Goods not liable for seizure and penalty thereof when designated route not taken during transportation

The Hon'ble Allahabad High Court (Lucknow Bench) in the case of Exide Industries Limited v. Addl. Commissioner Grade-II (Appeal)-1, State Tax, Mainpuri and Another [Writ Tax No 173 of 2024 dated July 09, 2024] allowed the writ petition and held that goods are not liable for seizure and further penalty cannot be imposed when designated route not taken during transportation as the documents accompanying the goods were found to be genuine.

Facts:

Exide Industries Limited ("the Petitioner") has filed a writ petition against order dated March 06, 2024 ("the Impugned Order") has been passed by the Revenue Department ("the Respondent") wherein penalty was imposed on account of violation of Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 ("the UPGST Act") as the Petitioner transporter took a different route.

The Petitioner contended that no route has been prescribed and the goods were intercepted at the place which was close to the destination of goods which were being transported. In this regard, reliance can be placed upon the judgment of the Hon'ble Gujarat High Court in the case of M/s Karnataka Traders Vs. State of Gujrat [Special Civil Application No. 19549 of 2021 dated January 06, 2022 and Hon'ble Telangana High Court in the case of Vijay Metal v. Deputy Commercial Tax Officer [W.P. No. 2869 of 2021 dated April 28, 2021]. Also, it was submitted that during the VAT regime, there was provision of declaring designated route, however, there is no provision under GST which requires declaration of designated route.

Issue:

Whether the goods are liable for seizure when designated route not taken during transportation?

Held:

The Hon'ble Allahabad High Court (Lucknow Bench) in the case of Writ Tax No 173 of 2024 held as under:

• Relying upon the judgment of the Hon'ble Gujarat High Court in the case of M/s Karnataka Traders Vs. State of Gujrat [Special Civil Application No. 19549 of 2021 dated January 06, 2022, it was noted that "On careful consideration of the facts and circumstances of the case and the submissions made by the respective advocates for the parties, we find the force in the contention of the learned advocate appearing for the petitioners that there cannot be any mechanical detention of a consignment in transit solely on the basis of the two reasons as stated by the respondent No.3 in the impugned notice. We find that merely the direction preferred by the petitioners for delivery of consignment to the place destined for, an inference cannot be drawn with regard to the intention of the petitioners to evade tax. So far as the second ground with regard to the goods being transported to be undervalue is concerned, no material has been placed on record. Even otherwise, as held by this Court as well as other High Courts, it is a settled legal position that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority. In the instant case, there is no such indication."
• Opined that, the Respondent was not required to seize the goods, the documents accompanying the goods were found to be genuine.
• Held that, the writ petition is allowed.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED