The Madhya Pradesh High Court recently comprising of a bench of Justices S.A.Dharmadhikari & Anand Pathak held that the failure to produce necessary documents will lead to cancellation of registration for supply of goods. (M/S Om Trading Company V Deputy Commissioner Of State Tax & Ors )
The bench observed that as per Section 129 of GST Act, there is no mandate for detaining goods merely because driver took an alternate route to reach the destination, if the goods are covered by valid E-way Bill. If all the requisite documents i.e., e-way bill and invoices are available, it cannot be said that no physical transportation of goods had been taken place. However, bringing all the requisite documents on record is a necessary condition.
Facts of the case
The appellant, M/s Om Trading Company is a dealer registered under the Central Goods and Services Tax Act, 2017and is engaged in carrying on the business of selling and purchasing of Clarified Butter (Ghee), Butter and other milk products under the name of M/s Om Trading Company Gwalior.
The show cause notice was issued to the appellant by the Deputy Commissioner of State Tax Gwalior, in which it was stated that the appellant is carrying on the business only on papers and the e-way bills are downloaded but the concerned vehicles are not transporting any goods in actual.
The cause of action action arose when the report was addressed by the Deputy Commissioner, Range- A, Agra to the Joint Commissioner, Gwalior, whereby it transpired that the appellant had carried out business transactions with one M/s Macro International, Kacharighat, Agra and has purchased 8100 kgs. of clarified butter through bill amounting to Rs.23,49,000/- and again purchased 1000 Tin of clarified butter through bill amounting to Rs.40,50,000/-.
The show cause notice was issued as it was found that the bills were without supply of goods in violation of stipulations contained in the Act of 2017. The notice was purportedly issued under Rule 21 (b) of the Central Goods and Services Tax Rules 2017, which mandates that the registration granted to the person is liable to be cancelled, if the person issued invoice or bill without supply of goods or services in violation of the provisions of the Act or the rules made thereunder.
Since the appellant failed to prove his e-way transaction details, his registration has been cancelled by order. Being aggrieved, the appellant preferred an appeal under Section 107 of the Act of 2017and Appellate Authority affirmed the order passed by the Commissioner of State Tax. Later he filed a writ petition whereby the orders passed by the Commissioner of State Tax as well as Appellate Authority have been affirmed. Being aggrieved, the present Writ Appeal has been filed.
Contention of the parties
Shri Kamal Kumar Jain, learned counsel appearing for the appellant submitted that the impugned order passed by the learned Single Judge is perverse and contrary to law and therefore the same deserves to be set aside. It is further contended that the order dt.09.01.2019 passed by the appellate authority is completely silent as to the provisions under which the impugned order has been passed and no good reason has been assigned for cancellation of GSTN of the appellant.
The appellant further contended that the consignment was being transported by the transporter namely M.R. Road Lines through which the material was physically transported to Gwalior through Vehicle No. UP83T0223 and HR63A3341 and the route taken was from Agra to Kheragarh to Rajakheda, then Dholpur to Morena and then Gwalior and in between there was no toll plaza located. Even though all the requisite documents i.e. e-way bill and invoices were available, therefore, it can not be said that no physical transportation of goods had taken place from Agra to Gwalior.
The appellant further contended that the said collection of tax and penalty by the respondents is through coercion and threat inspite of the fact that cancellation is covered by all the documents. It is alleged that it is an interState sale and the respondents can not deny the same and demand and collect the tax in the manner in which they have done, which is arbitrary and without jurisdiction. In such circumstances, the impugned order deserves to be set aside.
Shri R.P.Singh Kaurav, learned Government Advocate appearing for the respondents/State contended that the appellant had failed to bring on record any material before the authorities to show that the bills/e-way bills which were issued and are in question in the present litigation pursuance to which any material physically transferred from Agra to Gwalior or not and therefore there is no infirmity in the order dt.27.08.2019 passed by the writ court.
He further contended that even assuming for the sake of argument that the alleged contentions of the appellant are true, in that case there are number of toll plaza between Morena to Gwalior and if the goods had been physically transferred, the appellant ought to have possessed the toll plaza receipts. It is also settled practice that the transporters used to choose shortest route available to transport the goods in order to save time and money. In the present case, the route used to transport the goods is not only longer route but also takes more time to reach the destination. It is very surprising and strange that instead of using four lane high way, some alternative route, which is longer, has been used by the appellant. Cancellation of registration of GSTN was effected after affording due opportunity of hearing to the appellant
Courts observation & judgment
The HC stated that “Ongoing through the order passed by the appellate authority it appears that the detailed inquiry was conducted before passing the impugned order, in which certain discrepancies were found with regard to the business of the appellant. It was found that the appellant had failed to prove away bill transaction details, therefore, the registration was canceled. A proper opportunity of hearing was afforded to the appellant. No cogent documentary evidence is available on record to justify the stand taken by the appellant. The learned Single Judge has rightly come to the conclusion and dismissed the writ petition.”
The Court also observed that “The judgments relied on by the learned counsel for the appellant are of no assistance to the appellant inasmuch as the facts of those cases and the present case are altogether different. In the present case, in the detailed inquiry, it was found that no material was physically transferred from Agra to Gwalior.”
The court dismissing the writ appeal held that “no fault can be found in the finding recorded by the learned Single Judge as well as learned appellate authority”
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