Seizure under GST Act can be made on ground of Under-Valuation: Allahabad HC [Read Order]

The Allahabad High Court in its recent judgment, has held that the seizure under Goods and Service Tax (GST)  Act, 2017can be made on the ground of under-valuation.

The petitioner/assessee, Jaya Traders, is a sole proprietorship that deals in the sale of flavored tobacco and pan masala.  In the regular course of business, the petitioner received an order from several registered dealers in Delhi for the delivery of pan masala and scented tobacco. A tax invoice was prepared in response to the order, and IGST and cess were levied.

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The e-way bill was not generated since the products' value was below the prescribed limit. Instead, they were transported from West Bengal/Assam to New Delhi via tax invoice, and during their subsequent journey, they were transshipped at Kanpur, where they were intercepted.

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The statement of the truck driver was recorded in which he stated that the goods were loaded from Kanpur and on the said premise, show cause notice was issued to which the petitioner submitted its reply that crossing challan prescribed under the Act was accompanying the goods showing that the goods were transshipped at Kanpur during its onward journey to Delhi and since the value of the goods was less than Rs. 50,000 e-way bill was not required to accompany the goods, hence the proceedings cannot be initiated.

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To the department, it is just a case of tax avoidance.  Not only were the products undervalued, but they also had fake documents with them, which led to their seizure and detention.  The documentation that were included with the products indicate that they were being transported from West Bengal/Assam to Delhi; however, the driver of the van claimed that the commodities were loaded from Kanpur.

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Judge Piyush Agrawal's single bench has noted that if undervaluation is intentional and done to avoid paying taxes or to circumvent the GST Act's provisions, the seizure may still be conducted on that basis.  The dealer purposefully devalued the items in order to take advantage of Rule 138, which stipulates that an e-way bill must be included with the goods and cannot be spared, the court said.

To Read the full text of the Order CLICK HERE

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