Goods cannot be detained and penalty cannot be imposed under Section 129 of the UPGST Act when goods are undervalued

The Hon’ble High Court of Allahabad in the case of Shamhu Saran Agarwal & Company v. Additional Commissioner Grade-2 [WP. No. 33 of 2022 dated January 31, 2024] allowed the writ petition and held that goods cannot be detained and penalty cannot be imposed under Section 129 of the Uttar Pradesh Goods and Services Act, 2017 (“the UPGST Act”) when goods are undervalued.

Facts:

Revenue Department (“the Respondent”) issued Show Cause Notice dated December 19, 2020, (“the SCN”), against Shamhu Saran Agarwal & Company (“the Petitioner”) wherein it was alleged that, the goods detained on the ground of undervaluation.  Thereafter, the penalty was imposed on the Petitioner vide order dated December 20, 2020 (“the Impugned Order”) on the ground that the goods were undervalued. Thereafter, the appeal was filed by the Petitioner wherein the penalty was affirmed by the Respondent on the Petitioner vide order dated September 17, 2021 (“the Impugned Order”)

Aggrieved by the Impugned Order, the Petitioner filed writ petition before the Hon’ble High Court.

Issue:

Whether goods can be detained and penalty can be imposed under Section 129 of the UPGST Act when goods are undervalued?

Held:

The Hon’ble High Court of Allahabad in WP. No. 33 of 2022 held as under:

• Noted that, in case of undervaluation, the Department is required to issue Notice under Section 73 or 74 of the Uttar Pradesh Goods and Services Act, 2017 (“the UPGST Act”) in case of undervaluation of goods. The Proper Officer cannot detain the goods on the aforesaid ground and thereafter impose penalty under Section 129 of the UPGST Act.
• Further Noted that, after the issuance of the Notice, if the goods are found undervalued, thereafter penalty can be imposed.
• Opined that, the Respondent Officer is not competent to carry out detention based on under valuation of goods.
• Further Opined that, imposition of penalty under Section 129 of the UPGST Act, that the goods are undervalued cannot be allowed.
• Held that, the Impugned Orders are set aside. Hence, writ petition is allowed.

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