Allahabad High Court Sets Aside Seizure and Confiscation Under Section 129(3) UP GST Act for Want of Enquiry Disputing Genuine Tax Invoices Later Produced — M/S A.S. Enterprise vs Commissioner Of State Tax U.P. (Writ Tax No. 1126 of 2021)

Facts of the Case

The petitioner, M/S A.S. Enterprise, claimed to be the owner of goods sold from Ludhiana, Punjab, to three dealers at Gwalior — Navkar Fashions, Afzal Alam Khan and Jayendra Singh Jadon — each consignment valued below Rs.50,000/-, which is below the threshold prescribed for issuance of E-way bills. While the goods were in transit through Uttar Pradesh on a truck bearing registration No. MP-07-MK-5454, they were intercepted and checked by the Mobile Squad Authority on 01.08.2021. Documents were produced at that time, but owing to the driver's inadvertence the complete set was not produced for the disputed portion of the consignment; the driver realised the lapse shortly after and sought to produce the remaining documents, which the detaining authority declined to accept, stating that further documents could only be furnished in response to a show cause notice. A show cause notice followed on 04.08.2021, in reply to which the petitioner produced the entire set of original tax invoices, all dated 31.07.2021, establishing the goods were covered by regular tax invoices for an inter-state sale on which IGST had been paid. Treating this explanation as an afterthought, the respondent authorities proceeded on the assumption that the goods were being imported into U.P. in contravention of law, and demanded tax and penalty and ordered confiscation. The petitioner's first appeal against the order dated 6.9.2021 passed by respondent no.2, Assistant Commissioner (Mobile Squad) Unit 10 Commercial Tax, Agra, under the IGST Act read with Section 20 CGST Act and Section 129(3) of the UP GST Act, 2017, was dismissed by the First Appeal Authority on 7.10.2021, leading to this writ petition.

Issues Involved

1. Whether seizure, confiscation and demand of tax and penalty under Section 129(3) of the UP GST Act, 2017 could be sustained where original tax invoices were undisputedly produced by the petitioner at the show cause notice stage.
2. Whether the revenue authorities were required to conduct an enquiry to rebut the genuineness of such invoices before confirming confiscation.

Petitioner's Arguments

• The goods were genuinely sold on inter-state sale from Ludhiana to three Gwalior dealers, each transaction below the E-way bill threshold, and were covered by regular tax invoices dated 31.07.2021 on which IGST had been paid.
• Failure to produce the complete documents at the moment of interception was owing to the driver's inadvertence, and the missing documents were produced almost immediately thereafter and again in full at the show cause notice stage.
• Once original tax invoices were furnished and their genuineness was not doubted, the onus shifted to the revenue to establish that the invoices were bogus, which was never discharged.

Respondent's Arguments

• The petitioner's explanation for non-production of documents at interception was an afterthought, offered only after the goods had already been found without accompanying documents.
• The absence of documents at interception justified treating the goods as having been imported into U.P. in contravention of law, warranting tax, penalty and confiscation, which was accordingly confirmed in appeal.

Court Order/Findings

• It was undisputed that the documents produced at the show cause notice stage were original tax invoices issued by the petitioner, and no enquiry was made by the revenue to doubt their genuineness or the date of issue.
• No enquiry was conducted with the Punjab revenue authorities, the purchasing dealers, or the assessing authority to test whether the transaction or the consignee-side records were genuine.
• Continued seizure, confiscation and the demand of tax and penalty were held to be based solely on presumptions and conjectures once undoubted original tax invoices had been produced.
• The Court held that while the initial lapse at interception justified suspicion, that suspicion stood discharged once original invoices were furnished at the show cause stage; thereafter it was for the revenue to conduct a proper enquiry or lead evidence to show the invoices were bogus, which it did not do.
• The detention itself was not held illegal, but the subsequent orders of seizure, confiscation and demand were found unsupported by any material; the impugned orders dated 7.10.2021 and 6.9.2021 were set aside, and the goods and vehicle directed to be released forthwith.

Important Clarification

• Where original tax invoices are produced by a person-in-charge of goods and their genuineness is not doubted, this constitutes prima facie primary evidence of the genuineness of the transaction under transit.
• The initial onus on the assessee to explain non-production of documents at interception stands discharged once undisputed original invoices are furnished at the show cause notice stage; thereafter the burden shifts to the revenue authorities to conduct an enquiry and produce material to rebut genuineness before confirming seizure, confiscation or demand under Section 129(3) of the UP GST Act, 2017.

Sections Involved

• Section 129(3), Uttar Pradesh Goods and Services Tax Act, 2017 — governs detention, seizure and release of goods and conveyances in transit, and imposition of tax and penalty.
• Integrated Goods and Services Tax Act, 2017 — applicable to the inter-state sale on which the disputed invoices charged IGST.
• Section 20, Central Goods and Services Tax Act, 2017 — makes certain CGST Act provisions applicable to proceedings under the IGST Act.

Decision – In Favour of

In favour of the Assessee — the seizure, confiscation and consequent tax and penalty demand were set aside as unsupported by material, and the goods and vehicle were ordered released.

Related Case Laws

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

Case Details

• Court: Allahabad High Court
• Case No.: Writ Tax No. 1126 of 2021
• Coram: Hon'ble Mr. Justice Saumitra Dayal Singh
• Date of Order: 01.04.2022 (dictated); Order Date noted as 1.4.2022

Link to Download the Order

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