Failure to produce necessary documents will lead to cancellation of registration for supply of goods: High Court of Madhya Pradesh

 W.A.No.1823 2019 HIGH COURT OF MADHYA PRADESH BENCH AT GWALIOR Writ Appeal No.1823 2019 M s Om Trading Company Deputy Commissioner of State Tax and others Hon. Shri Justice S.A.Dharmadhikari Hon. Shri Justice Anand Pathak Shri Kamal Kumar Jain learned counsel for the appellant Shri R.P.Singh Kaurav learned Government Advocate for the JUDGMENT of the Madhya Pradesh Uchch Nyayalaya Adhiniyam 2005 challenge has been made to the order dt.27.08.2019 passed by the learned Single Judge in W.P.No.9885 2019 whereby Writ Petition challenging the order dt.18.04.2019 passed by the learned appellate authority has been dismissed. Brief facts leading to filing of the writ petition were that the appellant is a dealer registered under the Central Goods and Services Tax Act 2017and is engaged in carrying on the business of selling and purchasing of Clarified ButterButter and W.A.No.1823 2019 other milk products under the name of M s Om Trading Company Gwalior. On 05.10.2018 a show cause notice was issued to the appellant by the Deputy Commissioner of State Tax Gwalior in which it was stated that the appellant is carrying on the business only on papers and the e way bills are downloaded but the concerned vehicles are not transporting any goods in actual. The cause of action action arose when the report bearing No.229 Deputy Commissioner s office dt.29.08.2018 was addressed by the Dy. Commissioner Range A Agra to the Joint Commissioner Gwalior whereby it transpired that the appellant had carried out business transactions with one M s Macro International Kacharighat Agra and has purchased 8100 kgs. of clarified butter through bill No.53 on 31.07.2018 amounting to Rs.23 49 000 and again purchased 1000 Tin of clarified butter through bill No.54 amounting to Rs.40 50 000 . In view of aforesaid a show cause notice dt.05.10.2018 was issued as it was found that the bills were without supply of goods in violation of stipulations contained in the Act of 2017. The notice was purportedly issued under Rule 21of the Central Goods and Services Tax Rules 2017which mandates that the registration granted to the person is liable to be cancelled if the person issued invoice or W.A.No.1823 2019 bill without supply of goods or services in violation of the provisions of the Act or the rules made thereunder. Since the appellant failed to prove his e way transaction details his registration has been cancelled by order dt.09.01.2019. Being aggrieved the appellant preferred an appeal under Section 107 of the Act of 2017. The Appellate Authority taking into consideration the entire facts on record affirmed the order passed by the Dy.Commissioner of State Tax. Being aggrieved the appellant had filed writ petition before this Court bearing W.P.No.9885 2019 which came to finally decided on whereby the orders passed by Dy.Commissioner of State Tax as well as Appellate Authority has been affirmed. Being aggrieved the present Writ Appeal has been filed Shri Kamal Kumar Jain learned counsel appearing for the appellant submitted that the impugned order passed by the learned Single Judge is perverse and contrary to law and therefore the same deserves to be set aside. It is further contended that the order dt.09.01.2019 passed by the appellate authority is completely silent as to the provisions under which the impugned order has been passed and no good reason has been assigned for cancellation of GSTN of the appellant. The appellant further contended that the consignment was being W.A.No.1823 2019 transported by the transporter namely M.R. Road Lines through which the material was physically transported to Gwalior through Vehicle No. UP83T0223 and HR63A3341 and the route taken was from Agra to Kheragarh to Rajakheda then Dholpur to Morena and then Gwalior and in between there was no toll plaza located. Even though all the requisite documents i.e. e way bill and invoices were available therefore it can not be said that no physical transportation of goods had taken place from Agra to Gwalior. The appellant further contended that the said collection of tax and penalty by the respondents is through coercion and threat inspite of the fact that cancellation is covered by all the documents. It is alleged that it is an inter State sale and the respondents can not deny the same and demand and collect the tax in the manner in which they have done which is arbitrary and without jurisdiction. In such circumstances the impugned order deserves to be set aside Learned counsel for the appellant in support of his contention has placed reliance on the judgment of High Court of Kerala in the case of Kannangayathu Metals Vs. Asst State Tax Officer and others reported in38 GSTJ 482 Ker) to contend that as per Section 129 of GST Act there is no mandate for detaining goods merely because driver took an alternate route to reach the destination if the goods are covered W.A.No.1823 2019 by valid E way Bill. The writ petition was allowed. He further placed reliance on another judgment of High Court of Kerala in the case of Relcon FoundationsLtd. Vs. Asstt. State Tax Officer and others reported in38 GSTJ 482in which it is held that detention of the vehicle under Section 129 of GST Act is not justified Per contra the counter affidavit has been filed by the respondents. Shri R.P.Singh Kaurav learned Government Advocate appearing for the respondents State contended that the appellant had failed to bring on record any material before the authorities to show that the bills e way bills which were issued and are in question in the present litigation pursuance to which any material physically transferred from Agra to Gwalior or not and therefore there is no infirmity in the order dt.27.08.2019 passed by the writ court. He further contended that even assuming for the sake of argument that the alleged contentions of the appellant are true in that case there are number of toll plaza between Morena to Gwalior and if the goods had been physically transferred the appellant ought to have possessed the toll plaza receipts. It is also settled practice that the transporters used to choose shortest route available to transport the goods in order to save time and money. In the present case the route used to transport the goods is not only W.A.No.1823 2019 longer route but also takes more time to reach the destination It is very surprising and strange that instead of using four lane high way some alternative route which is longer has been used by the appellant. Cancellation of registration of GSTN was effected after affording due opportunity of hearing to the Learned Single Judge came to the conclusion that a detailed enquiry was conducted by the Commercial Department Range Agra and that the fact regarding issuance of invoices e way bills without any transportation of physical goods came into picture therefore verification in this regard was also done wherein it was actually found that the goods were not physically transported and that before initiating the proceeding against the appellant proper opportunity of hearing show cause notice was issued and only thereafter the order cancelling the GST registration was passed. The appellant had failed to produce the said documents to prove that the goods in question was physically transferred from Agra to Gwalior. As such finding no error in the judgment rendered by the appellate authority writ petition was dismissed Heard learned counsel for the parties For the purpose of convenience Rule 21 of the Rules of 2017 is reproduced hereinunder : W.A.No.1823 2019 “21. Registration to be cancelled in certain cases. The registration granted to a person is liable to be cancelled if the said person a) does not conduct any business from the declared place of business or b) issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act or the rules made thereunder or c) violates the provisions of section 171 of the Act or the rules made thereunder d) violates the provision of rule 10A e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder or f) furnishes the details of outward supplies in FORM GSTR 1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods g) violates the provision of rule 86B.” “22. Cancellation of registration. Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 he shall issue a notice to such person in FORM GST REG 17 requiring him to show cause within a period of seven working days from the date of the service of such notice as to why his registration shall not be cancelled 2) The reply to the show cause notice issued under sub ruleshall be furnished in FORM REG 18 within the period specified in the said 3) Where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled the proper officer shall issue an order in FORM GST REG 19 within a period of thirty days from the date Rule 22 of the Rules of 2017 is also reproduced hereinunder : W.A.No.1823 2019 of application submitted under rule 20 or as the case may be the date of the reply to the show cause issued under sub ruleor under sub rule 2A) of rule 21A cancel the registration with effect from a date to be determined by him and notify the taxable person directing him to pay arrears of any tax interest or penalty including the amount liable to be paid under sub section 5) of section 29 3A) Where a certificate of registration has not been made available to the applicant on the common portal within a period of fifteen days from the date of the furnishing of information and particulars referred to in clauseof sub ruleand no notice has been issued under sub rulewithin the said period the registration shall be deemed to have been granted and the said certificate of registration duly signed or verified through electronic verification code shall be made available to the registered person on the common portal 4) Where the reply furnished under sub ruleof rule 21A is found to be satisfactory the proper officer shall drop the proceedings and pass an order in FORM GST REG 20 Provided that where the person instead of replying to the notice served under sub ruleor clause of sub section of section 29 furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee the proper officer shall drop the proceedings and pass an order in FORM GST REG 20 5) The provisions of sub ruleshall mutatis mutandis apply to the legal heirs of a deceased proprietor as if the application had been submitted by the proprietor himself.” The appellate authority taking into consideration the entire facts on record had affirmed the order passed by the W.A.No.1823 2019 Dy.Commissioner of State Tax holding that “...ik k x k fd lacaf kr vf kdkjh }kjk iath u fujLr fd s tkus ds iwoZ vihykFkhZ dks dkj.k crkvks lwpuki= fnukad 05&10&2018 dks tkjh fd k x k FkkA rRi pkr fnukad 09&01&2019 dks vihykFkhZ dk iath u fujLr fd k x k gSA iath u fujLrhdj.k dk eq[ vk kkj fMIVh dfe uj ¼fo vuq kk ½ okf.kfT d dj jsat ] vkxjk dki= fnukad 29&08&2018 gS] ftlesa fMIVh dfe uj ¼fo vuq kk ½ okf.kfT d dj jsat vkxjk }kjk vihykFkhZ esllZ vkse VªsfMax dEiuh ds laca k esa g izfrosfnr fd k x k gS fd muds }kjk esllZ ekdksZ baVjus kuy vkxjk ls eky ns kh kh Øe k i s 2349000@& oa #i s 4050000@& fcy Øekad 53 fnukad 31&07&2018 oa fcy Øekad 54 fnukad 31&07&2018 ls Ø djuk n kkZ k gSA vkxjk ds foØsrk O olkbZ esllZ ekdksZ baVjus kuy vkxjk ds kjk foHkkxh iksVZy ij eq[ O olk LFky ds vfrfjDr rhu vU LFkkuksa ij Hkh xksnke kksf"kr fd s x s gSa ftuesa ls dsoy d LFkku ij gh QeZ dh O olkf d xfrfof k kW gksuk ikbZ xbZ rFkk foØsrk O olkbZ esllZ ekdksZ baVjus kuy] vkxjk dh tkap ds le mDr ekg ls lacaf kr dksbZ fu fer izi= ugh ik s x sA blds vykok esllZ vkxjk&Xokfy j ikFkost izk0fy0 tkto VksyIyktk] lSa k] vkxjk ls fMIVh dfe uj] okf.kfT d dj jsat] vkxjk }kjk lwpuk izkIr dh xbZ ftlds vuqlkj mDr okgu ftuds fd okgu Øekad Øe k% UP 83 T 0223 oa okgu Øekad HR 63 A 3341 gSa] fu kkZfjr frfFk dks VksyIyktk ls ikl ugh gq gSaA blls Li"V gS fd Øsrk foØsrk nksuksa O olkb ksa kjk dsoy izi=ksa dk vknku&iznku fd k tk jgk gSA okLro esa eky dk dksbZ ifjogu ugha fd k tk jgk gSA vihykFkhZ }kjk eky ls lacaf kr tks dkxtkr izLrqr fd s gSa muls eky dk okLrfod vknku&iznku fd k tkuk izekf.kr ugh gksrk gSA lgk d vk qDr jkT dj] Xokfy j o`r rhu ds funsZ k ij jkT dj fujh{kd] Xokfy j o`r rhu }kjk izLrqr izfrosnu fnukad 05&12&2018 oa iapukek esa nf kZr irs ij vihykFkhZ dk O olk lapkfyr gksuk izrhr gksrk gS fdUrq muds }kjk mDr laO ogkj ds laca k esa dksbZ izfrosnu ugh fn k x k gSA l{ke vf kdkjh }kjk vihykFkhZ ds W.A.No.1823 2019 izdj.k esa fMIVh dfe uj] okf.kfT d dj jsat] vkxjk ds izfrosnu ds vk kkj ij iath u fujLr fd k x k gSA ftlesa muds }kjk foØsrk O olkbZ esllZ ekdksZ baVjus kuy vkxjk ds O olk LFky dh tkap dh xbZ rFkk ik k x k fd foØsrk }kjk eky dk okLrfod foØ ugh fd k x k gSA okLrfod :i ls eky dk vknku&iznku u djrs gq dsoy izi=ksa dk vknku&iznku fd k x k gS rFkk VksyIyktk vkxjk&Xokfy j ikFkost izk0fy0 tkto lSa k] vkxjk ds fjdkMZ esa Hkh mDr okguksa dk fu kkZfjr frfFk dks ogkW ls fudyuk ugha ik k x k gSA” 10. On going through the order passed by the appellate authority it appears that the detailed enquiry was conducted before passing the impugned order in which certain discrepancies were found with regard to the business of the appellant. It was found that the appellant had failed to prove e way bill transaction details therefore the registration was cancelled. A proper opportunity of hearing was afforded to the appellant. No cogent documentary evidence is available on record to justify the stand taken by the appellant. The learned Single Judge has rightly come to the conclusion and dismissed the writ petition The judgments relied on by the learned counsel for the appellant are of no assistance to the appellant inasmuch as the facts of those cases and the present case are altogether different. In the present case in the detailed enquiry it was found that no material physically transferred from Agra to W.A.No.1823 2019 In view whereof no fault can be found in the finding recorded by the learned Single Judge as well as learned appellate authority. Accordingly the writ appeal fails and is hereby dismissed. Judge 

Summary: As per Section 129 of GST Act, there is no mandate for detaining goods merely because driver took an alternate route to reach the destination, if the goods are covered by valid E-way Bill. If all the requisite documents i.e., e-way bill and invoices are available, it cannot be said that no physical transportation of goods had been taken place. However, bringing all the requisite documents on record is a necessary condition. This auspicious judgment was recently passed by the High Court of Madhya Pradesh in the matter of M/S OM TRADING COMPANY V DEPUTY COMMISSIONER OF STATE TAX &amp; ORS. [WRIT APPEAL NO.1823/2019] by Honourable Justice S.A.Dharmadhikari and Justice Anand Pathak. This Writ Appeal was preferred under Section 2 (1) of the Madhya Pradesh Uchch Nyayalaya Adhiniyam, 2005 and a challenge has been made to the order passed by the learned Single Judge whereby Writ Petition challenging the order passed by the learned appellate authority was dismissed. The brief facts leading to filing of the writ petition were that the appellant was a dealer registered under the Central Goods and Services Tax Act, 2017 and was engaged in selling and purchasing Clarified Butter (Ghee), Butter and other milk products under the name of M/s Om Trading Company Gwalior. On 05.10.2018, a show cause notice was issued by the Deputy Commissioner of State Tax Gwalior, in which it was stated that the business is carried only on papers and the e-way bills are downloaded but the concerned vehicles are not transporting any goods in actuality. The cause of action arose when a report to the Joint Commissioner, Gwalior transpired that the appellant had carried out business transactions with one M/s Macro International, Agra, and had purchased 8100 kgs and 1000 tin of clarified butter. Later a show cause notice was issued since bills were without supply of goods and in violation of law. The notice was issued under Rule 21 (b) of the Central Goods and Services Tax Rules 2017 and appellant failed to prove his e-way transaction details so his registration was cancelled. Thus, he preferred an appeal under Section 107, and Appellate Authority affirmed the order passed by the Commissioner of State Tax. Later he filed a writ petition whereby the orders passed by the Commissioner of State Tax as well as Appellate Authority have been affirmed. Being aggrieved, the present Writ Appeal has been filed. The HC stated that “Ongoing through the order passed by the appellate authority it appears that the detailed inquiry was conducted before passing the impugned order, in which certain discrepancies were found with regard to the business of the appellant. It was found that the appellant had failed to prove away bill transaction details, therefore, the registration was canceled. A proper opportunity of hearing was afforded to the appellant. No cogent documentary evidence is available on record to justify the stand taken by the appellant. The learned Single Judge has rightly come to the conclusion and dismissed the writ petition.” Court also observed that “The judgments relied on by the learned counsel for the appellant are of no assistance to the appellant inasmuch as the facts of those cases and the present case are altogether different. In the present case, in the detailed inquiry, it was found that no material was physically transferred from Agra to Gwalior.” Thus, the court held that “no fault can be found in the finding recorded by the learned Single Judge as well as learned appellate authority” and hence dismissed the writ appeal.