High Court Upholds GST Regulatory Measures as Constitutionally Valid
The Calcutta High Court has ruled that regulatory measures under the Goods and Services Tax (GST) Act do not violate an assessee’s right to trade or business under Article 19(1)(g) of the Constitution. Justice Rajarshi Bharadwaj emphasized that such measures are necessary to ensure compliance and prevent tax evasion.
The petitioner, an iron and steel trader, contended that there were minor variations in the documentation and hence no grounds for the seizure of their goods and vehicle under Section 129(1) of the GST Act and Rule 138A of the CGST Rules. They also challenged the requirement to specify the size of goods in invoices, claiming it was legally untenable and invoked Article 19(1)(g), which grants the right to trade.
This legal challenge arose after the GST Department seized the trader’s goods and vehicle, leading to claims that the discrepancies during transportation were minimal and did not suggest unlawful intent. The trader argued that despite some differences in the categorization of ‘TMT Bars,’ the weight recorded in their invoices was consistent with the weight verified by the GST authority.
Conversely, the Respondents argued that the seized goods displayed significant discrepancies in both description and quantity compared to the declared details, indicating a deliberate attempt to evade tax. They highlighted inconsistencies and a lack of transparency in the petitioner’s inventory records as further evidence of an attempt to conceal the true state of business from the taxing authority.
In its ruling, the High Court upheld the legality of the detention of the petitioner’s goods and vehicle. The court found that the differences between the declared goods and those verified were substantial. It stated, “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 were deemed harmful to the accuracy of the petitioner’s tax declarations, which are crucial for assessing tax liability.
The court dismissed the petitioner’s claims of procedural violations as insufficient to invalidate the detention and subsequent proceedings, noting that the core findings of the case remained unchanged. Additionally, it rejected the assertion of an infringement on the fundamental right to trade, affirming that the regulatory measures under GST laws are vital for ensuring compliance and preventing tax evasion, thus not constituting a violation of fundamental rights.
The High Court supported the Respondents’ assertions about the petitioner’s inconsistent and opaque inventory records, reinforcing the conclusion of an intent to evade taxes. The court reiterated that under GST laws, the burden of proof rests with the taxpayer to demonstrate compliance with statutory provisions. The petitioner was unable to provide evidence of legitimate trading practices or refute the authorities’ valuation.
Case Details:
- Case title: Ashok Sharma v. State of West Bengal & Ors.
- Case no.: W.P.A 26591 of 2024
Appearance: Advocates Himangshu Kumar Ray, Subal Saha, Subhasis Podder, Sushant Bagaria for the petitioner; Advocates A. Ray, Md. T.M. Siddiqui, D. Sahu, S. Sanyal for the State.
