Case Law
Subject : Tax Law - Goods and Services Tax (GST)
Kanpur, India – In a recent judgment by the Allahabad High Court, Justice PiyushAgrawal dismissed a batch of writ petitions challenging the seizure of goods under the Goods and Services Tax (GST) Act. The court firmly established that the onus lies on the taxpayer to prove the genuineness of the movement of goods in transit, and discrepancies in documentation and driver statements can be detrimental to their case.
The case, Writ Tax No. 1022 of 2021 , with similar controversies in connected petitions, saw a proprietorship firm engaged in trading pan masala and scented tobacco challenge an order dated 25.10.2021, which upheld the seizure of their goods. The petitioner argued that the seizure was illegal as it was based on undervaluation, which they claimed is beyond the detaining authority's power.
Represented by Mr. Aditya Pandey, the petitioner contended that they were transporting goods from West Bengal/Assam to Delhi based on orders from registered dealers. Tax invoices were issued, and since the value was under Rs. 50,000, no e-way bill was generated. The goods were intercepted in Kanpur, and a show cause notice was issued based on the truck driver's statement that goods were loaded in Kanpur, contradicting the invoice origin. The petitioner argued that a crossing challan was present, and undervaluation was not a valid ground for seizure, citing precedents like S.K. Trading Co. and M/s Maa Aabe .
Mr. Ravi Shanker Pandey, Additional Chief Standing Counsel for the State, countered that it was a case of tax evasion. The seizure was not solely based on undervaluation but also on "non-genuine documents." He highlighted the contradiction between the invoice origin (West Bengal/Assam) and the driver's statement (Kanpur loading). The State argued that the petitioner failed to provide evidence of the goods' movement from West Bengal/Assam, such as truck numbers or toll receipts, emphasizing the driver's statement as initial evidence of the goods' actual origin.
Justice
> "It is admitted between the parties that the goods in question was accompanying with the tax invoice and cross challan but on the statement of the truck driver that the goods were loaded from Kanpur, the proceedings have been initiated. The accompanying document shows the movement of the goods from West Bengal / Assam to Delhi, whereas in the statement of the truck driver the goods were loaded at Kanpur."
The court emphasized the petitioner's failure to provide any evidence to substantiate the claimed origin from West Bengal/Assam, stating, "The record further shows that the petitioner has utterly failed to bring on record the actual movement of the goods from the West Bengal / Assam to Kanpur." The court relied on the principle that in original proceedings under tax statutes, the primary burden of proof lies with the assessee.
Referencing the Supreme Court’s ruling in *
> "In the case in hand, the petitioner was duty bound to establish beyond doubt the actual physical movement of the goods from West Bengal / Assam to Delhi via Kanpur but the petitioner has failed to do so, therefore, accompanying tax invoices and other documents cannot said to be genuine. In other words, it is a clear case of contravention of Act as well as the Rules."
The court also cited its earlier judgment in M/s Ghata Mehandipur Balaji Grinding Works Pvt. Ltd. , giving weight to the driver's initial statement recorded at the time of interception.
> “The Court feels that neither the papers were available with the revisionist nor they were produced within a reasonable period. The statements of the Driver which is obtained at the first instance should be given more sanctity than the explanation which are produced by the managers and proprietors later-on.”
Addressing the undervaluation argument, the court, referring to M/s Radha Fragrance Vs. Union of India , clarified that seizure can be justified even on grounds of undervaluation if it is deliberate to evade tax or circumvent the Act's provisions, especially concerning e-way bill exemptions for goods under Rs. 50,000.
Ultimately, the Allahabad High Court dismissed all writ petitions, upholding the seizure orders. The judgment reinforces the stringent documentation and proof requirements for taxpayers transporting goods, particularly concerning the origin and movement of goods in transit under the GST regime. It underscores that initial discrepancies, especially driver statements contradicting official documents, can significantly weaken a taxpayer's case, and the burden to prove the genuineness of transactions rests firmly with the assessee. This ruling serves as a crucial reminder for businesses to maintain meticulous records and ensure consistency across all documentation related to goods in transit.
#GST #TaxLaw #GoodsInTransit #AllahabadHighCourt
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