Alleged ‘intent to evade tax’ must have direct nexus with activity of trader, reiterates P&H High Court while quashing proceedings under CGST Act

Read Order: M/s Raghav Metals v. State of Haryana and others

Monika Rahar

Chandigarh, March 21, 2022: While relying upon the judgment of this Court in M/s. Shiv Enterprises vs. State of Punjab and Others,CWP-18392-2021, the Punjab and Haryana High Court has reiterated that the ‘intent to evade tax’ must have a direct nexus with the activity of trader and that a trader cannot be accused of having an intention to evade payment of tax for an act or omission on part of a person not immediately linked to his activity. 

In this petition before the Bench of Justice Ajay Tewari and Justice Pankaj Jain, the petitioner engaged in the business of copper wires and copper scraps claimed that in the ordinary course of business, he sold copper scraps to M/s R.N.T. Metals Pvt. Ltd., Bhiwadi (Rajasthan) for an amount of Rs. 83,69,594/- (including IGST @ 18%). While the aforesaid goods were in transit in a vehicle, the same were intercepted by the fourth respondent. 

The Counsel for the petitioner claimed that the goods were accompanied by a valid Invoice and e-way bill, as contemplated under the Haryana GST Act, 2017/Central GST Act, 2017. On being asked by the Authorities, the said documents were produced however the vehicle carrying goods was ordered to be stationed and Form GST MOV-02 was issued. Reply to GST MOV-02 was filed and on the same date, the fourth respondent issued an Order of Detention under Section 129(1) of the Act in Form GST MOV-06. 

Hence, the petitioner filed the present writ petition claiming that the proceedings under Section 129 of the Act against him were without jurisdiction and thus deserved to be quashed.

The respondent’s Counsel stated that so far as the issue with respect to bogus purchase by the supplier of the petitioner was concerned, the issue was settled by the law laid down by the Punjab and Haryana High Court in M/s. Shiv Enterprises’s Case (Supra) wherein it was held that the ‘intent to evade tax’ must have a direct nexus with the activity of trader and the opinion formed by the authorities must reflect such nexus before proceeding under Section 130 of 2017 Act. Further, it was also held that a trader cannot be accused of having an intention to evade payment of tax for an act or omission on part of a person not immediately linked to his activity. 

However, Deputy Advocate General, Haryana pointed out that on physical verification discrepancy was found in the actual quantity and the quantity shown in the Invoice and e-way bill. The actual quantity was found to be 90 kgs, i.e. 700 gms more than what was found as per the Invoice, added the DAG Haryana. Thus, she claimed that by showing lesser quantity the petitioner intended to evade tax. 

After having considered the case advanced by the petitioner’s counsel, the Court opined that the said difference in weight is less than 1%. Keeping in view these circumstances, the Court opined that it could not be said that the petitioner had any intent to evade the tax or the mismatch in the quantities was of such nature which shall entail proceedings under Section 129 of the Act. 

“A person, who has already paid a tax of Rs.1276717.68/- on a consignment cannot be said to have an intent to evade tax amounting to Rs.11000/-. At this stage, Mr. Goyal states that the petitioner is ready to pay even the tax and penalty imposed by the State-Authorities which comes to be around Rs.22000/-”, held the Court. 

Thus, in light of this stand taken by the petitioner and the fact that the mismatch could not be termed as a contravention of the provisions of the Act, the Court allowed the petition.