Facts of the Case

The petitioner, M/s Raghav Metals, engaged in the business of copper wires and copper scraps and registered under the Delhi GST Act, 2017 and the Central GST Act, 2017, sold copper scrap to M/s R.N.T. Metals Pvt. Ltd., Bhiwadi, Rajasthan, for Rs.83,69,594/- (including IGST @18%). While the goods were in transit in Vehicle No.HR-55S-1938, they were intercepted by respondent No.4 at Manesar on 27.11.2021. Despite the vehicle carrying a valid invoice and e-way bill, it was detained and Form GST MOV-02 was issued; the petitioner replied on 03.12.2021. The same day, respondent No.4 passed an Order of Detention under Section 129(1) of the Act in Form GST MOV-06, alleging a quantity mismatch of 90 kg 700 gm between the e-way bill and goods in movement, and a bogus input tax credit claim on the transaction. A further notice under Form GST MOV-07 followed under Section 129(3). The petitioner challenged the proceedings as being without jurisdiction.

Issues Involved

  1. Whether the alleged quantity mismatch and bogus ITC allegation justified detention and penalty proceedings under Section 129 of the CGST/HGST Act, 2017.
  2. Whether an intent to evade tax could be inferred from a marginal discrepancy in the physically verified quantity of goods.
  3. Whether allegations of bogus ITC arising from the supplier's conduct could be attributed to the petitioner-trader absent a direct nexus.

Petitioner's Arguments

  • The goods were accompanied by a valid invoice and e-way bill at the time of interception, and the proceedings under Section 129 were without jurisdiction.
  • Relying on M/s. Shiv Enterprises vs. State of Punjab (CWP-18392-2021), counsel argued the alleged intent to evade tax must have a direct nexus with the trader's own activity, and a trader cannot be penalised for the conduct of a predecessor in the supply chain that he has no means of verifying.
  • Without prejudice, the petitioner offered to pay the tax and penalty as assessed by the State, amounting to around Rs.22,000/-.

Respondent's Arguments

  • Counsel for the State fairly conceded that the issue of alleged bogus purchase by the petitioner's supplier stood settled against the Revenue by the ruling in Shiv Enterprises.
  • The Deputy Advocate General, Haryana, pressed the second ground — that physical verification showed 90 kg 700 gm more than the quantity recorded in the invoice and e-way bill — arguing that under-declaration of quantity indicated an intent to evade tax.

Court Order/Findings

  • The Division Bench found the e-Invoice recorded a consigned quantity of 10,430.7 kg against a tax payment of Rs.12,76,717.68/-, while the State recorded the physically verified quantity as 10,520 kg — a difference of less than 1%, on which the alleged evasion would not exceed Rs.11,000/-.
  • The Court held that a person who has already paid tax of Rs.12,76,717.68/- on a consignment cannot be said to harbour an intent to evade tax of merely Rs.11,000/-, and the mismatch could not be treated as a contravention warranting Section 129 proceedings.
  • Proceedings against the petitioner under Section 129 of the Act were quashed, and any fine or penalty deposited was ordered to be refunded within 15 days of receipt of the certified copy.
  • Since the goods already stood released, no further order was required.

Important Clarification

  • An 'intent to evade tax' under Section 129 must bear a direct nexus with the trader's own conduct; a trader cannot be penalised for a supplier's default further up the chain that he has no practical means to verify — the maxim lex non cogit ad impossibilia applies.
  • A marginal quantity discrepancy on physical verification, disproportionate to the tax already discharged on the consignment, does not by itself establish intent to evade tax sufficient to sustain detention.

Sections Involved

  • Section 129 of the CGST Act, 2017 / HGST Act, 2017 — governs detention, seizure and release of goods and conveyances in transit found in contravention of the Act.
  • Section 130 of the CGST Act, 2017 — deals with confiscation of goods or conveyances and levy of penalty, referenced in the Shiv Enterprises precedent on intent to evade.
  • Form GST MOV-02, MOV-06, MOV-07 — the prescribed forms for order of physical verification, order of detention, and show cause notice respectively under the detention procedure.

Decision – In Favour of

Decided in favour of the Assessee. The writ petition was allowed, the Section 129 detention and penalty proceedings were quashed, and refund of any fine/penalty deposited was directed within 15 days.

Related Case Laws

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

Case Details

  • Court: High Court of Punjab and Haryana at Chandigarh
  • Case No.: CWP No.25057 of 2021
  • Coram: Justice Ajay Tewari and Justice Pankaj Jain
  • Date of Decision: 14 March 2022
  • Parties: M/s Raghav Metals vs State of Haryana and others

Link to Download the Order

Download the full order of the Punjab and Haryana High Court in CWP No.25057 of 2021

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.