2020 (3) TMI 729 - Commissioner - GST

Appellate authority overturns tax penalty, orders refund due to technical difficulties.

The appellate authority found the tax and penalty imposed under Section 129(3) of the CGST/HPGST Act, 2017 unsustainable due to technical difficulties ... Penalty under section 129(3) for detention of goods in transit - updation of Part B of e-way bill on trans-shipment - opportunity of being heard under section 129(4) - penalty under section 122 for transporting taxable goods without cover of documents - relief for minor or procedural breaches and applicability of CBIC circularsPenalty under section 129(3) for detention of goods in transit - updation of Part B of e-way bill on trans-shipment - Validity of tax and penalty levied under section 129(3) where goods were transshipped and the e-way bill part B was not updated at the time of inspection but was subsequently updated. - HELD THAT: - The Appellate Authority found no dispute as to quantity or existence of invoices and that the e-way bill had been generated on 05-11-2018. The goods were transshipped after the carrying vehicle broke down and the transporter updated part B of the e way bill thereafter. The authority below detained the vehicle and mechanically imposed tax and penalty under section 129(3) despite production of the corrected e way bill. The Appellate Authority concluded that there was no evidence of intention to evade tax or of changing vehicle to evade tax, and that the imposition under section 129(3) was therefore unsustainable in the circumstances. [Paras 7, 9, 11]Order under section 129(3) setting out tax and penalty is set aside and the amount deposited under that order is directed to be refunded.Opportunity of being heard under section 129(4) - Whether the determination under section 129(3) complied with the requirement of hearing under section 129(4). - HELD THAT: - The Appellate Authority observed that section 129(4) requires an opportunity of being heard before determining tax, interest or penalty under subsection (3). The authority below proceeded to levy tax and penalty without affording the statutory opportunity, and acted in haste in doing so. This failure was material to the conclusion that the levy under section 129(3) could not be sustained. [Paras 8, 9]The determination under section 129(3) is vitiated for want of the opportunity of being heard prescribed by section 129(4).Penalty under section 122 for transporting taxable goods without cover of documents - relief for minor or procedural breaches and applicability of CBIC circulars - Appropriate penalty for the procedural lapse of not updating the e-way bill at the time of inspection. - HELD THAT: - While the Appellate Authority found the transporter guilty of a procedural lapse in not updating part B before resuming the journey, it treated the breach as one warranting a lesser, statutory penalty rather than the tax/penalty under section 129(3). The authority referred to the penal provisions in section 122 and concluded that a moderate penalty was appropriate in view of absence of evasive intent and production of requisite documents. Consequently, a penalty under section 122(xiv) for transporting taxable goods without the cover of documents was imposed as the alternative statutory consequence. [Paras 10, 11]A penalty of Rs. Ten Thousand is imposed on the taxpayer under section 122(xiv); the deposit made under section 129(3) shall be refunded.Final Conclusion: The appeal is allowed: the order imposing tax and penalty under section 129(3) is set aside for want of substantive justification and failure to afford the hearing mandated by section 129(4); the sum deposited under that order shall be refunded, and a reduced penalty of Rs. Ten Thousand is imposed under section 122(xiv). Issues Involved:1. Legality of tax and penalty imposition under Section 129(3) of the CGST/HPGST Act, 2017.2. Applicability of Section 126 for minor procedural lapses.3. Justification for imposing a lesser penalty as per Circular No. 64/38/2018-GST.4. Consideration of the appellant’s intent and technical difficulties in updating the E-way bill.Detailed Analysis:1. Legality of Tax and Penalty Imposition under Section 129(3) of the CGST/HPGST Act, 2017:The appellant contested the order passed by the Assistant Commissioner State Taxes & Excise (ACST&E), which imposed a tax and penalty of Rs. 1,43,432 under Section 129(3) of the CGST/HPGST Act, 2017. The appellant argued that the penalty was unjust as it was imposed for a minor mistake in updating the vehicle number in the E-way bill due to weak internet connectivity. The appellant cited the Supreme Court’s principles in Hindustan Steel Ltd. Vs. State of Orissa, emphasizing that penalties should not be imposed for technical or venial breaches of the law.2. Applicability of Section 126 for Minor Procedural Lapses:The appellant argued that the minor mistake in updating the vehicle number should attract a lesser penalty under Section 126 of the CGST Act, which deals with omissions or mistakes in documentation that are easily rectifiable. The appellant maintained that the error was due to a breakdown of the original vehicle and subsequent weak internet connectivity, which prevented the timely update of the E-way bill.3. Justification for Imposing a Lesser Penalty as per Circular No. 64/38/2018-GST:The appellant referred to Circular No. 64/38/2018-GST, which prescribes a lesser penalty for minor procedural mistakes that are easily rectifiable. The appellant contended that the order imposing a tax and penalty equal to 100% of the tax payable on the goods was contrary to the guidelines provided in the circular.4. Consideration of the Appellant’s Intent and Technical Difficulties in Updating the E-way Bill:The appellant emphasized that there was no fraudulent intention or malice in not updating the vehicle number in the E-way bill. The delay was due to weak internet connectivity, and the vehicle number was eventually updated before the issuance of the show cause notice. The appellant argued that the proper officer should have considered these facts and taken a lenient view.Respondent’s Arguments:The respondent argued that the vehicle was intercepted, and the driver initially failed to produce the E-way bill. Upon production, the vehicle number on the E-way bill did not match the vehicle carrying the goods. The respondent dismissed the appellant's claim of weak internet connectivity, stating that other vehicles were checked without such issues. The respondent maintained that the appellant's actions constituted a breach of Section 129(1) of the Act, and the penalty was justified.Judgment:After hearing both parties, the appellate authority noted that the appellant had declared the consignment on 05.11.2018, indicating no intention to evade tax. The proper officer acted hastily by imposing the tax and penalty without giving the appellant a proper opportunity to be heard, as required under Section 129(4). The authority found that the appellant had updated the E-way bill with the new vehicle number, and the only mistake was the delay in updating it due to technical difficulties.The appellate authority concluded that the tax and penalty imposed under Section 129(3) were unsustainable. However, acknowledging the procedural lapse, the authority imposed a minor penalty of Rs. 10,000 under Section 122(xiv) of the Act. The order dated 06.11.2018 was set aside, and the tax and penalty deposited by the appellant were ordered to be refunded.Conclusion:The appeal was accepted, and the order imposing a tax and penalty of Rs. 1,43,432 was set aside. A minor penalty of Rs. 10,000 was imposed on the appellant for the procedural lapse. The judgment emphasized the importance of considering technical difficulties and the intent of the appellant in such cases.