Higher penalty cannot be levied where owner of goods come forward in case of detention

The Allahabad High Court has ruled that a higher penalty under Section 129(1)(b) of the UPGST Act cannot be levied if the owner of the goods comes forward to pay the penalty. In this case, the owner of the goods, M/s. Margo Brush India, presented themselves after their goods were seized. The court found that only a penalty equivalent to 200% of the tax payable, as per Section 129(1)(a), could be imposed. The original penalty order was set aside.

The Hon'ble Allahabad High Court in M/s.Margo Brush India & Ors. v. State of U.P[Writ Tax No. 1580 of 2022 dated January 16, 2023] set aside the penalty order passed under Section 129(1)(b) of the Uttar Pradesh Goods and Services Tax Act, 2017 ("the UPGST Act") by the adjudicating authority and held that penalty under Section 129(1)(b) of the UPGST Act was unjustified and untenable since the owner has come forward for payment of penalty.

Facts

M/s. Margo Brush India ("the Petitioner") undertook transportation ofgoods. During the transit the goods were seized by the Revenue Department ("the Respondent") and the detention order was passed in GST MOV-06 on September 29, 2022.

Further, a show Cause Notice in Form GST MOV-07 ("the SCN") and thereafter dated October 07, 2022 the Adjudicating Authority vide GST MOV-9 passed a penalty order ("the Impugned order") on the driver of the vehicle under Section 129(1)(b) of the UPGST Act.

Aggrieved with the Impugned order, the Petitioner filed a writ before the Hon'ble Allahabad High Court.

The Petitioner contended that the Respondent have issued notice to the driver of the vehicle even through the owner of the goods (the Petitioner) came forward and issued penalty order under Section 129(1)(b) of the UPGST Act which was not applicable.

Further, the Petitioner relied on the Circular dated December 31, 2018 ("the Circular") issued by the Central Board of Indirect Taxes and Customs, clarifying to treat consignor a deemed owner in case if the goods are accompanied with invoices. Since, in the case the Petitioner were consignor who have accepted the ownership of goods the penalty order passed under Section 129(1)(b) of the UPGST Act was not correct.

Issue

Whether Section 129 (1)(b) of the UPGST Act can be invoked where the owner of the goods comes forward?

Held

The Hon'ble Allahabad High Court in Writ Tax No. 1580 of 2022 held as under:

• Observed that, the Petitioner was present and had accepted the ownership of the seized goods.
• Held that, in light of the facts of the case and the Circular, the imposition of a penalty under Section 129(1)(b) of the UPGST Act was not justified, as the owner of the goods
• comes forward for payment of penalty. Only penalty to as per Section 129(1)(a) of the UPGST Act can be levied which is amount equivalent to 200% of the tax payable.
• Set aside the Impugned Order and remitted back the matter to the Adjudicating Authority for passing fresh order.