2024 (2) TMI 187 - HC - GST

Detention of goods and Levy of penalty on the ground of under valuation - There is no dispute that the invoice, e-way bill and all other relevant documents were accompanied with the goods. Furthermore, there was no mismatch in the description of the goods with the documents. - HELD THAT - The only ground for detention of the goods was that the valuation of the goods as per the invoice was not correct. This is not a valid ground for detaining the goods as the officer concerned was not competent to carry out such detention. In the event of under valuation, appropriate notice under Sections 73 or 74 of the Uttar Pradesh Goods and Service Tax Act, 2017 is required to be issued as per the procedure provided therein. If the Court holds such a detention to be valid, it would be open to the authorities to carry out detention on their whims and fancies. The detention of the goods in such a scenario is not envisaged under the Act and the officers have not been vested with such a power to detain the goods and thereafter impose penalty under Section 129 of the Act. Specific provisions have been provided for detection of under valuation and the GST officials have to adhere to the same. It is to be noted that only after issuance of notice under Sections 73 or 74 of the Act, if the goods are found under valued, penalty can be imposed. Accordingly, imposition of penalty under Section 129 of the Act on the speculation that the goods are under valued cannot be allowed - impugned orders dated December 20, 2020 and September 17, 2021 are quashed and set-aside - Petition allowed.

Summary

Issues involved:
The legality of penalty order for under valuation of goods under Article 226 of the Constitution of India.

Issue 1: Under valuation of goods and imposition of penalty

The petitioner challenged the penalty order dated December 20, 2020, passed by the Commercial Tax Officer and the subsequent order dated September 17, 2021, by the Additional Commissioner Grade-II (Appeal)-II, State Tax, Agra. The show cause notice indicated that the goods were detained due to under valuation, which was upheld in the appeal. However, a circular by the Commissioner of Commercial Tax, Uttar Pradesh, stated that goods should not be detained solely on the ground of under valuation. The petitioner cited a judgment from the Kerala High Court emphasizing the need for a bonafide dispute regarding goods classification before detention. In this case, all relevant documents were with the goods, and the only reason for detention was the alleged incorrect valuation according to the invoice. The court held that this was not a valid ground for detention as the officer lacked the authority to make such a decision.

Issue 2: Legal procedure for detention and penalty under the Act

The court highlighted that under the Uttar Pradesh Goods and Service Tax Act, 2017, specific procedures under Sections 73 or 74 must be followed in case of under valuation. The court emphasized that detention based on speculation of under valuation without following the proper procedure could lead to arbitrary actions by authorities. The Act does not empower officers to detain goods and impose penalties under Section 129 without issuing the necessary notices under Sections 73 or 74. Therefore, the imposition of a penalty under Section 129 based on assumptions of under valuation was deemed impermissible by the court.

Decision:

The court quashed and set aside the impugned orders dated December 20, 2020, and September 17, 2021. The petitioner was granted consequential reliefs, and any deposits made to the authorities were to be returned within four weeks. The writ petition was allowed in favor of the petitioner.