GST Penalty On Alleged Misdeclaration of Industrial Solvent Upheld: Allahabad High Court

The Allahabad High Court of Judicature has dismissed a writ petition affirming the imposition of penalty under Section 129(3) of the U.P. GST Act, 2017 for alleged misdeclaration of goods during transit. The bench of Justice Vikas Budhwar has observed that the appellate authority had applied its mind to the grounds raised in appeal. The findings were based on laboratory analysis and not mere conjecture. In writ jurisdiction under Article 226 of the Constitution, the Court cannot reappreciate evidence or conduct a “roving and fishing inquiry” merely because two views are possible. No additional documentary evidence was produced by the petitioner to dislodge the findings of the authorities. The petitioner had challenged the order of the Appellate Authority dated June 6, 2025, which upheld the penalty imposed by the Mobile Squad, Chandauli. The petitioner, a registered GST dealer engaged in wholesale trading of petrochemicals, had sold 30,220 kilograms of “Industrial Solvent” to a Bihar-based dealer under a tax invoice dated March 18, 2025. An e-way bill was duly generated, and the goods were transported via tanker from Rajasthan to Bihar. However, during transit, the vehicle was intercepted by the Mobile Squad authorities. Upon physical verification and sampling, the consignment was sent for chemical analysis to Shri Ganesh Analytical Lab. The lab report observed that the sample did not fit into any specific industrial solvent category and appeared to be a blended variant of mineral spirits, turpentine oil, light naphtha, or petroleum ether-like solvents. Based on the report, authorities concluded that the goods transported were different from those declared in the invoice. An order of detention was issued under Section 129(1) of the GST Act, followed by a show cause notice and eventual imposition of penalty amounting to ₹4,89,564. The vehicle and goods were released upon payment of the penalty. The petitioner’s appeal before the Additional Commissioner (Appeal), State Tax, Varanasi, was rejected on June 6, 2025, prompting the present writ petition. The petitioner contended that the goods were duly accompanied by tax invoice and e-way bill. There was no intention to evade tax, and tax had been correctly charged. The lab report itself described the product as a type of solvent, albeit a blended one. Industrial solvent is not a single chemical compound and may vary in composition depending on industrial use. The appellate authority failed to properly consider the grounds raised in appeal, violating Section 107(12) of the U.P. GST Act, which mandates recording of points for determination and reasons for decision. The petitioner relied on earlier judicial precedents to argue that penalty cannot be imposed merely on technical discrepancies without establishing mens rea or intent to evade tax. The High Court rejected the petitioner’s submissions, holding that the Appellate Authority had sufficiently discussed the analytical report and recorded detailed findings. The Court noted that the laboratory findings highlighted deviations in specific gravity, flash point, viscosity, moisture, and other parameters. The report concluded that the sample was not pure industrial solvent but a blended solvent differing from what was declared in the tax invoice. The Court further clarified that while Section 107(12) requires the appellate authority to state points for determination and reasons, the order in question reflected adequate consideration of the material on record. Finding no infirmity in the appellate order, the High Court declined interference and dismissed the writ petition on February 24, 2026. Case Details Case Title: M/S Chamunda Petrochemicals Pvt. Ltd Versus State of UP Citation: JURISHOUR-171-HC-2026(Allah) Case No.: WRIT TAX No. - 7915 of 2025 Date: 24/02/2026 Counsel For Petitioner: Pooja Talwar Counsel For Respondent: C.S.C. Click Here To Read Order Read More: Cost Of Rs. 1 Lakh Imposed For Misusing Writ Remedy To Avoid Timely Payment Of Property Tax Since Past 3 Years: Allahabad High Court

GST Penalty On Alleged Misdeclaration of Industrial Solvent Upheld: Allahabad High Court

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