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Intention to evade tax cannot be attributed to movement of assessee’s goods from one unit to another: Allahabad High Court

The Allahabad High while allowing the petition filed challenging the order dated 23.02.2019 passed by the Additional Commissioner, State Tax, Mathura as well as the order dated 16.05.2018 passed by the Assistant Commissioner, State Tax, Mobile Squad, Mathura under section 129(3) of the UP GST Act, has held that intention to evade tax cannot be attributed on movement of assesse’s goods from one unit to another.

A Single Bench of Justice Piyush Agrawal passed this order while hearing a petition filed by M/S Vacmet India Ltd.

The facts of the case are that the petitioner is a Company registered under the Companies Act, 1956 and deals in production of polyester films, BOPP films, specialty coated films and metallized paper, etc in India.

On 14.05.2018, while the goods were transported from manufacturing unit of the petitioner at Agra to its unit at Kosi Kalan, Mathura, the vehicle was intercepted and detention order in Form GST MOV 06 under section 129(1) UP GST Act was passed on the ground that part – B of the e-way bill was not filled up.

Thereafter, a show cause notice was issued on the same day, i.e, 14.05.2018, proposing to impose tax amounting to Rs 1,82,000/- on the estimated value of Rs 6,50,000/-, together with penalty of Rs 1,82,000/-.

The petitioner submitted its reply stating that non-filling up of Part B of e-way bill was a mistake on the part of the transporter and as soon as the petitioner realized the mistake, e-way bill was updated and the Part B was filled up.

Thereafter, on 16.05.2018, the respondent no. 2 passed the penalty order under section 129(3) of the UP GST Act. Against the penalty order, the petitioner preferred an appeal before the respondent no 1, which also dismissed vide impugned order dated 23.02.2019 affirming the penalty order dated 16.05.2018.

Counsel for the petitioner submitted that the petitioner, being a registered dealer, is adhering to the provisions of GST in letter and spirit. In the normal course of business, the petitioner made a stock transfer from its Agra unit to its Kosi Kala unit at Mathura, which was accompanying with all proper documents, such as, stock transfer of challan, e-way bill, transporter bilty and no discrepancy was found in the said documents, except Part ‘B’ of e-way bill, which was required to be filled up by the transporter was not filled, but as soon as the said discrepancy came to the notice of the petitioner, the same was updated and filled up immediately and produced before the authority concerned, along with its reply.

He further submitted that specific ground was raised before the authorities concerned that there was no intention to evade payment of tax as the goods in question were going from the petitioner’s one unit to another unit at Mathura as stock transfer and since there was no element of tax evasion involved in the present case, the proceedings ought to have been dropped by the authorities below.

Per contra, ACSC supports the impugned orders and submitted that at the time of interception of the goods in question, genuine documents were not produced as required under rule 138 of the GST Rules as the e-way bill, part ‘B’ was not filled up and therefore, the proceedings have rightly been initiated against the petitioner. He further submits that in the event the goods were not detained, the petitioner ought to have succeeded in not disclosing the goods in its books of account. He prays for dismissal of the petition.

The Court observed that,

Admitted, the goods in question were going to petitioner’s one unit to another, i.e, from Agra to Mathura, as stock transfer. The said goods were accompanied with stock transfer challan, in which no discrepancy, whatsoever, was pointed out. Further, the consignment note/bilty was also accompanying the goods, in which also no discrepancy was pointed out. E-way bill was also accompanying the goods, in which part ‘A’ was duly filled, but part ‘B’ was not filled up, on the basis of which, the proceedings were initiated against the petitioner.

At the time of interception of the goods, when it came to the notice of the petitioner, the same was duly filled up and produced before the authorities along with the reply, but not being satisfied with the reply, the impugned penalty order was passed against the petitioner, which was confirmed by the appellate authority in appeal.

In the appeal, a specific point was raised that the goods in question are raw material, which were going from one unit to another unit as stock transfer and there was no intention of the petitioner to evade any tax as there was no liability for payment of tax for stock transfer being made from one unit to another, but still, by the impugned order, the penalty order has been confirmed.

“The record further reveals that in pursuance of the show cause notice, the petitioner filed reply along with duly filled up Part ‘B’ of e-way bill. Once it was brought to the notice of the authorities that the discrepancy, which was pointed out, was rectified before passing of the seizure order, the authority ought to have taken a lenient view in the facts & circumstances of the present case.

ACSC could not point out any provision under the GST Act, which could show that while stock transfers are made within the State of Uttar Pradesh from one unit to another, i.e., Agra to Mathura, the tax is to be charged as the goods in question, which were raw material and not a finished goods.

The specific point was raised before the authority also, but the authority failed to consider the same. Since the respondents have utterly failed to show any intention to evade payment of tax in the case, the impugned order cannot be justified.

Since the goods in question were stock transfer from one Unit to another within the State of Uttar Pradesh (Agra to Mathura) and in absence of any provision being pointed out by the ACSC or any authority below that the goods (stock transfer) in transit were liable for payment of tax, no evasion of tax could be attributed to the goods in question. Once there was no intention to evade payment of tax, the entire proceedings initiated against the petitioner are vitiated and are liable to be set aside”, the Court further observed while allowing the petition.

In view of the aforesaid facts & circumstances of the case, the Court quashed the order dated 23.02.2019 passed by the Additional Commissioner, State Tax, Mathura as well as the order dated 16.05.2018 passed by the Assistant Commissioner, State Tax, Mobile Squad, Mathura.

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