of Rs. 14,50,560 to the petitioner. The Court held that the Authorities erred in presuming the purpose of transporting the gold ornaments and wrongly imposed the penalty based on incorrect assumptions. The Court granted liberty to the respondents to proceed against the petitioner only for the alleged mismatch of Kundan stones not shown in the Delivery Challan.