2025 (6) TMI 1664 - HC - GST

Maintainability of petition - availability of alternative remedy - lack of jurisdiction - Detention of goods - levy of tax and penalty - reliance placed upon reasons which were not part of the show cause notice - power of judicial review - HELD THAT - This Court has carefully examined the impugned order dated 02.06.2025 in the context of the material available on record the statutory provisions under the CGST Act and the principles of natural justice. The impugned order reflects due application of mind to the facts and submissions presented. The order sets out the factual matrix records the reply submitted by the Petitioner and provides cogent reasons for rejecting the same. No procedural impropriety manifest illegality or violation of the principles of natural justice has been demonstrated by the Petitioner. The authorities have acted within the scope of their powers under Section 129(3) of the CGST Act and their conclusions are based on a reasonable appreciation of the available evidence. The power of judicial review under Article 226 of the Constitution does not extend to reappreciation of evidence or substitution of factual findings particularly when an efficacious alternative remedy is available under the statute. This Court is of the considered view that the writ petition is devoid of merit and does not warrant interference under Article 226 of the Constitution. Accordingly the present writ petition stands dismissed. However the Petitioner is granted liberty to pursue the remedy of statutory appeal under Section 107 of the CGST Act 2017 if so advised.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• Whether the order passed under Section 129(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) imposing tax liability and penalty on the petitioner is valid and sustainable.
• Whether the weighment report relied upon by the authorities to determine excess quantity of goods is admissible and in accordance with statutory procedure.
• Whether the valuation of goods at Rs. 240/- per kg instead of the declared Rs. 145/- per kg is justified and legally sustainable.
• Whether the petitioner was denied natural justice by the authorities relying on grounds not disclosed in the show cause notice.
• Whether the petitioner is entitled to challenge the order by way of writ petition, bypassing the statutory appellate remedy under Section 107 of the CGST Act.
• Whether penalty can be imposed by enhancing the valuation of goods and without establishing intention to evade tax.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the order under Section 129(3) CGST Act imposing tax liability and penalty

Relevant legal framework and precedents: Section 129(3) of the CGST Act provides for detention, seizure, and release of goods and conveyances in transit along with imposition of tax and penalty if goods are transported in contravention of the Act. Precedents emphasize the need for cogent evidence and adherence to procedural safeguards before imposing penalties.

Court's interpretation and reasoning: The Court examined the factual matrix wherein the petitioner dispatched 350 bags of Assam dried areca nuts with declared net weight of 24,500 kg, accompanied by requisite documents including e-way bill and invoice. The authorities intercepted the vehicle, conducted weighment, and found excess quantity of 420 kg. The Court noted the absence of any reliable material from the petitioner to dispute weighment figures or establish genuineness of the transaction.

Key evidence and findings: The weighment slip showed gross weight of 36.310 MT and tare weight of 11.390 MT, yielding net weight of 26.920 MT, exceeding declared weight by 420 kg. The petitioner failed to produce supplementary documents such as original purchase invoice, weighment certificate at loading, or bank transaction proof. The driver's statement revealed discrepancies regarding the transporter and loading point.

Application of law to facts: The Court found that the authorities had sufficient material to raise legitimate doubts about the authenticity of the goods movement and transaction. The order under Section 129(3) was passed after due consideration of the petitioner's reply and was not procedurally flawed.

Treatment of competing arguments: The petitioner contended that the weighment was not conducted per statutory procedure and valuation was arbitrarily enhanced. The Court rejected these contentions noting absence of any statutory mandate for weighment procedure beyond administrative practice and held that valuation disputes are better suited for appellate adjudication.

Conclusion: The order under Section 129(3) imposing tax liability and penalty was valid and sustainable.

Issue 2: Admissibility and statutory compliance of weighment report

Relevant legal framework and precedents: The CGST Rules do not prescribe a rigid procedure for weighment at the point of interception, but the authorities must adhere to principles of natural justice and maintain evidentiary standards.

Court's interpretation and reasoning: The weighment was conducted in presence of the driver and two independent witnesses, following usual administrative practice. The petitioner failed to show any statutory or procedural irregularity in the weighment process or that the weighment slip was unauthenticated or inaccurate.

Key evidence and findings: The weighment slip was undisputed and the petitioner did not produce any contrary weighment certificate or evidence.

Application of law to facts: The Court held that the weighment report was admissible evidence and the administrative practice followed was reasonable and lawful.

Treatment of competing arguments: The petitioner's argument that weighment should have been conducted in presence of the driver was met by the respondent's evidence that the driver was present and the weighment was conducted properly.

Conclusion: The weighment report was admissible and complied with statutory requirements.

Issue 3: Justification and legality of valuation enhancement from Rs. 145/- to Rs. 240/- per kg

Relevant legal framework and precedents: Section 15 of the CGST Act defines "transaction value" as the price actually paid or payable for goods, subject to certain conditions. Valuation can be enhanced if the declared value is found to be not the true transaction value. Precedents establish that valuation enhancement must be supported by cogent evidence.

Court's interpretation and reasoning: The Court observed that the valuation adopted by the respondent was based on prior similar consignments and prevailing market rates. However, the Court noted that valuation disputes involve factual determinations and are more appropriately examined in appellate proceedings.

Key evidence and findings: The petitioner submitted tax invoices declaring Rs. 145/- per kg, supported by e-way bills and consignment notes. The respondent relied on market rates and weighment findings to enhance valuation.

Application of law to facts: The Court declined to interfere with the valuation in writ jurisdiction, emphasizing that the petitioner has an efficacious remedy by way of appeal under Section 107 of the CGST Act.

Treatment of competing arguments: The petitioner argued the valuation enhancement was arbitrary and lacked legal basis. The Court acknowledged the dispute but held that the appropriate forum for such challenge is the appellate authority.

Conclusion: Valuation enhancement was not adjudicated upon by the Court in writ jurisdiction; petitioner may raise this issue in appeal.

Issue 4: Alleged denial of natural justice due to reliance on grounds not in show cause notice

Relevant legal framework and precedents: Principles of natural justice require that the party be given an opportunity to know and meet the case against them. Reliance on grounds not disclosed in the notice may vitiate the order.

Court's interpretation and reasoning: The Court found that the impugned order set out factual matrix and reasons for rejecting the petitioner's submissions. It did not rely on any new grounds beyond those indicated in the notice.

Key evidence and findings: The petitioner failed to demonstrate any procedural irregularity or that the authorities considered extraneous grounds without opportunity to respond.

Application of law to facts: The Court held that there was no violation of natural justice.

Treatment of competing arguments: The petitioner's contention was rejected as unsubstantiated.

Conclusion: No denial of natural justice was established.

Issue 5: Maintainability of writ petition bypassing statutory appeal remedy

Relevant legal framework and precedents: The CGST Act provides a statutory appeal mechanism under Section 107. Courts generally discourage writ petitions challenging orders where efficacious statutory remedies exist. Exceptions arise only in cases of lack of jurisdiction or grave injustice.

Court's interpretation and reasoning: The Court noted the petitioner's submission that the order suffers from lack of jurisdiction and that pre-deposit requirement for appeal would cause grave injustice. However, the Court found no jurisdictional defect in the order and held that the petitioner must avail the statutory appeal remedy.

Key evidence and findings: The Court observed that the order is appealable and that the petitioner was granted liberty to file appeal. The Court emphasized that judicial review under Article 226 does not extend to re-appreciation of evidence when alternative remedy is available.

Application of law to facts: The Court dismissed the writ petition on maintainability grounds.

Treatment of competing arguments: The petitioner relied on a Supreme Court precedent to argue that appeal was not appropriate remedy; the Court distinguished the facts and upheld the statutory remedy.

Conclusion: Writ petition was not maintainable; statutory appeal remedy must be pursued.

Issue 6: Imposition of penalty without establishing intention to evade tax and by enhancing valuation

Relevant legal framework and precedents: Penalty under GST law requires proof of tax evasion or willful default. Enhancement of valuation for penalty purposes must be legally justified. Various precedents cited by petitioner hold that penalty cannot be imposed merely by enhancing valuation or without establishing intent to evade tax.

Court's interpretation and reasoning: The Court noted the petitioner's reliance on precedents but observed that the issue of penalty quantum and justification involves factual and evidentiary examination. Such issues are better suited for appellate adjudication.

Key evidence and findings: The impugned order imposed penalty based on excess quantity and valuation enhancement. The petitioner did not demonstrate absence of intent or procedural infirmity in penalty imposition.

Application of law to facts: The Court refrained from interfering with penalty imposition in writ jurisdiction.

Treatment of competing arguments: The petitioner's reliance on precedents was acknowledged but the Court held that these issues can be ventilated in appeal.

Conclusion: Penalty imposition issue not adjudicated in writ; appeal is appropriate forum.

3. SIGNIFICANT HOLDINGS

"The impugned order reflects due application of mind to the facts and submissions presented. The order sets out the factual matrix, records the reply submitted by the Petitioner, and provides cogent reasons for rejecting the same. No procedural impropriety, manifest illegality, or violation of the principles of natural justice has been demonstrated by the Petitioner."

"The power of judicial review under Article 226 of the Constitution does not extend to reappreciation of evidence or substitution of factual findings, particularly when an efficacious alternative remedy is available under the statute."

"The valuation adopted by the Respondent, although disputed by the Petitioner, cannot be adjudicated upon by this Court in the present writ jurisdiction, as it involves factual determinations that are more appropriately examined in the appellate proceedings under the statutory framework."

"Accordingly, the present writ petition stands dismissed. However, the Petitioner is granted liberty to pursue the remedy of statutory appeal under Section 107 of the CGST Act, 2017, if so advised."

The Court established the core principles that orders passed under Section 129(3) CGST Act must be supported by cogent evidence and procedural fairness, valuation disputes are to be resolved through statutory appeal, and writ jurisdiction is not a substitute for appellate remedy where facts are in dispute. The Court confirmed that weighment reports prepared in administrative practice are admissible and that natural justice was not violated. The Court emphasized that penalty imposition requires factual scrutiny and is not amenable to writ interference when appeal is available.

Final determinations on each issue were that the impugned order was valid and sustainable, the weighment report was admissible, valuation enhancement and penalty imposition issues are to be examined in appeal, no natural justice violation occurred, and the writ petition was not maintainable due to availability of statutory appeal remedy.