The Calcutta High Court has held that regulatory measures under the GST laws are necessary to ensure compliance and prevent tax evasion and do not constitute a violation of fundamental rights.
The bench of Justice Rajarshi Bharadwaj has observed that the petitioner’s failure to maintain consistent and transparent inventory records further supported the inference of intent to evade taxes.
The bench emphasized that under the GST laws, the burden of proof lies on the taxpayer to demonstrate compliance with statutory provisions. In this case, the petitioner failed to substantiate claims of legitimate trade practices or demonstrate that the valuation applied by the authorities was unreasonable.
The petitioners/assessees carries on business under the name and style of Ekta Trading Co., with a registered office in Liluah, West Bengal. The petitioner is engaged in the business of trading iron and steel and is registered under the GST Act. The petitioner raised invoices for the sale of M. S. TMT Bars and Shutter Profiles to M/s. New Binodray Traders in Odisha, with the corresponding e-way bills issued for the goods. The goods were loaded onto the same vehicle for transportation.
The vehicle was intercepted by the State Tax Officer. The vehicle was detained and FORM GST MOV-01 (Statement of Owner/Driver/Person-in- charge) was issued. However, the form was unsigned and lacked necessary details such as the date and driver’s signature, rendering it invalid.
The petitioner stated that at the time of interception, the driver presented all required documents, including invoices and e-way bills. However, the documents were not handed over to the driver and the annexure was incorrectly recorded as “N.A.” in the document column.
The department conducted a physical verification and issued a report in Form GST MOV-04, which found discrepancies only in the description of the goods but no mismatch in quantity. The billed weight in the invoices matched the weight recorded during the verification, confirming the goods’ quantity was correct. The description mismatch, however, was solely based on categorization differences, such as “M.S. TMT Bar” being described as different sizes in the report, which did not constitute any unlawful intent to evade tax.
The department issued a detention order.
The petitioner invoked Article 19(1)(g) of the Constitution of India, which guarantees the fundamental right to carry on trade and business. The petitioner asserted that, they are entitled to sell goods without being required to specify the size of the goods in the invoice and the Respondents’ insistence on segregating the components of the goods for valuation purposes is legally untenable.
The department contended that the seized goods exhibit a substantial deviation in both their description and quantity compared to what was declared. This discrepancy has directly resulted in a difference in the transaction value, pointing towards a deliberate attempt to evade tax by the Registered Taxable Person. The deviations undermine the accuracy and reliability of the declarations made by the taxpayer, which are foundational for assessing tax liability.
The court held that the discrepancies between the declared description of goods and the physical verification report were significant. While the petitioner argued that the differences were minor trade variations, this Court concluded that the mismatch, coupled with a substantial gap between the declared and verified valuation, indicated a deliberate misrepresentation. Such discrepancies undermined the accuracy of the petitioner’s declarations, which are crucial for determining tax liability, justifying the imposition of penalties under the GST framework.
Case Details
Case Title: Ashok Sharma Versus The State of West Benal
Case No.: W.P.A 26591 of 2024
Date: 17.12.2024
Counsel For Petitioner: Himangshu Kumar Ray
Counsel For Respondent: A. Ray
