Facts of the Case

The petitioner, Algae Labs Pvt. Ltd., a start-up engaged in research and development on algae and its utilisation, represented by its Managing Director Shri Adhi Visvanathan, placed a purchase order dated 07.10.2021 with M/s.ABV Engineering, Ahmedabad, for a specialised spray dryer and parts. The supplier consigned the goods under invoice No.197/21-22 dated 28.02.2022, accompanied by a valid E-way Bill, showing the consignee address as No.5/150, South Karumpattor, South Thamaraikulam, Kanyakumari — an address not then reflected in the petitioner's GST Registration. The respondent, State Tax Officer-I, Adjudication, Tirunelveli, seized the vehicle (Registration No.RJ-06-GC-7978) and its consignment on the ground that the delivery address did not match the registered place of business, and passed an order dated 11.03.2022 in Order No.OR.317/2021-22 demanding tax and penalty of Rs.12,46,678/- [Rs.6,23,339 + Rs.6,23,339] under Section 129 of the GST enactments. Aggrieved, the petitioner filed this writ petition before the Madurai Bench of the Madras High Court seeking release of the vehicle and consignment and quashing of the demand order.

Issues Involved

  1. Whether detention and demand of tax and penalty under Section 129 of the GST Acts was justified merely because the consignee address on the tax invoice and E-way Bill did not match the address recorded in the petitioner's GST Registration at the time of transit.
  2. Whether subsequent, post-facto amendment of the GST Registration to include the delivery address negated any inference of intent to evade tax.

Petitioner's Arguments

  • The petitioner had entered into a rental agreement with one of its own Directors, who ran a proprietary concern, Tvl.Pinnacle Biosciences, at the delivery premises, which had genuinely been taken on rent by the petitioner.
  • The petitioner had, post facto, amended its GST Registration to include the delivery address at No.5/150, South Karumpattor, South Thamaraikulam, Kanyakumari.
  • There was no violation of Section 129 since the goods were transported from Gujarat accompanied by a valid tax invoice and E-way Bill evidencing that tax had already suffered on the consignment.
  • Reliance was placed on Circular No.10/2019 Q1/17253/2019 dated 31.05.2019 issued by the Commissioner of Commercial Taxes.

Respondent's Arguments

  • The registration profile showed that Shri M. Adhi Visvanathan, Director of the petitioner company, was also the Proprietor of Tvl.Pinnacle Biosciences, situated at the very address to which the goods were consigned.
  • Since Tvl.Pinnacle Biosciences was engaged in the same trade, the delivery to that address indicated an attempt to divert and clear the goods to it, amounting to an attempt to evade tax.
  • The petitioner's reliance on Circular No.10/2019 Q1/17253/2019 dated 31.05.2019 was of no relevance to the facts of the case.

Court Order/Findings

  • Both parties admitted that, as on date, the disputed address had already been included in the petitioner's place of business in its GST Registration — a post-facto inclusion of the very address mentioned in the supplier's tax invoice and E-way Bill.
  • The Court held that on these facts there was no attempt to evade tax, and was therefore inclined to quash the impugned demand order.
  • Reliance was placed on a similar order passed on 30.03.2022 in W.P.(MD) No.5720 of 2022 (M/s. Smart Roofing Private Limited vs. The State Tax Officer), where relief was granted on materially identical facts of post-facto GST Registration amendment.
  • The writ petition was accordingly allowed, the impugned order quashed, and the connected miscellaneous petition closed, with no order as to costs.

Important Clarification

  • A mismatch between the consignee address on the E-way Bill/tax invoice and the address recorded in the transporter/consignee's GST Registration at the time of transit does not, by itself, establish an intent to evade tax under Section 129, particularly where the discrepancy is later regularised.
  • Post-facto amendment of the GST Registration to include the delivery address can be treated as bona fide evidence that the transaction was genuine and not designed to evade tax, especially where the goods were otherwise accompanied by valid tax invoice and E-way Bill.
  • Detention and penalty proceedings under Section 129 are meant to address genuine tax evasion, not technical or curable discrepancies in registration particulars.

Sections Involved

  • Section 129, CGST/TNGST Act, 2017 — detention, seizure and release of goods and conveyances in transit, and imposition of tax and penalty for contravention of the Act.
  • Circular No.10/2019 Q1/17253/2019 dated 31.05.2019 — clarificatory circular issued by the Commissioner of Commercial Taxes on E-way Bill related matters, relied upon by the petitioner though held not relevant by the respondent.

Decision – In Favour of

The decision is in favour of the Assessee. The Madras High Court (Madurai Bench) allowed the writ petition and quashed the Section 129 demand of tax and penalty, holding that the post-facto inclusion of the delivery address in the GST Registration showed no attempt to evade tax.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: Madurai Bench of the Madras High Court
  • Case No.: WP (MD) No. 4958 of 2022 (with W.M.P.(MD) No.4073 of 2022)
  • Coram: Justice C. Saravanan
  • Date of Order: 04.04.2022

Link to Download the Order

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