Once The Physical Verification Report (MOV-04) Showed No
Discrepancies, The State Authorities Could Not Subsequently Change Their Stance
Or Impose A Penalty
Case
Overview:
- Case Title: M/s
Maa Kamakhya Trader vs. Additional Commissioner Grade 2 and Another
- Case Number:
Writ Tax No. 1386 of 2023
- Court:
High Court of Judicature at Allahabad, Court No. 2
- Bench: Hon’ble
Justice Piyush Agrawal
- Reserved On: 22
April 2025
- Delivered On: 28
April 2025
Background
and Summary of the Case:
The case involved the
interception of goods in transit, carried by the petitioner, M/s Maa Kamakhya
Trader, during movement from Guwahati (Assam) to Delhi, while passing
through District Amroha, Uttar Pradesh. The interception took place on 21
September 2023, and the authorities issued a penalty/demand order on
the grounds that the goods found were different from those described in the
accompanying documents.
The petitioner challenged
the penalty order dated 10 November 2023, as confirmed in the appeal
order passed by respondent no.1, alleging procedural unfairness and
contradiction in the Revenue's stand post-verification. The Hon’ble High Court
held that once the physical verification report (MOV-04) showed no
discrepancies, the State authorities could not subsequently change their
stance or impose a penalty, and quashed the impugned orders.
Facts of
the Case:
1. Transportation
and Interception: Goods belonging to M/s Maa Kamakhya
Trader were being transported from Guwahati to Delhi, passing through
Uttar Pradesh.
2. Documents
Produced During Interception: At the time of
interception on 21 September 2023, the transporter produced all requisite
documents, including:
o Tax
invoices
o E-invoices
o E-way
bills
o Goods
Receipt (GR or Bilty)
3. Driver's
Statement (MOV-01): The driver's statement was recorded on 22
September 2023 in Form MOV-01, confirming the presence and
correctness of the documents.
4. Physical
Verification (MOV-04): The physical verification was
conducted and recorded in Form MOV-04, which did not report any
discrepancy between the goods carried and those described in the
accompanying documents, including the HSN Code and item descriptions.
5. Subsequent
Contradictory Allegation: Despite the clear findings in
MOV-04, the authorities later alleged that the goods were different
from the description in the documents and raised a demand, which was upheld
in appeal.
Petitioner's
Submissions:
Learned counsel for the
petitioner, Sri Aditya Pandey, strongly contested the penalty and raised
the following arguments:
1. No
Discrepancy Noted in Verification Report: The physical
verification (MOV-04) recorded by the authorities found no mismatch
between the goods physically checked and the documents.
2. Authorities’
U-Turn Invalid: It was argued that the authorities
took a complete somersault, changing their stand after the inspection
was completed and findings were recorded.
3. No
Mention of Discrepancy in Counter Affidavit: The respondents,
in their reply, did not mention or dispute the content of MOV-04 or
provide valid reasoning for shifting their stand.
4. Changing
Grounds Is Legally Unsustainable: The petitioner relied
on settled legal principles that tax authorities cannot keep changing the
grounds or reasons post-facto to justify an action.
5. Violation
of Natural Justice: Such contradictory conduct was argued to
be unfair and arbitrary, leading to violation of principles of natural
justice.
Respondents’
Submissions:
Sri R.S. Pandey,
learned Additional Chief Standing Counsel, argued in defense of the order:
1. Authority’s
Justification Based on HSN Code Input: It was contended that
once the HSN Code was entered into the digital system, the description
of goods automatically filled in, which might have led to miscommunication or
mismatches later on.
2. Manual
Errors and System Constraints: The Counsel tried to
justify the later discrepancy as a result of manual entry errors or technical
constraints, implying the goods were not accurately described initially.
3. Support
for Impugned Order: The Standing Counsel supported the
decision of the authority and the appellate order, claiming that the final
findings were justified.
Key
Observations by the Court:
Justice Piyush Agrawal
delivered a well-reasoned and legally grounded judgment, making the following
crucial observations:
1. MOV-04
Is Conclusive Unless Contradicted Promptly: Once the
physical verification report (MOV-04) is prepared by the officer concerned,
showing no discrepancy, it forms a conclusive record of
compliance at that stage.
2. State
Cannot Shift Grounds Later: The Court found it unacceptable
that the authorities later changed their version, contradicting their
own physical verification report without new evidence.
3. Manual
Input of Description Admitted by State: On pointed queries by
the Court, the State admitted that both the description as per invoice
and that of the goods in conveyance had to be fed manually by the
officer, disproving the claim of automatic filling based on HSN codes.
4. Reference
to Precedent – Jitendra Kumar v. State of U.P.:
The Court referred to its earlier judgment in Jitendra Kumar vs. State of
U.P. and Another (Writ Tax No. 1425 of 2023), where it was held:
o Revenue
cannot change the goalposts at different stages.
o Once
a ground is taken at the time of detention, it cannot be substituted later
with a different reason.
o Such
“volte-face” is not countenanced by the Court.
5. Invalidity
of the Detention and Demand: Based on the above reasoning, the
Court held that the detention and subsequent demand were vitiated and bad
in law.
Court’s
Judgment:
Justice Piyush Agrawal
conclusively ruled:
- The impugned order dated
10.11.2023 passed in Appeal No. 0513/2023 is quashed.
- The writ petition is allowed
in its entirety.
- Any amount deposited by the
petitioner during the pendency of the litigation shall be refunded
within three weeks, upon production of a certified copy of the order.
Legal
Significance of the Judgment:
This case reinforces
critical jurisprudence in GST law concerning interception of goods in
transit and procedural fairness. It lays down important principles:
1. Verification
Reports Must Be Respected: Authorities must adhere to their initial
findings recorded during verification and cannot contradict them without
fresh evidence.
2. Fixed
Legal Grounds: Revenue authorities are not permitted
to change the legal grounds for detention and penalty at subsequent stages.
3. Accountability
in Documentation: Where manual entry is made by
officers, any inconsistency cannot be attributed to the taxpayer,
especially when documents are in order.
4. Protection
Against Arbitrary Action: The judgment ensures that taxpayers
are not penalized on shifting grounds or flimsy administrative excuses
like system errors or typographical mistakes.
Conclusion:
The Allahabad High
Court’s decision in Maa Kamakhya Trader vs. Additional Commissioner is a
landmark reiteration of procedural discipline and taxpayer protection under GST
laws. It clearly sets out that a taxpayer cannot be penalized after physical
verification has certified compliance, and government officers are bound by
their official records.
This ruling should serve
as a reminder to GST officials to act with fairness and consistency, and that technical
lapses or contradictory conduct will not be tolerated in courts. It offers
relief to honest traders and businesses who often find themselves caught in bureaucratic
overreach or system-generated inconsistencies.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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