2025 (6) TMI 1421 - HC - GST

Confiscation of goods with conveyance - mismatch between the goods described in the tax invoice and the goods physically found during inspection - typographical error - intent to evade duty - clerical/typographical error - burden of proof - interpretation of Section 130 of the CGST/SGST Act - HELD THAT - The tax invoice is furnished along with the Writ Petition and the same is marked as Annexure-D. It contains a tabular column. There are six descriptions of goods and the controversy is about the fourth item. At serial number four it is shown as Copra weighing 8, 50, 000 g / 850 kg. In the E-way bill it has been mentioned as dry grapes. The petitioner has paid the requisite tax on all the goods. Hence the tax authorities ought to have considered whether the petitioner has evaded the tax liability. Except for quoting the Sections the impugned orders do not provide any reasons. The mistake was merely a clerical error and there was no intention to evade tax. They presented supporting documents including the tax invoice packing list and bill of entry which indicated that all necessary duties and taxes had been paid. The burden of proof lies on the petitioner in certain cases but when the error is a typographical or clerical one the initial burden of proof is on the tax authorities to demonstrate an intention to evade tax. In this case the department failed to establish such intent and did not discredit the documents provided by the petitioner. Furthermore there is a tabular column in the order passed by the Joint Commissioner of Commercial Taxes (Appeals). There are certain discrepancies in mentioning the quantity of the grapes in the table - The first respondent has just confirmed the order passed by the original authority. There was no evasion of tax by the petitioner. However the Original Authority and the Appellate Authority went ahead with the matter and rejected the claim of the petitioner. The order dated 23.08.2022 passed by the first respondent in Appeal No.APL/GST-30/2021-22 vide Annexure-A and the order dated 10.07.2021 passed by the second respondent in order No.ACCT(ENF)/HPT/MOV-11/2021-22/109 vide Annexure-B are quashed - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

(a) Whether the tax authorities were justified in confiscating the goods and conveyance and imposing tax demand, penalty, and fine under the GST Act, 2017, on the ground of a mismatch between the goods described in the tax invoice and the goods physically found during inspection.

(b) Whether the alleged mismatch of goods constituted an intentional evasion of tax liability by the petitioner or was merely a clerical/typographical error.

(c) The applicability and interpretation of Section 130 of the CGST/SGST Act regarding confiscation powers of the State Government in cases of alleged tax evasion.

(d) The burden of proof regarding the intention to evade tax in cases of discrepancies between documents and physical goods.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Justification of confiscation and imposition of tax demand, penalty, and fine for mismatch of goods

The legal framework relevant to this issue is the GST Act, 2017, particularly provisions relating to tax demands, penalties, and confiscation under Section 130. The authorities intercepted a vehicle carrying Dry Grapes, which was accompanied by a tax invoice and E-way bill. However, the tax invoice described one item as Copra weighing 850 kg, whereas the physical verification revealed only Dry Grapes and no Copra.

The Court examined the original records secured from the department, including the tax invoice and E-way bill. It was found that the invoice contained a tabular column listing six descriptions of goods, with the fourth item erroneously described as Copra instead of Dry Grapes. The petitioner had paid tax on all goods listed.

The tax authorities, relying on the mismatch, confiscated the goods and conveyance and imposed tax demand, penalty, and fine. The Court noted that the impugned orders merely quoted statutory provisions without providing detailed reasons or evidence demonstrating intentional tax evasion.

The Court emphasized that the authorities failed to consider whether the petitioner had in fact evaded tax liability, given that the petitioner had produced supporting documents such as the tax invoice, packing list, and bill of entry, indicating payment of requisite taxes.

The Court concluded that the confiscation and penalties were not justified solely on the ground of the mismatch, especially when the petitioner had paid tax and there was no evidence of evasion.

Issue (b): Whether the mismatch was a clerical/typographical error or intentional tax evasion

The petitioner contended that the discrepancy was a typographical error and there was no intention to evade tax. The Government argued that the mismatch indicated deliberate evasion.

The Court analyzed the evidence and found that the petitioner had consistently maintained that the error was clerical. The petitioner furnished documents supporting the payment of tax on the goods actually transported.

The Court observed that the burden of proof in cases of alleged tax evasion lies initially on the tax authorities to demonstrate intent. Mere clerical or typographical errors do not ipso facto establish evasion.

Since the authorities failed to discredit the petitioner's documents or establish fraudulent intent, the Court held that the mismatch was a bona fide error rather than an attempt to evade tax.

Issue (c): Applicability and interpretation of Section 130 of the GST Act regarding confiscation powers

The Government invoked Section 130, which empowers the State Government to confiscate goods and conveyances involved in tax evasion.

The Court acknowledged the statutory power but clarified that such power must be exercised based on cogent evidence of evasion. The mere presence of a mismatch without proof of intent or evasion cannot justify confiscation.

The Court highlighted that the impugned orders lacked reasoned analysis or findings on evasion, rendering the exercise of confiscation powers arbitrary.

Issue (d): Burden of proof regarding intention to evade tax in case of discrepancies

The Court noted that while the burden of proof may lie on the petitioner in certain circumstances, when the discrepancy arises from a clerical or typographical error, the initial burden shifts to the tax authorities to prove intentional evasion.

In this case, the authorities failed to discharge this burden, as they did not provide evidence or disprove the petitioner's documents indicating tax payment.

The Court further noted discrepancies in the quantity of grapes mentioned in the appellate order's tabular column, undermining the reliability of the authorities' findings.

The Court concluded that the authorities failed to consider relevant facts and disregarded the petitioner's explanations, resulting in an unjustified order.

3. SIGNIFICANT HOLDINGS

The Court quashed the orders of confiscation and penalty passed by the Assistant Commissioner of Commercial Taxes and the Joint Commissioner of Commercial Taxes (Appeals), stating:

"Except for quoting the Sections, the impugned orders do not provide any reasons."

"The mistake was merely a clerical error, and there was no intention to evade tax."

"The Original Authority and the Appellate Authority have failed to have regard to the relevant considerations and disregarded relevant matters."

"The burden of proof lies on the petitioner in certain cases, but when the error is a typographical or clerical one, the initial burden of proof is on the tax authorities to demonstrate an intention to evade tax."

"The authority concerned is hereby directed to refund the amount paid by the petitioner."

The core principles established include:

• Confiscation and penalty under GST must be supported by clear evidence of intentional tax evasion.
• Typographical or clerical errors in tax documents, without evidence of fraudulent intent, do not justify confiscation or penalties.
• The tax authorities must provide reasoned orders explaining the basis for their findings and actions.
• The burden of proof regarding evasion initially rests on the tax authorities when the discrepancy is a clerical error.

On the facts, the Court held that the petitioner did not evade tax and that the authorities' actions were unjustified, thereby allowing the writ petition and directing refund of amounts paid.