Higher penalty cannot be imposed u/s 129(1)(b) of the CGST Act if owner of goods comes forward to pay penalty

The Allahabad High Court has ruled that if the owner of detained goods comes forward and is willing to pay the penalty, the Revenue Department cannot impose a higher penalty under section 129(1)(b) of the CGST Act. In this case, the petitioner, Bhawani Traders, proved ownership with valid documents, and the court found the Revenue's conclusion otherwise to be erroneous. The penalty order under 129(1)(b) was set aside, and a fresh order under 129(1)(a) was directed.

The Hon'ble Allahabad High Court in Bhawani Traders Pvt. Ltd. v. State of Uttar Pradesh [Writ Tax No. 854 of 2023 dated July 24, 2023] held that if the assessee comes forward and is willing to pay the penalty for the detained goods, the Revenue Department cannot issue penalty order under section 129(1)(b) of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). 

Facts

M/s. Bhawani Traders ("the Petitioner") was the owner of the goods which were detained by the Revenue Department during the transit and subsequently, the Petitioner was served with a penalty order under section 129(1)(b) of the CGST Act by considering the Petitioner not as owner of the goods in transit. However, the Petitioner produced the valid documents such as a tax invoice, e-way bill, which were all issued in his name as the consignor.

Aggrieved by the Penalty order the Petitioner filed a writ before the Allahabad High Court and contended there was no intention to evade tax and the Petitioner was willing to deposit the penalty under protest under Section 129(1)(a) of the CGST Act, in order to release the goods.

The Respondent contended that the Petitioner was not the owner of the goods and that the penalty was rightly imposed under Section 129(1)(b) of the CGST Act.

Issue

Whether the Revenue Department can invoke penalty under Section 129(1)(b) of the CGST Act if the owner of the goods comes forward and is willing to pay penalty?

Held

The Hon'ble Allahabad High Court inWrit Tax No. 854 of 2023 held as under:

• Observed that, the goods were duly accompanied by the tax invoice, e-way bill and bilty issued in the name of the Petitionerwhich proves that the Petitioner was the owner of the goods attached during the transit.
• Noted that, the conclusion of the Revenue Department that the Petitioner was not the owner of the goods is patently erroneous. Consequently, the penalty proceedings were liable to be initiated under section 129(1)(a) and not 129(1)(b) of the CGST Act. 
• Set aside the penalty order under section 129(1)(b) of the CGST Act and directed the Revenue to pass a fresh order treating.