Disciplinary action directed against SGST Commissioner by High Court stayed by Supreme Court
ABCAUS Case Law Citation:
ABCAUS 3321 (2020) (06) SC
Important case law relied upon by the parties:
Dabur India Ltd. vs. State of Uttar Pradesh
The Hon’ble Supreme Court In the instant case, the respondent was a proprietary concern and a registered dealer. He purchased goods from a dealer within the State and the IGST was levied in the tax invoice.
The vehicle carrying the consignment was detained and a notice u/s 129(3) of the CGST Act 2017 (‘the Act’) was issued alleging ‘wrong destination’ and directing payment of 9% of the Central Tax and 9% of State Tax along with penalty.
The proprietor could not contest the said notice on account of a marriage and under the pressure from the driver for release of the vehicle, the respondent was forced to pay the demand as per the said notice.
However, the respondent filed a Petition before the Hon’ble High Court and contended that the payment of tax and penalty by the Assistant Commissioner of State Tax was through coercion and threat in spite of the fact that the consignment was covered by all the requisite documents.
It was alleged that when the goods were in transit in an inter-State sale, the State Tax Department could not have detained the same and demand and collect the tax in the manner done which was arbitrary and without jurisdiction.
The Hon’ble High Court observed that in the order of detention issued under 129(1) of the CGST Act, 2017 it was mentioned that the reason for such detention was ‘wrong destination’. However, under the Act, this is not a ground to detain the vehicle carrying the goods or levy tax or penalty.
The case of the Department was that the vehicle was found at a location which was much ahead from the declared destination. It was alleged that the respondent tried to sell the goods in the local market to evade levies both under the CGST and SGST.
The Hon’ble High Court opined that it was possible for the driver to lose his way on account of being unfamiliar with the roads in other cities and bypassing destination does not automatically lead to any presumption that there was an intention to sell the goods at the local market evading the CGST and SGST.
The Hon’ble High Court opined that invoice indicated that applicable IGST was already collected and the goods were inter state, goods cannot be treated as having escaped tax and fresh tax and penalty could not be imposed. Thus, there was no warrant to detain the vehicle along with goods, demand payment of tax and penalty under the CGST and SGST Act, 2017.
The Hon’ble High Court stated that settled law is that no tax shall be levied or collected except by authority of Law as per Article 226 of the Constitution of India.
The Hon’ble High Court stated that as held by the Hon’ble Supreme Court, though the State is entitled to enforce payment and to take all legal steps, it cannot be permitted to play dirty games with the citizens to coerce them in making payments when the citizens were not obliged to make them. It also observed that if any money is due to the Government it should not take extra-legal steps to recover it.
The Hon’ble High Court opined that the impugned action of the Department in collecting tax and penalty under the CGST and SGST Act, 2017 under threat of detention of the vehicle for an absurd reason (‘wrong destination’) when the vehicle carried all the proper documents evidencing that it was an inter-State sale transaction was arbitrary, violative of Articles 14, 265 and 300-A of the Constitution of India.
The Hon’ble High Court directed refund of the amount collected with interest and cost of Rs. 25000/- to be paid by the Asstt. Commissioner.
The Hon’ble High Court also directed the State Tax Department to initiate disciplinary action against the Asstt. Commissioner for his conduct.
Aggrieved by the order of the Hon’ble High Court, the State Department approached the Hon’ble Supreme Court and contended that the High Court was not justified in entertaining the Writ Petition under Article 226 of the Constitution for the purpose of deciding upon the validity of the action initiated by the revenue authorities when an alternate remedy would have been available to the assessee.
It was further contended that the entire judgment of the High Court had proceeded on the basis of presumptions and there was no reason to direct a disciplinary enquiry to be considered against the Assistant Commissioner.
The Hon’ble Supreme Court stayed the operation of the impugned judgment and order of the High Court.
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