Introduction
The case of Poddar Trading Company v. Commissioner, Commercial Tax[i] centers on the imposition of a penalty under s. 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 ('Act') despite the search and seizure operation under s. 67 of the Act where no action was taken. Poddar Trading Company (‘Petitioner’) filed a writ petition (‘WP’) challenging both the order imposing the penalty and the subsequent appellate order. The High Court of Allahabad (‘Court’), in its judgment, addressed the legality of initiating penalty proceedings under these circumstances and provided its findings.
Brief Facts
A search and seizure under s. 67 of the Act were conducted at the premises of the Petitioner, and no items were seized during the search. Subsequently, penalty proceedings under s. 129(3) of the Act was initiated, and an order imposing a penalty on the Petitioner was passed. Aggrieved by this order, the Petitioner filed a WP under a. 226 of the Constitution of India, 1949.
The Petitioner argued that in instances where search and seizure operations take place at their premises, penalties should not be imposed. They emphasized that penalties under s. 129(3) of the Act are applicable when goods are in transit, not when they are stored in a godown. The Petitioner also pointed out that no action was taken by the department during the search and seizure operation.
Held
The Court quashed and set aside the impugned orders, thereby ruling in favour of the Petitioner.
Relying on the precedent outlined in the Mahavir Polyplast Pvt. Ltd. v. State of U.P.[ii], the Court found that the penalty proceedings initiated against the Petitioner were without jurisdiction as penalties cannot be initiated when a search and seizure operation targets the premises of the assessee.
Consequently, the Court held that the entire proceedings initiated against the Petitioner lacked legal basis and were thus untenable.
Our Analysis
The Court's decision underscores the importance of adherence to procedural requirements and jurisdictional boundaries by tax authorities. Further, the Court's scrutiny of the actions of the authorities highlights the need for accountability and diligence in the exercise of powers conferred upon them. The negligence displayed by the authorities in misinterpreting their jurisdiction underscores the potential consequences of hasty or ill-informed decision-making in tax matters.
End Notes
[i] [2024] 160 taxmann.com 492 (Allahabad) dated 11.03.2024.
[ii] 2022 U.P.T.C. [Vol.112]-1514)/ [2022] 142 taxmann.com 8/ [2023] 95 GST 688 (All.)
Authored by Nitish Solanki, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.