Court DecisionThe Court allowed the writ petition and quashed the show cause notice dated 19 September 2023 insofar as it was issued to the petitioner.The Court held:Section 122(1A) applies only to a taxable person:Section 122(1A) applies to a person who retains the benefit of transactions covered under clauses (i), (ii), (vii) or (ix) of Section 122(1), and at whose instance such transaction is conducted. Such person must necessarily be a “taxable person” as defined under Sections 2(107) and 2(94) of the CGST Act.The petitioner, being merely an employee and power of attorney holder of Maersk, was not a taxable or registered person and could not retain the benefit of the alleged transactions. Therefore, invocation of Section 122(1A) against him was wholly without jurisdiction.Jurisdictional ingredients not satisfied:The show cause notice did not disclose any material to establish that the petitioner retained the benefit of the alleged GST evasion or that the transactions were conducted at his instance. In absence of these basic elements, the notice was held to be illegal for want of jurisdiction and for non-application of mind.Section 137 could not be invoked in a demand notice under Section 74:Section 137 relates to offences by companies and falls under the chapter dealing with offences and penalties. The impugned notice was a demand cum show cause notice under Section 74, which pertains to determination of tax not paid or short paid. The Court held that such penal provisions could not be intermingled with demand proceedings, and such invocation against the petitioner was without jurisdiction.No vicarious liability under Sections 122 and 137:The Court held that no principle of vicarious liability could be read into Sections 122 or 137 so as to fasten liability on an employee for tax alleged to be evaded by the company.Disproportionate demand:The demand of ₹3731 crores from the petitioner, which was alleged to be the liability of Maersk, was held to be highly unconscionable and disproportionate.Accordingly, the show cause notice was quashed insofar as it applied to the petitioner. The connected writ petitions were also allowed on the same reasoning. Cases Referred by the CourtNo judicial precedents were referred to or relied upon in the judgment.
Shantanu Sanjay Hundekari vs. Union of India & Ors. 18-03-2024
Court DecisionThe Court allowed the writ petition and quashed the show cause notice dated 19 September 2023 insofar as it was issued to the petitioner.The Court held:Section 122(1A) applies only to a taxable person:Section 122(1A) applies to a person who retains the benefit of transactions covered under clauses (i), (ii), (vii) or (ix) of Section 122(1), and at whose instance such transaction is conducted. Such person must necessarily be a “taxable person” as defined under Sections 2(107) and 2(94) of the CGST Act.The petitioner, being merely an employee and power of attorney holder of Maersk, was not a taxable or registered person and could not retain the benefit of the alleged transactions. Therefore, invocation of Section 122(1A) against him was wholly without jurisdiction.Jurisdictional ingredients not satisfied:The show cause notice did not disclose any material to establish that the petitioner retained the benefit of the alleged GST evasion or that the transactions were conducted at his instance. In absence of these basic elements, the notice was held to be illegal for want of jurisdiction and for non-application of mind.Section 137 could not be invoked in a demand notice under Section 74:Section 137 relates to offences by companies and falls under the chapter dealing with offences and penalties. The impugned notice was a demand cum show cause notice under Section 74, which pertains to determination of tax not paid or short paid. The Court held that such penal provisions could not be intermingled with demand proceedings, and such invocation against the petitioner was without jurisdiction.No vicarious liability under Sections 122 and 137:The Court held that no principle of vicarious liability could be read into Sections 122 or 137 so as to fasten liability on an employee for tax alleged to be evaded by the company.Disproportionate demand:The demand of ₹3731 crores from the petitioner, which was alleged to be the liability of Maersk, was held to be highly unconscionable and disproportionate.Accordingly, the show cause notice was quashed insofar as it applied to the petitioner. The connected writ petitions were also allowed on the same reasoning. Cases Referred by the CourtNo judicial precedents were referred to or relied upon in the judgment.
Facts :The petitioner challenged a penalty order dated 20.12.2020 and appellate order dated 17.09.2021 passed under GST law. The goods were detained during transit solely on the ground of alleged undervaluation. All documents including invoice and e-way bill were available and there was no discrepancy in description of goods. The detention and penalty were confirmed by the authorities on the same ground.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129. It observed that when documents are proper and there is no mismatch, detention cannot be justified merely on valuation issues. The Court held that in cases of undervaluation, proceedings must be initiated under Sections 73 or 74 and not by detention and penalty during transit. Accordingly, the impugned penalty and appellate orders were quashed and set aside, with direction to refund any deposited amount.Cases Referred:Hindustan Coca Cola Pvt. Ltd. v. Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther caseJ.K. Synthetics Ltd. v. Commercial Taxes Officer
Shamhu Saran Agarwal and Company v. Additional Commissioner Grade-2 & Ors. 31-01-2024
Facts :The petitioner challenged a penalty order dated 20.12.2020 and appellate order dated 17.09.2021 passed under GST law. The goods were detained during transit solely on the ground of alleged undervaluation. All documents including invoice and e-way bill were available and there was no discrepancy in description of goods. The detention and penalty were confirmed by the authorities on the same ground.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129. It observed that when documents are proper and there is no mismatch, detention cannot be justified merely on valuation issues. The Court held that in cases of undervaluation, proceedings must be initiated under Sections 73 or 74 and not by detention and penalty during transit. Accordingly, the impugned penalty and appellate orders were quashed and set aside, with direction to refund any deposited amount.Cases Referred:Hindustan Coca Cola Pvt. Ltd. v. Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther caseJ.K. Synthetics Ltd. v. Commercial Taxes Officer
Facts :The petitioner challenged penalty order dated 20.12.2020 and appellate order dated 17.09.2021 arising from detention of goods in transit. The goods were detained solely on the allegation of undervaluation despite accompanying invoice, e-way bill, and proper documents. The appellate authority affirmed the penalty on the same ground of undervaluation. The petitioner relied on departmental circular stating that goods should not be detained merely on valuation disputes.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129 of the Act. Where all documents are proper and there is no discrepancy, detention cannot be justified on valuation issues. Issues of undervaluation must be examined through proceedings under Sections 73 or 74 of the GST Act and not through detention proceedings. Penalty imposed under Section 129 on mere suspicion of undervaluation was held unsustainable and set aside. The impugned orders were quashed and consequential relief including refund was directed.Cases Referred:Hindustan Coca Cola Pvt. Ltd. vs Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther’s caseJ.K. Synthetics Ltd. vs Commercial Taxes Officer
Shamhu Saran Agarwal and Company vs Additional Commissioner Grade-2 & Others 31-01-2024
Facts :The petitioner challenged penalty order dated 20.12.2020 and appellate order dated 17.09.2021 arising from detention of goods in transit. The goods were detained solely on the allegation of undervaluation despite accompanying invoice, e-way bill, and proper documents. The appellate authority affirmed the penalty on the same ground of undervaluation. The petitioner relied on departmental circular stating that goods should not be detained merely on valuation disputes.Court Decision:The Court held that undervaluation is not a valid ground for detention of goods under Section 129 of the Act. Where all documents are proper and there is no discrepancy, detention cannot be justified on valuation issues. Issues of undervaluation must be examined through proceedings under Sections 73 or 74 of the GST Act and not through detention proceedings. Penalty imposed under Section 129 on mere suspicion of undervaluation was held unsustainable and set aside. The impugned orders were quashed and consequential relief including refund was directed.Cases Referred:Hindustan Coca Cola Pvt. Ltd. vs Assistant State Tax OfficerN.V.K. Mohammed Sulthan Rawther’s caseJ.K. Synthetics Ltd. vs Commercial Taxes Officer
Facts :The petitioners filed Special Leave Petitions challenging the judgment and order dated 02.08.2023 passed by the High Court at Calcutta. The dispute pertained to tax demand raised against the respondent. The matter was placed before the Supreme Court for admission, including an application for condonation of delay. Court Decision:The Supreme Court condoned the delay but declined to interfere with the impugned judgment of the High Court in exercise of its jurisdiction under Article 136. The Court noted the facts and circumstances of the case and the relatively low tax demand, and dismissed the Special Leave Petitions. Cases Referred by Court:No cases were referred to in the order.
Assistant Commissioner of State Tax, Ballygunge Charge & Ors. v. Suncraft Energy Private Limited & Ors. 14-12-2023
Facts :The petitioners filed Special Leave Petitions challenging the judgment and order dated 02.08.2023 passed by the High Court at Calcutta. The dispute pertained to tax demand raised against the respondent. The matter was placed before the Supreme Court for admission, including an application for condonation of delay. Court Decision:The Supreme Court condoned the delay but declined to interfere with the impugned judgment of the High Court in exercise of its jurisdiction under Article 136. The Court noted the facts and circumstances of the case and the relatively low tax demand, and dismissed the Special Leave Petitions. Cases Referred by Court:No cases were referred to in the order.
Facts :Petitioner wrongly transitioned balance from Personal Ledger Account as input tax credit under Section 140 of CGST Act.Refund was sanctioned, but ₹9,25,366 was adjusted towards interest on such utilization.Petitioner contended that sufficient Input Tax Credit was available and there was no loss to revenue.Dispute arose on legality of interest adjustment while granting refund.Court Decision:Petitioner ought to have claimed refund under Section 11B of Central Excise Act read with Section 142(3) of CGST Act.Wrong transition of credit was acknowledged, but tax liability was subsequently squared up using available Input Tax Credit.There was no loss to revenue, as sufficient credit existed.Directions:Deduction of ₹9,25,366 towards interest held unsustainable.Impugned order modified to that extent.Respondent directed to refund ₹9,25,366 to petitioner.Refund to be made within 8 weeks.
Infac India Pvt. Ltd. v. Deputy Commissioner of GST & Central Excise 14-09-2023
Facts :Petitioner wrongly transitioned balance from Personal Ledger Account as input tax credit under Section 140 of CGST Act.Refund was sanctioned, but ₹9,25,366 was adjusted towards interest on such utilization.Petitioner contended that sufficient Input Tax Credit was available and there was no loss to revenue.Dispute arose on legality of interest adjustment while granting refund.Court Decision:Petitioner ought to have claimed refund under Section 11B of Central Excise Act read with Section 142(3) of CGST Act.Wrong transition of credit was acknowledged, but tax liability was subsequently squared up using available Input Tax Credit.There was no loss to revenue, as sufficient credit existed.Directions:Deduction of ₹9,25,366 towards interest held unsustainable.Impugned order modified to that extent.Respondent directed to refund ₹9,25,366 to petitioner.Refund to be made within 8 weeks.
Facts (Background):The petitioner challenged an assessment order dated 10.12.2021 passed under Section 73(9) of the BGST Act determining excess input tax credit. Notices were issued through the GST portal and reminders were sent, but the petitioner did not respond. The petitioner later filed an appeal with delay, which was rejected as time-barred, and thereafter approached the High Court.Court Decision:The Court held that the statutory remedy of appeal under Section 107 must be filed within three months with a further condonable period of one month. Even considering the extension of limitation granted by the Supreme Court in In Re: Cognizance for Extension of Limitation, the appeal should have been filed by 28.06.2022, but it was filed only on 10.07.2022.The Court held that when the statute prescribes a specific period for condonation of delay, neither the appellate authority nor the High Court under Article 226 can extend the limitation further. As the petitioner failed to avail the statutory appellate remedy within the prescribed period and no jurisdictional error or violation of natural justice was established, the writ petition was dismissed.Cases Referred by Court: In Re: Cognizance for Extension of Limitation, Suo Motu Writ Petition (C) No.3 of 2020 (Supreme Court of India ; State of H.P. & Ors. v. Gujarat Ambuja Cement Limited & Anr., (2005) 6 SCC 499
Punit Kumar Choubey vs The Commissioner, Commercial Tax, Patna & Ors. 10-08-2023
Facts (Background):The petitioner challenged an assessment order dated 10.12.2021 passed under Section 73(9) of the BGST Act determining excess input tax credit. Notices were issued through the GST portal and reminders were sent, but the petitioner did not respond. The petitioner later filed an appeal with delay, which was rejected as time-barred, and thereafter approached the High Court.Court Decision:The Court held that the statutory remedy of appeal under Section 107 must be filed within three months with a further condonable period of one month. Even considering the extension of limitation granted by the Supreme Court in In Re: Cognizance for Extension of Limitation, the appeal should have been filed by 28.06.2022, but it was filed only on 10.07.2022.The Court held that when the statute prescribes a specific period for condonation of delay, neither the appellate authority nor the High Court under Article 226 can extend the limitation further. As the petitioner failed to avail the statutory appellate remedy within the prescribed period and no jurisdictional error or violation of natural justice was established, the writ petition was dismissed.Cases Referred by Court: In Re: Cognizance for Extension of Limitation, Suo Motu Writ Petition (C) No.3 of 2020 (Supreme Court of India ; State of H.P. & Ors. v. Gujarat Ambuja Cement Limited & Anr., (2005) 6 SCC 499
Facts The appellant availed Input Tax Credit on purchases made from a supplier and paid the tax amount along with the value of goods/services. The department issued notices alleging mismatch between GSTR-2A and GSTR-3B and non-reflection of supplier invoices in GSTR-1. A demand order under Section 73(10) was passed reversing ITC along with interest and penalty. The writ petition was disposed of directing the appellant to file a statutory appeal, which led to the present intra-court appeal. Court Decision:The High Court set aside the demand order and held that reversal of ITC was not justified without first taking action against the selling dealer. The Court held that when the purchasing dealer has fulfilled conditions under Section 16(2), including possession of invoice, receipt of goods/services, and payment of tax, ITC cannot be denied merely due to non-reflection in GSTR forms. It was further held that proceedings against the purchaser can arise only in exceptional circumstances such as fraud, collusion, or where the supplier is non-existent or without assets. Cases Referred by Court:• Union of India v. Bharti Airtel Ltd. • Arise India Limited v. Commissioner of Trade and Taxes, Delhi • Commissioner of Trade and Taxes v. Arise India Limited (SLP dismissed)
Suncraft Energy Private Limited & Anr. v. Assistant Commissioner, State Tax, Ballygunge Charge & Ors. 02-08-2023
Facts The appellant availed Input Tax Credit on purchases made from a supplier and paid the tax amount along with the value of goods/services. The department issued notices alleging mismatch between GSTR-2A and GSTR-3B and non-reflection of supplier invoices in GSTR-1. A demand order under Section 73(10) was passed reversing ITC along with interest and penalty. The writ petition was disposed of directing the appellant to file a statutory appeal, which led to the present intra-court appeal. Court Decision:The High Court set aside the demand order and held that reversal of ITC was not justified without first taking action against the selling dealer. The Court held that when the purchasing dealer has fulfilled conditions under Section 16(2), including possession of invoice, receipt of goods/services, and payment of tax, ITC cannot be denied merely due to non-reflection in GSTR forms. It was further held that proceedings against the purchaser can arise only in exceptional circumstances such as fraud, collusion, or where the supplier is non-existent or without assets. Cases Referred by Court:• Union of India v. Bharti Airtel Ltd. • Arise India Limited v. Commissioner of Trade and Taxes, Delhi • Commissioner of Trade and Taxes v. Arise India Limited (SLP dismissed)
Facts (Background):The petitioner’s goods (barbed wire) being transported from Raipur (Chhattisgarh) to Sitapur (U.P.) were intercepted on 19.02.2018. The authorities seized the goods and imposed tax of ₹2,08,800 and equal penalty under Section 129(3) of the U.P. GST Act on the ground that the petitioner was not carrying a U.P. State e-way bill during transportation. The petitioner challenged the seizure and penalty orders before the High Court.Court Decision:The High Court held that the transaction involved inter-State movement of goods and therefore the provisions of the IGST Act and CGST Act would apply. At the relevant time (19.02.2018) the e-way bill system under the CGST Rules had not yet been implemented and the requirement of carrying a U.P. State e-way bill was not applicable to inter-State trade.The Court further observed that the petitioner was carrying valid documents such as tax invoice, consignment note and national e-way bill and IGST had already been paid. As the transportation was bona fide and the requirement of State e-way bill was not applicable, the seizure and penalty orders passed under Section 129(3) of the U.P. GST Act were held to be unsustainable. The impugned orders were quashed and the authorities were directed to refund the amount deposited as tax and penalty.Cases Referred by Court:• Satyendra Goods Transport Corp. vs. State of U.P. & Ors.• ASCICS Trading Company vs. Assistant State Tax Officer & Anr.• Godrej & Boyce Manufacturing Co. Ltd. vs. State of U.P.• M/s. Shaurya Enterprises vs. State of U.P. & Ors.
Biharilal Chhaterpal vs. State of U.P. & Ors. 16-11-2021
Facts (Background):The petitioner’s goods (barbed wire) being transported from Raipur (Chhattisgarh) to Sitapur (U.P.) were intercepted on 19.02.2018. The authorities seized the goods and imposed tax of ₹2,08,800 and equal penalty under Section 129(3) of the U.P. GST Act on the ground that the petitioner was not carrying a U.P. State e-way bill during transportation. The petitioner challenged the seizure and penalty orders before the High Court.Court Decision:The High Court held that the transaction involved inter-State movement of goods and therefore the provisions of the IGST Act and CGST Act would apply. At the relevant time (19.02.2018) the e-way bill system under the CGST Rules had not yet been implemented and the requirement of carrying a U.P. State e-way bill was not applicable to inter-State trade.The Court further observed that the petitioner was carrying valid documents such as tax invoice, consignment note and national e-way bill and IGST had already been paid. As the transportation was bona fide and the requirement of State e-way bill was not applicable, the seizure and penalty orders passed under Section 129(3) of the U.P. GST Act were held to be unsustainable. The impugned orders were quashed and the authorities were directed to refund the amount deposited as tax and penalty.Cases Referred by Court:• Satyendra Goods Transport Corp. vs. State of U.P. & Ors.• ASCICS Trading Company vs. Assistant State Tax Officer & Anr.• Godrej & Boyce Manufacturing Co. Ltd. vs. State of U.P.• M/s. Shaurya Enterprises vs. State of U.P. & Ors.
Facts :The assessee, a registered dealer dealing in garments, claimed input tax credit on purchases supported by invoices. The audit authority disallowed ITC under Section 39(1) alleging that transactions with certain dealers were not genuine and that the burden under Section 70 was not discharged. The First Appellate Authority upheld the disallowance, but the Karnataka Appellate Tribunal allowed the assessee’s appeal. The State filed a revision petition before the High Court challenging the Tribunal’s order. Court Decision:The High Court upheld the Tribunal’s order and dismissed the revision petition. It held that the assessee had discharged the burden under Section 70 by producing invoices and proof of payment through banking channels, establishing genuineness of transactions. The Court further held that once transactions are proved genuine, input tax credit cannot be denied merely because the selling dealer failed to remit tax. It was also held that the statute does not permit action against the purchasing dealer for default of the selling dealer. Cases Referred by Court:• Microqual Techno Pvt. Ltd. v. Additional Commissioner of Commercial Taxes • Packwell Industries v. State of Karnataka
State of Karnataka v. M/s Tallam Apparels 26-02-2021
Facts :The assessee, a registered dealer dealing in garments, claimed input tax credit on purchases supported by invoices. The audit authority disallowed ITC under Section 39(1) alleging that transactions with certain dealers were not genuine and that the burden under Section 70 was not discharged. The First Appellate Authority upheld the disallowance, but the Karnataka Appellate Tribunal allowed the assessee’s appeal. The State filed a revision petition before the High Court challenging the Tribunal’s order. Court Decision:The High Court upheld the Tribunal’s order and dismissed the revision petition. It held that the assessee had discharged the burden under Section 70 by producing invoices and proof of payment through banking channels, establishing genuineness of transactions. The Court further held that once transactions are proved genuine, input tax credit cannot be denied merely because the selling dealer failed to remit tax. It was also held that the statute does not permit action against the purchasing dealer for default of the selling dealer. Cases Referred by Court:• Microqual Techno Pvt. Ltd. v. Additional Commissioner of Commercial Taxes • Packwell Industries v. State of Karnataka
Facts :The petitioner’s goods were detained during transit through a detention order (Form GST MOV-06) on the ground that the invoice value was lower than the MRP and HSN code was wrongly mentioned. The petitioner challenged the detention contending that these grounds do not justify detention under Sections 129 or 130 of the GST Act. It was also contended that there was no discrepancy in tax rate or supporting documents accompanying the goods. The issue arose from detention at a parcel godown during movement of goods.Court Decision:The Court held that undervaluation with reference to MRP is not a valid ground for detention of goods under the GST Act. There is no statutory provision prohibiting sale of goods below MRP, and such comparison cannot justify detention. The Court further held that incorrect HSN classification, without impact on tax rate, does not warrant detention. The detention order was quashed and authorities were directed to release the goods forthwith. Directions were also issued to the Commissioner to ensure such unwarranted detentions are not repeated.Cases Referred:None.
Alfa Group vs The Assistant State Tax Officer & Others 18-11-2019
Facts :The petitioner’s goods were detained during transit through a detention order (Form GST MOV-06) on the ground that the invoice value was lower than the MRP and HSN code was wrongly mentioned. The petitioner challenged the detention contending that these grounds do not justify detention under Sections 129 or 130 of the GST Act. It was also contended that there was no discrepancy in tax rate or supporting documents accompanying the goods. The issue arose from detention at a parcel godown during movement of goods.Court Decision:The Court held that undervaluation with reference to MRP is not a valid ground for detention of goods under the GST Act. There is no statutory provision prohibiting sale of goods below MRP, and such comparison cannot justify detention. The Court further held that incorrect HSN classification, without impact on tax rate, does not warrant detention. The detention order was quashed and authorities were directed to release the goods forthwith. Directions were also issued to the Commissioner to ensure such unwarranted detentions are not repeated.Cases Referred:None.
