Facts of the Case

The petitioner, M/S Meera Tent Cloth Supplies, a registered firm engaged in wholesale supply of carpets, plastic chairs, sofas, etc., filed a Writ Tax petition before the High Court of Judicature at Allahabad challenging an appellate order dated 22.11.2019 confirming detention and penalty proceedings. The petitioner had originally been issued GSTIN No.09BUYPB2872C1ZE on 03.08.2017, but owing to login credential issues, a second GSTIN, 09BUYPD2872C2ZD, was allotted. Goods purchased from a Surat-based supplier under two tax invoices with accompanying e-way bills, while in transit to Agra via Truck No. UP 80 CT 9887, were intercepted on 19.12.2018 and detained in Form GST MOV-06 on the ground that the second GSTIN had already been cancelled by the department on 30.11.2018. A tax liability of Rs.3,570.23/- and penalty of Rs.71,405/- were imposed via Form GST MOV-09, and the petitioner's subsequent appeal was dismissed, confirming both tax and penalty.

Issues Involved

  1. Whether goods could be lawfully detained and penalised on the ground that the GSTIN mentioned in the accompanying tax invoice and e-way bill had been cancelled prior to their generation.
  2. Whether the genuineness of the e-way bill and tax invoice, and the fact that the petitioner had opted for the composition scheme (precluding any ITC claim), was relevant to the allegation of tax evasion.

Petitioner's Arguments

  • The goods were accompanied by genuine tax invoices, e-way bills and G.R. at the time of interception, purchased on the strength of the GSTIN allotted to the petitioner.
  • No due process under the GST Rules (notice in Form 17, reply in Form 18, order in Form 19) had been followed for cancelling the registration, nor was any communication of cancellation ever made to the petitioner.
  • If the registration had genuinely been cancelled, the portal would have automatically locked generation of e-way bills, which could not have happened if the GSTIN was in fact cancelled; the two circumstances could not co-exist.
  • Since the petitioner had opted for the composition scheme, no input tax credit could be claimed, and therefore there could be no question of any intention to evade tax or wrongly avail credit.

Respondent's Arguments

  • Once the petitioner's GSTIN was cancelled on 30.11.2018, it could not lawfully be used in the tax invoice of the selling dealer.
  • Verification on the official website at the time of interception showed that the GSTIN mentioned in the tax invoice had already been cancelled, justifying the imposition of tax and penalty for intention to evade tax.

Court Order/Findings

  • The Court found it undisputed that the petitioner had opted for the composition scheme, precluding any claim of input tax credit, and that the genuineness of the e-way bill and tax invoice accompanying the goods was never disputed by the department.
  • Since the portal cannot generate e-way bills once a GSTIN is cancelled, yet the petitioner had accessed the portal and generated the documents from the very GSTIN alleged to be cancelled, the genuineness of the transaction could not be doubted, and no intention to evade tax could be attributed to a composition dealer ineligible for ITC.
  • The petitioner's argument regarding lack of due process and communication in cancelling the registration was rejected as not having been pleaded in the writ petition and raised for the first time at the hearing.
  • The impugned order dated 22.11.2019 was held unsustainable in law and quashed, and the writ petition was allowed with all consequential benefits.

Important Clarification

Detention and penalty on goods cannot be sustained merely on the ground that the GSTIN reflected in the accompanying tax invoice and e-way bill was shown as cancelled, where it is undisputed that the e-way bill and invoice were genuinely generated from the GST portal using that very GSTIN (which the system would not permit if genuinely cancelled), and where the dealer, having opted for the composition scheme, could not have availed input tax credit or had any motive to evade tax.

Sections Involved

  • Form GST MOV-06, MOV-07 and MOV-09 under the CGST Rules, 2017 – detention, notice and order for detention of goods and conveyances.
  • Rules governing cancellation of registration (Forms 17, 18, 19) under the CGST Rules, 2017.
  • Composition scheme provisions under the CGST Act, 2017 – bar on availing input tax credit.

Decision – In Favour of

The decision favours the Assessee. The Allahabad High Court quashed the appellate order confirming detention and penalty, holding that the genuineness of the e-way bill and tax invoice, coupled with the petitioner's composition status precluding any ITC benefit, negated any intention to evade tax.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: Writ Tax No.410 of 2020
  • CNR: Not available
  • Coram: Justice Piyush Agrawal
  • Decision Date: 03 October 2023
  • Disposal Nature: Writ petition allowed, impugned order quashed

Link to Download the Order

Download the full judgment (PDF)

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.