“Organized Tax Evasion” and “Intentional Undervaluation”: Allahabad High Court Upholds Seizure under GST Act, States “Primary Duty of Movement Not Discharged”
Kiran Raj
The High Court of Judicature at Allahabad has dismissed a batch of writ petitions filed by multiple traders challenging the seizure of goods transported without e-way bills and accompanied by documents alleged to be non-genuine. The Single Bench of Justice Piyush Agrawal, recorded that the matter represented “a glaring example of organized tax evasion” and rejected the challenge to the seizure order passed under Section 129(3) of the GST Act, 2017.
The Court stated that the petitioners failed to discharge their burden of proving the actual movement of goods from West Bengal or Assam to Delhi. The goods were intercepted at Kanpur, where the driver of the vehicle disclosed that the goods were loaded locally.
The petitioners, proprietorship firms engaged in the trading of pan masala and scented tobacco, challenged the seizure orders passed by the Additional Commissioner Grade-2 in separate appeals under Section 129(3) of the GST Act. The petitioners submitted that the goods were dispatched from West Bengal and Assam to Delhi through Kanpur, accompanied by tax invoices and cross-challans. The petitioners argued that as the value of each consignment was below ₹50,000, the mandatory e-way bill requirement under Rule 138 of the CGST Rules was not triggered.
Counsel for the petitioners submitted that “the goods were seized on the ground of under-valuation, which is beyond the power of the detaining / seizing authority.” It was argued that the documents on record proved a valid inter-State transaction and the seizure order lacked jurisdiction. The petitioners relied on prior decisions of the Allahabad High Court, the Kerala High Court, and the Chhattisgarh High Court.
In opposition, the respondents submitted that the seizure was not based solely on under-valuation, but also on discrepancies regarding the place of loading. The truck driver, during verification at Kanpur, disclosed that the goods were loaded at Kanpur, contradicting documents indicating dispatch from West Bengal or Assam. The respondents contended that “the petitioner has failed to bring any material on record, even before this Court, in order to prove that the actual movement of the goods started from West Bengal / Assam.”
It was further submitted that no transport vehicle numbers, toll receipts, or any other records were produced to establish the claimed route from West Bengal or Assam. The respondents cited prior precedent, including M/s Ghata Mehandipur Balaji Grinding Works Pvt. Ltd. v. Commissioner Commercial Tax, to support the argument that driver statements recorded at the first instance are credible evidence.
Justice Piyush Agrawal recorded that “in the present case, the petitioner has utterly failed to bring on record any cogent material for transporting the goods from West Bengal / Assam to Delhi via Kanpur.” The Court noted that “the statement of the truck driver which was taken at the first instance should be given more sanctity.”
It was further observed that the petitioners did not produce details such as “truck/vehicle number on which the goods were transported from West Bengal / Assam, toll receipts of the toll plazas crossed during its journey up to Kanpur.”
The Court examined findings recorded in MOV-7 and MOV-6, observing that “the physical verification and affidavit of the driver confirmed that the goods were manufactured in Kanpur and loaded from there, despite invoices indicating West Bengal/Assam as the origin.”
The Court observed that “in the original proceeding or in the summary proceeding, the primary burden is to be discharged by the assessee by bringing on record the cogent material.” It recorded that “the petitioner was duty bound to establish beyond doubt the actual physical movement of the goods from West Bengal / Assam to Delhi via Kanpur but the petitioner has failed to do so.”
The Court further stated that “Section 129(3) read with Section 31 of GST Act as well as Rule 46 of GST Rules is analogous of Section 48 and 50 of the VAT Act.” It recorded that “if the petitioner wants to take any advantage of tax invoice accompanying the goods then primary duty of movement of goods from West Bengal / Assam to Delhi have not been discharged.”
The Court referred to the decision in State of Karnataka v. M/s Ecom Gill Coffee Trading Pvt. Ltd., stating that “the dealer has to prove the actual physical movement of the goods.” The Bench also noted that prior decisions in M/s Shiv Trading v. State of U.P. and M/s Radha Fragrance were applicable to the present case.
The Court observed that “in view of the aforesaid two judgements one by Division Bench in the case of Shiv Shakti Trading Company (supra) and other by the co-ordinate Bench of this Court in the case of Radha Fragnance (supra), it has been held that the seizure can be made even on the ground of under valuation, if under valuation is deliberate for the purpose of avoiding payment of tax or to defeat the provisions of the Act.”
The Court recorded that “the judgements relied upon by the petitioner of Kerala High Court as well as Chhattisgarh High Court are of no aid to the petitioner as the jurisdiction High Court has given the judgement on the issue which squarely covers the present case.”
Further, the Court noted that “the other judgments relied upon by the petitioner in the cases of S.K. Trading (supra), M/s Shamhu Saran Agarwal and company (supra) has not noticed the earlier judgment given in the case of M/s Radha Fragrance (supra), hence the same are per incuriam and of no aid to the petitioner.”
It was also stated that “so far as the Division Bench judgment relied upon by the petitioner in the case of M/s Maa Aabe (supra) is concerned, it is only for the purposes of release of goods and not in the proceedings under Section 129(3) of the Act, therefore, the same is not applicable in the facts of the present case.”
The Court concluded that “no interference is called for by this Court in the impugned order.” It further recorded that “all the aforesaid writ petition lack merit and same are dismissed accordingly.”
The Court also recorded that “the record clearly shows that dealer has intentionally undervalued the goods to take wrong advantage of Rule 138 which dispense the requirement of e-way bill accompany the goods.”
Advocates Representing the Parties
For the Petitioners: Mr. Aditya Pandey, Advocate
For the Respondents: Mr. Ravi Shanker Pandey, Additional Chief Standing Counsel
Case Title: M/s Jaya Traders Through Its Proprietor Mr. Vishwanath Tiwari & Others v. Additional Commissioner Grade-2 and Another
Neutral Citation: 2025:AHC:29062
Case Number: Writ Tax No. 1022 of 2021 (with connected matters)
Bench: Justice Piyush Agrawal
[Read/Download order]
