2023 (10) TMI 101 - HC - GST

Detention of goods in transit - GST registration of purchaser / petitioner had been cancelled - petitioner has opted for composition scheme - HELD THAT - Once the fact of composition is not disputed and there could be no availment of input tax credit, intention to evade the payment of tax or wrong availment of input tax credit does not arise at any stage. So far as the argument raised by the counsel for the petitioner that petitioner was neither intimated about the cancellation of registration or due process has not been followed in cancellation is concerned, the said argument has not been raised at any stage nor any pleading has been made in this respect in the writ petition. In view of the aforesaid fact, this Court does not permit the petitioner to raise the said argument for the first time in the present writ petition even without there being any pleading made in the writ petition in this respect, hence, the said argument is rejected. The fact remains that if the petitioner is in compounding, the benefit of input tax credit cannot be availed, hence there cannot be any evasion of tax, if the registration of the petitioner was cancelled on 30.11.2018, the generation of e-way bill, which has not been disputed to be genuine, the seizure cannot be made - The impugned order dated 22.11.2019 cannot be sustained in the eyes of law and is hereby quashed. Petition allowed.

Summary

Issues Involved:
The issues involved in the judgment include the cancellation of GST registration, detention of goods during transit, imposition of tax liability and penalty, dispute over the genuineness of tax invoices and e-way bills, composition scheme opted by the petitioner, and the legality of the impugned order.

Cancellation of GST Registration:
The petitioner's GST registration was cancelled on 30.11.2018, leading to the detention of goods during transit on the grounds of using a cancelled GSTIN. The petitioner argued that no communication was received regarding the cancellation, and the e-way bill was generated after the alleged cancellation, indicating a technical glitch in the system. The court found that the cancellation of registration would lock the portal, preventing e-way bill generation, and since the petitioner had opted for composition, the benefit of input tax credit could not be availed.

Detention of Goods and Tax Liability:
The goods being transported from Gujarat to Uttar Pradesh were detained on 19.12.2018 due to the alleged cancellation of the petitioner's GSTIN. The respondent imposed tax liability and penalty, alleging evasion of tax. However, the court noted that the petitioner had accessed the portal using the cancelled GSTIN to download relevant forms, indicating a technical issue. The court found that since the petitioner was under the composition scheme, there was no question of tax evasion or wrongful input tax credit.

Genuineness of Invoices and E-way Bills:
The genuineness of the tax invoices and e-way bills accompanying the goods was not disputed at any stage. The department found that the GSTIN mentioned on the documents had been cancelled before the generation of these documents. Despite this, the court found that the transaction's genuineness could not be disputed, especially considering the petitioner's composition scheme status.

Composition Scheme and Input Tax Credit:
The petitioner had opted for the composition scheme, which was not disputed by the respondent. As per the composition scheme, input tax credit could not be claimed. This fact was crucial in determining that there was no intention to evade tax or wrongfully claim input tax credit. The court emphasized that the benefit of input tax credit cannot be availed under the composition scheme.

Legal Implications and Judgment:
The court quashed the impugned order dated 22.11.2019, stating that it could not be sustained in the eyes of the law. The writ petition was allowed, granting the petitioner all consequential benefits. The judgment focused on the technical aspects of GST registration cancellation, the petitioner's composition scheme status, and the lack of evidence supporting tax evasion or wrongful input tax credit claims.