Merry Gold vs Union of India

In this petition, the petitioner has sought to quash the impugned order at Annexure M dated 15.12.2022 passed by the respondents, whereby the appeal filed by the petitioner against the proceedings dated 15.07.2022 was dismissed by the Appellate Authority. The learned counsel for the petitioner and the learned counsel for the respondents have been heard, and the material on record has been perused. A thorough examination of the material on record indicates that the petitioner was transporting gold jewelry from Mumbai to Bengaluru. When the vehicle was intercepted by respondent No.4 on 30.06.2022, an order for vehicle verification was issued in GST MOV-02, pursuant to which proceedings under Section 129(3) of the Central Goods and Services Tax Act, 2017 (for short, ‘CGST Act’) were initiated. These proceedings culminated in the order at Annexure H dated 15.07.2022, leading the petitioner to pay a penalty of Rs.14,50,560/- and subsequently file an appeal, which was also dismissed by the Appellate Authority on 15.12.2022. Aggrieved by the impugned order passed by the respondents, the petitioner has approached this Court through the present petition.

In addition to reiterating various contentions urged in the memorandum of the petition and referring to the material on record, the learned counsel for the petitioner invited attention to the Delivery Challan at Annexure B as well as Rule 55 of the Central Goods and Services Tax Rules, 2017 (for short, ‘CGST Rules’) to highlight that there was no violation committed by the petitioner insofar as the Delivery Challan was concerned. It is also submitted that the minor discrepancy of not mentioning the existence of Kundan stones in the Delivery Challan could not have been made the basis to impose the penalty upon the petitioner, and it was always open for the respondents to proceed against the petitioner for not disclosing the Kundan stones in the Delivery Challan. It is further submitted that both the Original Authority and the Appellate Authority have erroneously concluded that there is a violation of Rule 55 of the CGST Rules, which is contrary to the said provision as well as the Delivery Challan. As such, the impugned orders deserve to be set aside, and the penalty of Rs.14,50,560/- deserves to be refunded back to the petitioner.

Per contra, the learned AGA supports the impugned order and submits that since there was a mismatch between the goods and a discrepancy shown in the Delivery Challan, it was open for the respondents to initiate proceedings under Section 129 of the CGST Act and pass the impugned order, which does not warrant interference in the present petition and that the petition is liable to be dismissed. A perusal of the material on record, including the impugned order and the Delivery Challan, indicates that except for the non-disclosure of Kundan stones in the Delivery Challan, all other requirements of Rule 55 of the CGST Rules have been complied with by the petitioner, as evidenced by the Delivery Challan itself. Despite this, both the Original Authority and the Appellate Authority have erroneously invoked Rule 55 of the CGST Rules to conclude that there was a mismatch between the Delivery Challan and the actual goods without appreciating that the mere non-disclosure/non-mentioning of the Kundan stones in relation to the subject gold ornaments, which were being transported solely for sample purposes, could not have been the basis for concluding that the petitioner would be liable to pay a penalty of Rs.14,50,560/-.

A perusal of the impugned order further indicates that both authorities committed an error by proceeding on the erroneous presumption/assumption that the gold was not being sent for sample purposes but was being transported for the purpose of sale and since the names of the prospective purchasers were not mentioned in the Delivery Challan, the petitioner would be liable to pay the penalty as directed in the impugned order. However, the said reasoning and findings recorded by the authorities are clearly contrary to the material on record, which establishes that there is no basis for concluding that the gold ornaments were meant for sale to the prospective purchasers and not for sample purposes, as indicated in the Delivery Challan. It is also pertinent to note that as long as the Delivery Challan contains all the details required under Rule 55 of the CGST Rules, the mere non-mentioning of the Kundan stones cannot be treated as a violation of Rule 55 of the CGST Rules. On this ground as well, the impugned order cannot be sustained.