2025 (1) TMI 592 - HC - GST

Detention of petiitoner's goods with vehicle - failure to prove or establish that there was any intention to evade payment of tax by the petitioner - intent to evade tax or not - HELD THAT - The goods in question were in transit from Gwalior to Bihar as it was passing through the State of U.P. The same were intercepted at Auraiya on the ground of different goods being transported other than mentioned in the accompanying documents. The documents are stated to be for R.B. Oil and the allegation has been made that on physical verification, mustard oil was found. Surprisingly, no samples were drawn or any test report was obtained for taking a different view. The authorities cannot be said to be expert for treating the goods differently as declared without any basis. The seizing authority, if was of the opinion that the goods in question were not R.B. Oil as declared in the accompanying documents, it ought to have drawn sample and got an expert report. Without expert report, the authority ought not to have seized the goods. Once the authorities have not observed that there was an intention to evade payment of tax, the proceedings initiated under section 129(3) of the GST Act ought not to have been initiated against the petitioner. On this ground alone, the entire proceedings are vitiated. The record further shows that the seizing authorities have not drawn any sample or got an expert report holding that the goods in question seized were mustard oil and no R.B. Oil as disclosed in the accompanying documents, i.e., e-tax invoice and e-way bill. In absence of any such report from the expert, the view taken by the authorities below differently cannot be sustained in the eyes of law. Conclusion - i) For invoking the proceedings under section 129(3) of the GST Act, there must be an intention to evade payment of tax, which is a mandatory requirement. ii) The authorities below have miserably failed to record a finding against the petitioner that there was an intention to evade payment of tax. Once the authorities have failed to discharge their primary duty as prescribed under the Act, the impugned orders cannot be sustained. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

Whether the authorities acted within their jurisdiction and followed due process under the U.P. GST Act when detaining the petitioner's goods and issuing a demand for tax and penalty.
Whether the authorities were justified in concluding that the goods being transported were different from those declared in the accompanying documents without conducting a laboratory test or obtaining an expert report.
Whether the proceedings initiated under section 129(3) of the GST Act were valid in the absence of any recorded intention to evade tax by the petitioner.
Whether the procedural requirements, such as issuing notices in MOV-07 and MOV-09, were adhered to by the authorities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction and Due Process

Relevant legal framework and precedents: The proceedings were initiated under section 129(3) of the U.P. GST Act, which requires the establishment of an intention to evade tax for detaining goods and demanding penalties.
Court's interpretation and reasoning: The court emphasized the necessity of adhering to procedural requirements, including issuing proper notices and establishing jurisdiction.
Key evidence and findings: The authorities failed to issue MOV-07 and MOV-09 notices, which are necessary procedural steps under the GST framework.
Application of law to facts: The court found that the absence of these notices rendered the proceedings procedurally flawed.
Treatment of competing arguments: The respondent argued that the proceedings were in compliance with amended rules, but the court found this insufficient to override procedural lapses.
Conclusions: The court concluded that the proceedings were vitiated due to non-compliance with procedural requirements.

Issue 2: Nature of Goods and Expert Verification

Relevant legal framework and precedents: Sections 153 and 154 of the GST Act require proper verification and expert analysis when disputing the nature of goods.
Court's interpretation and reasoning: The court criticized the authorities for not obtaining a laboratory test or expert report before concluding that the goods were different from those declared.
Key evidence and findings: No samples were drawn, and no expert report was obtained, undermining the authorities' claim.
Application of law to facts: The lack of expert verification was deemed a significant procedural lapse.
Treatment of competing arguments: The respondent's assertion of compliance with the GST Act was rejected due to the absence of expert verification.
Conclusions: The court held that without expert evidence, the authorities' actions were unsustainable.

Issue 3: Intention to Evade Tax

Relevant legal framework and precedents: Section 129(3) of the GST Act mandates the establishment of an intention to evade tax for imposing penalties.
Court's interpretation and reasoning: The court noted that the authorities failed to record any intention to evade tax by the petitioner.
Key evidence and findings: The authorities did not document any intention to evade tax, which is a prerequisite for proceedings under section 129(3).
Application of law to facts: The absence of documented intent to evade tax invalidated the proceedings.
Treatment of competing arguments: The respondent's arguments were dismissed due to the lack of evidence of intent.
Conclusions: The court concluded that the proceedings were invalid due to the absence of intent to evade tax.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "For invoking the proceedings under section 129(3) of the GST Act, there must be an intention to evade payment of tax, which is a mandatory requirement."
Core principles established: Procedural compliance and evidence of intent are critical under the GST Act for valid proceedings.
Final determinations on each issue: The court quashed the impugned orders and allowed the writ petition, emphasizing the need for procedural adherence and evidence-based conclusions.

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