GST Update No 322 on tax and penalty can’t be imposed on basis of conjecture

It is well known principle that tax and penalty cannot be imposed on the taxpayers merely on the basis of assumptions. The revenue department should possess corroborative evidences in support of their contentions. However, time and again it is often observed that such practices are not followed by the departmental officers resulting into hampering of operations of the business houses. Furthermore, even the Courts also throws light on these practices and directs the tax officers to act properly and judiciously. Once again one more case was reported before Allahabad High Court in the case of State of U.P. V/s M/s Maa Vindhyavasini Tobacco Pvt. Ltd. The decision imparted in this case is subject matter of our present update. The petitioner is challenged the order dated 22.06.2019 passed by Appellate Authority in favour of respondent wherein demand of tax and penalty was set aside. In the present case, goods transported were intercepted on the basis of intelligence received by petitioner. It was stated that the goods were transported on the basis of tax invoices which were pre-used. The statements of driver was recorded and authorities passed an order after serving copy of notice to the respondent and it was directed to respondent to pay the tax and penalty demanded. The appellate authority set aside the impugned order stating that here was no material available with the authorities concerned for detention and seizure of the goods, for passing the orders under Section 129 of CGST Act, 2017. Further, the order was set aside by the authority stating that Section 129 of CGST Act, 2017 cannot be invoked on the basis of presumptions. The counsel of petitioner argued that intelligence was received regarding goods being transported twice over on the same set of invoices.

The court held that the submissions of petitioner are not acceptable since goods to be transported have to be accompanied by E-way bills which neither emerged in the assessment order nor is there any basis to arrive at the conclusion. Therefore, the authority rightly arrived at the conclusion of setting aside the impugned order. Further, as per provisions of Section 129 of CGST Act, 2017, an opportunity is awarded to assessee to come forward for release of goods on payment of amount as determined under Section 129 of CGST Act, 2017. This is alternate mode available to assessee. In the present case since as the respondent has not approached for availing the benefit that flow from Section 129 and the appellate authority also held that the basis of initiating proceedings are non-existent, the Court do not see any reason to interfere with the order passed by the appellate authorities in accordance with powers under Section 226 of Constitution of India. The above decision is a favourable decision for business wherein the Courts have supported the fact that harsh proceedings such as prescribed under Section 129 of CGST Act, 2017 cannot be invoked merely on the basis of arbitrary reasons. There has to be an evidence to establish that goods are liable to be confiscated. There had been various judicial rulings on same subject matter such as Kerala High Court in the case of Polycab India Ltd. V/s State of Kerala. It is high time that judicial binding precedents like these should be followed at the earliest so as to avoid any further unnecessary litigations.

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GST Update No 322 on tax and penalty can’t be imposed on basis of conjecture

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