HC set aside both SCN & Order due to lack of reasoning for tax liability and penalty

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Case Details: Ram Prakash Chauhan v. Commissioner of Delhi - [2023] 148 taxmann.com 168 (Delhi)

Judiciary and Counsel Details

• • Vibhu Bakhru & Amit Mahajan, JJ.
  • Ms Smriti Sinha, Satyam Thareja, Ms Vasundhara Nagarath & Ms Shriyanshi Pathak, Advs. for the Petitioner.
  • Satyakam, Standing Counsel for the Respondent.

Facts of the Case

The petitioner operates a steel/iron bar trading company. He purchased goods from Mahendra Steels and sold them to S.K Integrated Consultants. The aforementioned goods were being transported straight from M/s Mahendra Steels to M/s S.K. Integrated Consultants. As a result, a Bill-to-Ship-to model is created. The GSTN of petitioner is plainly stated in the E-way bill, but because the transaction is Bill-to-ship-to, the address mentioned in the E-way bill was that of the recipient of goods. The truck transporting the goods was detained because the documents discovered were defective. However, according to the respondent’s counter-affidavit, the products were detained because they were not accompanied by an E-Way Bill.

The reasons stated in the show cause notice and the detention order for detaining the goods as prima facie documents are both defective, and an order of demand for tax and penalty was issued on the same day. Because the petitioner required the goods immediately, he paid the tax and penalty and demanded the goods to be released. Following that, the petitioner filed an appeal with the Appellate Authority, which dismissed the appeal on the grounds that the Proper Officer had categorically pointed out the discrepancy in the form of mis-Match between the E-Way Bill and goods in Movement in the order, which formed the basis for penalising the Appellant.

High Court Held

The SCN and detention order lacked an explanation of the reason for detaining the goods, raising the tax and penalty liability, and simply stated that the documents submitted are found to be defective, with no specific flaw mentioned. The Honourable High Court set aside both the Show Cause Notice and the demand order imposing tax and penalty, and remanded the case to the relevant GST officials to be decided afresh.