If HSN Code and rate of tax is similar, goods can not be detained for incorrect description of items transported.
In a recent judgment, Hon’ble Allahabad High Court has held that when HSN Code and rate of tax is similar, goods can not be detained for mentioning incorrect description of goods transported in tax invoice and e-way bill.
ABCAUS Case Law Citation:
4320 (2024) (11) abcaus.in HC
In the instant case, the assessee Petitioner was a GST registered dealer and engaged in the trade of scrap. The petitioner in the normal course of business has sold goods through tax invoice along with E-way Bill.
During transit on its onward journey, the goods were intercepted and on its physical verification, it was alleged that instead of aluminum, the goods transported was a mix of PVC Aluminum. On the said pretext, the goods were seized and proceedings under Section 129 of the Act was initiated and the Petitioner was saddled with tax and penalty.
Against the proceedings under Section 129 of the Act, an appeal was filed in which new ground was taken by the Department that the goods in question was undervalued.
Before the Hon’ble High Court, the Petitioner challenged the appellate order and submitted that the goods in transit had the same HSN Code and same rate of tax as the goods alleged to be transported. The petitioner had no intention to evade the payment of tax. Hence the proceeding was illegal and arbitrary in manner.
It was further submitted that no show cause notice was issued in respect of under valuation of the goods and for the first time the said plea was taken before the appellate authority. He submitted that the Commissioner, Commercial Tax had issued a circular stating therein that the goods shall not be detained on the ground of under valuation.
In support of his contentions, the Petitioner relied upon the judgement of the Hon’ble High Court.
The Hon’ble High Court observed that the goods in question were accompanying with all the relevant documents i.e. e-way bill, GR, tax invoice etc. and in the e-way bill, the HSN Code were specifically been mentioned and quantity was mentioned. There was no difference in HSN Code and quantity as well as the tax leviable on the goods in question. However, only on the ground that on physical verification there was a slight difference in the description of goods, the goods were detained. Further, the Commissioner, Commercial Tax, UP by way of Circular dated May 9, 2018 had specifically stated that no goods shall be detained on the ground of under valuation.
It was further noted that the Co-ordinate Bench of the Hon’ble High Court has held that in case of a bonafide dispute with regard to the classification between a transitor of the goods and the squad officer, the squad officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial assessing officers and nothing beyond. The Bench held that the only ground for detention of the goods was that the valuation of the goods as per the invoice was not correct is not a valid ground for detaining the goods as the officer concerned was not competent to carry out such detention.
The Hon’ble High Court observed that in the instant case, the GST authorities had failed to bring on record any material that the goods mentioned in the tax invoice accompanying with the goods, had different HSN Code and different rate of tax or mentioned in the detention memo. Once this fact is not disputed that HSN Code and rate of tax is similar, no adverse inference can be drawn. The petitioner would not gain in not mentioning correct description of items or state would loose its legitimate tax.
Accordingly, it was held that the impugned order was unsustainable in the eyes of law and was quashed.
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