The Allahabad High Court has quashed a penalty order under Section 129(1)(b) of the CGST Act, 2017 as absence of physical activity at business premises is not enough to deny ownership.
The bench of Justice Shekhar B. Saraf and Justice Praveen Kumar Giri observed that mere absence of business activity at the principal place of business cannot be the sole basis for treating the goods as not belonging to the registered taxpayer.
The penalty was originally imposed following the detention of goods and the accompanying vehicle on June 11, 2025, under Section 129(1)(a). Authorities later treated the petitioner as not being the owner of the goods and levied a higher penalty under Section 129(1)(b).
The department claimed the petitioner did not appear physically before the authority and responded only via registered email. The Court, however, dismissed this as an untenable basis, noting that no adverse inference could be drawn from communication made through official channels in the absence of any summons.
The department conducted a site visit and found no activity at the petitioner’s principal place of business. Based on this, GST registration was suspended, and the petitioner’s ownership of the goods was disputed.
The court referred to its earlier decision in M/s Halder Enterprises v. State of U.P. and the CBIC’s Circular No. 76/50/2018-GST, which states that if the invoice bears the name of the registered taxpayer who claims the goods, ownership must be presumed.
The Court concluded that the petitioner’s name is clearly mentioned in the invoice, and the petitioner has taken steps to get the goods released. Thus, Clause 6 of the circular applies, and the petitioner must be treated as the owner.
The Court quashed the penalty order and directed the department to grant a hearing to the petitioner, and instructed issuance of a fresh, reasoned order in compliance with the Halder Enterprises precedent within eight weeks.
Case Details
Case Title: S.S. Enterprises Versus State of U.P. and Another
Case No.: WRIT TAX No. – 3026 of 2025
Date: 9.7.2025
Counsel For Petitioner: Suyash Agarwal
Counsel For Respondent: C.S.C.
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