Assessee Bears Primary Burden In Original Tax Proceedings; Burden Shifts To Revenue In Re-Assessment Proceedings: Allahabad High Court
The High Court dismissed a Writ Petition challenging the seizure of goods by revenue authorities, holding that under Section 129 of the GST Act, the burden to prove the actual physical movement of goods lies with the assessee.
The Allahabad High Court has ruled that in original and summary tax proceedings, the primary burden of proof lies with the assessee, who must present cogent material to substantiate their claims. However, in reassessment or subsequent proceedings, the burden shifts to the revenue authorities.
The Single Bench of Justice Piyush Agrawal held, "Under the taxing statute, 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. The burden of proof is shifting to the department only in the re-assessment proceeding or subsequent proceeding, not being the original proceeding. In other words, the assessee in the original proceeding is duty bound to bring the material on record in support of its claim, but in the subsequent proceeding, i.e., re-assessment proceedings, the burden shifts on the revenue."
The Court dismissed a Writ Petition challenging the seizure of goods by revenue authorities, holding that under Section 129 of the GST Act, the burden to prove the actual physical movement of goods lies with the assessee. It also ruled that even if eyewitnesses are not examined, the absence of proper evidence to demonstrate the transportation of goods from West Bengal/Assam to Delhi is fatal to the petitioner’s claim.
Facts of the Case
The dispute arose from a case involving a petitioner engaged in the trade of pan masala and scented tobacco. The petitioner received an order to supply goods to Delhi. However, as the declared value of the goods was allegedly lower than the prescribed limit, the petitioner did not generate an e-way bill. Instead, the goods were reportedly set out from West Bengal/Assam towards Delhi with tax invoices numbered 41 to 45 dated September 15, 2021.
During transit, the goods were intercepted in Kanpur by the authorities, leading to the issuance of a show cause notice. In its reply, the petitioner argued that since the value of the goods was below Rs. 50,000, an e-way bill was not required, and a crossing challan was provided. The petitioner further contended that the detaining authority lacked jurisdiction to seize the goods on the grounds of undervaluation. However, the revenue authorities passed a penalty order, which was later challenged by the petitioner on appeal. The appellate order was dismissed, allegedly without due consideration of the material evidence.
Court's Observations
The High Court emphasized that in original proceedings, the primary responsibility to produce cogent evidence rests with the assessee. The burden of proof only shifts to the revenue authorities in re-assessment or subsequent proceedings.
The Single Bench meticulously reviewed the evidence on record and noted that the petitioner failed to rebut the driver's statement, which clearly indicated that the goods were loaded at Kanpur. The petitioner did not produce any toll receipts or documents to demonstrate that the goods had been transported from West Bengal/Assam to Delhi.
In fact, the Court found that the goods were manufactured in Kanpur, casting further doubt on the petitioner’s claim regarding the origin of transportation.
The Single Bench remarked, “For claiming the genuineness of the document, the petitioner was duty-bound to spell out the detail of the mode of transport as well as details of the vehicle used for the transportation of the goods up to Kanpur. In the absence of any such details, the proceedings cannot be said to be illegal.” It further observed that the petitioner had not rebutted the facts recorded by the authorities, which indicated that there was a deliberate undervaluation of goods with the intent to avoid generating an e-way bill under Rule 138 of the GST Rules.
The High Court relied on precedents such as State of Karnataka v. M/s Ecom Gill Coffee Trading Pvt. Ltd. (2023), where the Supreme Court held that the burden to prove the actual physical movement of goods lies with the assessee. Similarly, the Allahabad High Court in M/s Shiv Trading v. State of UP, (2024), had emphasized that the true movement of goods must be established by the assessee, a judgment that has been confirmed by the Apex Court.
After careful consideration, the Singke concluded that the petitioner had failed to establish any material evidence to prove the actual movement of goods from West Bengal/Assam to Delhi.
The Court described the case as “a glaring example of organized tax evasion” and underscored that the failure to produce critical documents, such as toll receipts, meant that the driver’s statement must be given greater sanctity. Furthermore, although the petitioner challenged the seizure order on the ground that the authority did not have jurisdiction to assess the value of the goods, the Court noted that the penalty and detention orders were passed on multiple grounds, none of which were successfully rebutted by the petitioner.
"Various findings have been recorded against the petitioner as quoted herein above but the same have not been assailed at any stage even before this Court. The findings of fact recorded against the petitioner have not been assailed and the petitioner chose in its wisdom to assail only some part of the finding i.e. on the ground of under valuation, the seizure cannot be held to be justified," the Court said.
Conclusively, the Court held that the provisions under Section 129 of the GST Act empower authorities to seize goods if the goods in transit do not conform to the provisions regarding valuation, as outlined in Section 31 of the Act and further elaborated by Rule 46 (j) and (k) of the GST Rules. It emphasized that the legislative intent is for the registered dealer to declare the true and correct value of the goods on the tax invoice. Failing to do so, the goods become subject to seizure.
Accordingly, the writ petition was dismissed, and the seizure of the goods was upheld, thereby reinforcing that ESI (Excise) authorities have the legal power to take action against deliberate undervaluation and misdeclaration in the transportation of goods.
Cause Title: M/S Jaya Traders v. Additional Commissioner Grade-2 And Another [Neutral Citation No. 2025:AHC:29062]
Appearance:-
Petitioner: Advocate Aditya Pandey
Respondent: Additional Chief Standing Counsel (Addl. CSC) Ravi Shanker Pandey
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