In a recent legal development, the Allahabad High Court addressed the issue of penalty computation under the U.P. GST Act, 2017, in the case of M/s M.D. Traders v. State of Uttar Pradesh & Anr. The case arose when the petitioner’s goods were intercepted by the Mobile Squad in Bareilly due to the absence of a valid e-way bill, despite being accompanied by genuine tax invoices. The adjudicating authority initially imposed a penalty under Section 129(1)(b), which mandates a penalty of double the tax payable, rather than under Section 129(1)(a), where the penalty equals the tax payable on the goods.

The petitioner argued that since the goods and tax invoices were authentic and the ownership was undisputed, the situation warranted a penalty under Section 129(1)(a). The petitioner supported their argument by referencing a similar case, Halder Enterprises v. State of U.P., where the court had ruled in favor of applying Section 129(1)(a). The primary issue for determination was whether penalties should be computed under Section 129(1)(a) or 129(1)(b) when genuine tax invoices are present but e-way bill defects exist.

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The Court found that the facts of the present case matched those of the Halder Enterprises case and ruled that the penalty should be recalculated under Section 129(1)(a). The previous order imposing a penalty under Section 129(1)(b) was set aside, and authorities were instructed to recalculate the penalty within three weeks. Upon payment of the recalculated penalty, the goods were to be released immediately, with any remaining concerns to be addressed through statutory appellate remedies. The writ petition was thus disposed of accordingly.