Tax authorities to detain goods only in the case of deliberate tax evasion and not for technical or minor defects

In NE Equipment Solution Pvt. Ltd. v. The State of Tripura and Others [WP(C) No. 577/2021 dated August 24, 2021],NE Equipment Solution Pvt. Ltd. ("the Petitioner") approached the Hon'ble Tripura High Court primarily for release of the machinery which was intercepted by the GST authorities on the ground that the driver did not have valid e-way bill for the machinery being brought within the State.

Further, the Superintendent of Taxes, Churaibari Enforcement Wing issued a show-cause notice dated August 19, 2021 ("SCN") to the Petitioner under Section 129(3) of the Central Goods and Services Tax Act, 2017 ("CGST Act") and the State Goods and Services Tax Act, 2017 ("SGST Act") imposing penalty of Rs. 17,87,796/- on the Petitioner.

The Hon'ble Tripura High court held that the machinery should be released as the validity of the E-way bill expired on account of unforeseen and unexpected delay in crossing the check post since the transport department stopped the movement of the vehicle on the ground that the machinery was not registered in the State of Tripura and GST department imposed a fine of Rs.10,000/- which the Petitioner paid. This process, however, took more than 24 hours and in the meantime, the validity of the e-way bill expired. Though the Petitioner generated a new e-way bill, the GST department of the State was not prepared to accept it.

Further, added that detaining such machinery at the check post would expose it to deterioration particularly in the present season of heavy rainfall. The purchaser of the vehicle would also suffer gross inconvenience because having paid more than fifty lakhs of rupees for the purchase of the machinery he would not get the delivery of it for an indefinite period of time.

Moreover, the tax authorities must make a clear distinction between deliberate tax evasion and technical or minor defects which manifest no intention to evade tax. When the IGST liability has been fully discharged, no intention can be attributed on part of the Petitioner to evade tax.

Directed

• GST Department to release the transport vehicle and the machinery.
• The Petitioner to file an undertaking before the Court to the effect that if any tax or penalty liability is crystallized upon final assessment subject to right of appeal and further challenge, the Petitioner shall deposit the same with the Government revenue.
• The Petitioner to reply to the SCN till September 10, 2021
• The Assessing Officer to pass final order of assessment in connection with the SCN bearing in mind the observations made in this order.