Penalty can’t be imposed on goods in transit with valid tax invoice and e-way bill, even after suspension of GST registration: Allahabad High Court

Allahabad High Court: In a writ petition challenging a demand and penalty order, the division bench of Arun Bhansali, CJ. and Vikas Budhwar, J., set aside the impugned order passed under Section 129 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) , asthe documents accompanied by the goods were proper and the penalty was solely imposed on the ground of cancellation of GST registration of the appellant.

On 04-10-2024, the authorities intercepted the appellant firm’s vehicle when it was on its way from Patna to Gurugram. Upon inspection, the goods were allegedly not accompanied by the proper documents and subsequently, the goods were detained and a notice was issued , indicating that the registration of the appellant was suspended on the ground that it was based on fake documents. The appellant was proceeded against under Section 129 of the CGST Act read with Section 20 of the Integrated Goods and Services Tax Act, 2017 and vide the impugned order a demand under Section 129 (1)(b) of the CGST Act of Rs.14,81,490/- was made.

Perusing the documents on record, the Court held that the documents in question which were accompanied by the goods, were dated 01-10-2024 and contained the requisites. The Court noted that the notice issued by the authorities indicated that the registration was suspended by the jurisdictional authorities at Bihar on 03-10-2024, based on which, the penalty was imposed under provisions of Section 129(1)(b) of the CGST Act.

Drawing similarities with the case of Halder Enterprises v. State of U.P.¹, the Court held that it is not the case of the respondents that the goods were not accompanied by proper tax invoice and E-way bill. It is solely on the ground of suspended registration that the action was initiated, and the impugned order was passed.

Allowing the writ petition, the Court set aside the impugned order and directed the authorities to carry out the exercise in terms of Section 129 (1)(a) of the CGST Act within two weeks from the date of this order,

[Lakhdatar Traders v. State of UP, 2024 SCC OnLine All 6816, decided on 11-11-2024]

Advocates who appeared in this case:

For the Appellant: Aditya Pandey

For the Respondent: Ankur Agarwal, S.C.