Seizure and Confiscation of goods merely on the ground that there were no records maintained by Assessee was not valid.

Case Title: Metenere Ltd. v. Union of India

Court: High Court of Allahabad

Petition Number: WRIT TAX No. 360 of 2020

Category of Dispute: Maintenance of Records under GST (Section 35)

Date of Judgement: 22 October 2020

Relevant Section: Section 35(1) of the Central Goods and Services Tax Act, 2017

Facts of the Case

1. The petitioner, Metenere Ltd., was found with goods stored at its business premises without availability of corresponding sale and purchase documents, leading to the inference that such goods were unaccounted for and inviting action under Section 35(1) of the CGST ActMetenereLtdvsUnionofInd….
2. The petitioner contended that due to the transitional period from the pre-GST regime to the new GST regime, most documentation and filings had moved online, and the necessary records were maintained at the company’s Head Office and not at the business premisesMetenereLtdvsUnionofInd….
3. It was submitted that the absence of day-to-day records at the business site was not a willful non-compliance but a logistical outcome of transitional tax administration, and the documents had subsequently been placed on record through a rejoinder affidavit

Questions in Consideration

1. Whether non-availability of sale and purchase documents at the business premises, when such documents are available at the Head Office, amounts to non-compliance under Section 35(1) of the CGST Act?MetenereLtdvsUnionofInd…
2. Whether the transitional phase from the old tax regime to GST offers reasonable justification for such non-availability?

Observation of the Court

1. The Court acknowledged the petitioner’s submission that the documents were indeed stored at the Head Office, which had not been verified by the department before drawing adverse inferenceMetenereLtdvsUnionofInd….
2. The Court considered the transitional nature of the GST regime and found merit in the argument that this transition reasonably explained the temporary absence of records at the business premisesMetenereLtdvsUnionofInd….
3. It was noted that the respondent counsel could not refute the availability of documents at the Head Office due to lack of proper verification

Judgement of the Court

1. The Court allowed the petitioner ten days to produce all the relevant documents, duly signed by the designated company authority, before the Additional Commissioner, Central Excise and GST, Gautam Budh NagarMetenereLtdvsUnionofInd….
2. The concerned officer was directed to verify the documents and submit a report to the Court within a week of submissionMetenereLtdvsUnionofInd….
3. The matter was listed for further hearing on 09.11.2020

Between Fine Lines

• The case emphasized that procedural compliance under GST should be viewed contextually, especially during the transitional period.
• Courts are willing to offer remedial time where taxpayers can establish bona fide conduct.
• Maintenance of records at the Head Office was not outrightly invalidated if justified and verifiable.
• The ruling encouraged revenue authorities to adopt a fair, verification-based approach.
• The decision protected taxpayer rights against premature conclusions drawn without full inquiry.

Summary of Referred Cases