Allahabad High Court: GST Demand Penalty cannot be based on the presumption
In a recent ruling, the Allahabad High Court, while quashing an order demanding GST and penalty, has held that the tax demand and penalty cannot be solely based on presumptions under the Central GST Act, 2017.
The goods transported by the respondent-assessee, M/s Maa Vindhyavasini Tobacco were intercepted on 28.04.2019 at about 21:31 hours on the intelligence received by the petitioners that the goods were being transported based on tax invoices which were pre-used. After the interception, the statement of the truck driver was recorded. Based upon the said statement, the authorities proceeded to pass an order under Section 129(3) of the CGST Act after serving the copy of the notice to the respondent, whereby the respondents were directed to pay the tax on the goods being transported amounting toRs.7,23,700/- and further cess of Rs.19,05,024/-.
On appeal, the appellate authority quashed the orders holding that it is well settled that the levy of tax and penalty cannot be based upon the presumption.
Justice Pankaj Bhatia observed that “the plain reading of the provisions of CGST Act makes it clear that the provisions as contained in Chapter 19 including Section 129 are the provisions for release of goods intercepted during transportation on the ground as engrafted therein and provides an opportunity to the assessee to take the benefit and to come forward for the release of the goods on payment of the amounts as indicated in Section 129 (1)(a)(b) and (c) as the case may be. The quantum of penalty which is to be paid under Section 129 (1)(a)(b) and (c) is to be determined under Section 129(3) of the CGST Act. The said power is purely an alternate mode given to the assessees to come forward and avoid any future litigation and to offer and pay the amount. If the assessee does not avail the benefit as accruing from Section 129, the department is free to take recourse under Chapter 15 read with Section 122 of the CGST Act to take steps for determining the tax due liability and the penalty.”
“In the present case, as the respondent has not approached for availing the benefit that flows from Section 129, coupled with the fact that the appellate authority found that the basis for initiating proceedings was non-existent, I do not see any reason to interfere with the order passed by the appellate authority, in the exercise of powers under Section 226 of the Constitution of India,” the Court said.