29 Jun CGST Act: Search and Seizure Penalties Clarified
Introduction
In a recent judicial decision by the Hon’ble Allahabad High Court, the matter of penalty imposition following a search and seizure of a godown under the Central Goods and Services Tax Act, 2017 (“CGST Act”) was deliberated upon, resulting in significant implications for taxation and procedural fairness.
Facts of the Case
M/s. Gopi Chand Batra Traders, engaged in the transportation and storage of goods, faced a search operation by the Proper Officer under the Uttar Pradesh Goods and Services Tax Act, 2017 (“UPGST Act”). Subsequently, penalty proceedings were initiated under Section 129(3) of the UPGST Act, leading to the issuance of a Penalty Order dated March 21, 2018. Despite an appeal, an adverse order was upheld by the Appellate Authority.
Issue
The pivotal issue examined in this case was whether the mere act of conducting a search and seizure of a godown can legally lead to penalty proceedings under relevant GST legislation.
Held
The Hon’ble Allahabad High Court, in Writ Tax No. 1632 of 2018, deliberated on the matter and referenced a precedent set by the Coordinated Bench of the same court in Mahavir Polyplast Pvt. Ltd. v. State of U.P., where it was clearly established that:
- Search and Seizure Do Not Justify Penalty: The court affirmed that the search and seizure of a godown alone cannot substantiate penalty proceedings under Section 129 of the CGST Act.
- Refund of Deposits: It directed the Respondent to refund the tax and penalty amounts deposited by M/s. Gopi Chand Batra Traders.
- Quashing of Orders: Concluding that the penalty proceedings were unjustified, the court quashed and set aside the Impugned Orders.
This decision underscores the importance of procedural adherence and the necessity for substantial grounds before imposing penalties related to GST violations based solely on search and seizure activities.
Conclusion
The verdict by the Hon’ble Allahabad High Court clarifies that while enforcement actions like search and seizure are essential for tax administration, they alone cannot validate penalty proceedings without clear evidence of non-compliance. This ruling provides clarity and protection of rights for businesses under GST laws.
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