2021 (3) TMI 540 - HC - GST

Court sets aside tax order for minor error in E-way bill penalties, citing lack of authority and procedural flaws.

The court ruled in favor of the petitioner, setting aside the order demanding tax and penalties under the CGST and SGST Acts. The court emphasized that ... Clerical error in E-way bill - validity of e-way bill - proceedings under Section 129 of the CGST Act, 2017 - penalty under Section 125 of the CGST Act - CBEC Circular No. 64/38/2018-GST dated 14-09-2018 - right to hearing / audi alteram partemClerical error in E-way bill - proceedings under Section 129 of the CGST Act, 2017 - penalty under Section 125 of the CGST Act - CBEC Circular No. 64/38/2018-GST dated 14-09-2018 - Whether demand of CGST/SGST and invocation of Section 129 for transportation accompanied by invoice and an E-way bill which contained a typographical error in distance was sustainable - HELD THAT: - The court found on the material before it that the goods were indisputably being transported inter-state from Howrah to Agartala, that the distance was wrongly recorded as 470 kms instead of approximately 1470 kms due to a typographical clerical error, and that the goods were accompanied by invoice and other specified documents. Applying the Board's clarification in CBEC Circular No. 64/38/2018-GST dated 14-09-2018, proceedings under Section 129 ought not to be initiated for minor discrepancies such as one or two digit errors in e-way bill particulars; in such cases the proper course is collection of a nominal penalty under Section 125 (as specified in the circular) rather than confirmation of the tax demand and heavy penalties under Section 129. The Central Government and consignor's affidavits admitted the clerical lapse and supported application of the circular. On these findings the Inspector had no power to treat the clerical error as a ground for the substantial tax and penalty demand under Section 129. [Paras 6, 7, 8, 9]Demand of CGST/SGST with penalties under Section 129 was not sustainable in view of the clerical error in the e-way bill and the Board's circular; at most the limited penalty regime under Section 125 as clarified by the circular would apply.Right to hearing / audi alteram partem - Whether the impugned order could stand where the Inspector issued a notice fixable for personal appearance on a future date but passed the confirmatory order on the same day without affording the hearing - HELD THAT: - The court recorded that the Inspector issued a notice calling upon the petitioner to appear on a later date but, notwithstanding that, passed an independent order on the same day confirming the demand. Such procedure was held to be grossly irregular because the authority treated the order as a mandatory demand without granting the opportunity of personal hearing provided in the notice. Given this procedural defect the order could not be allowed to stand, and the petitioner should not be relegated to appellate remedy where the impugned order itself suffered from denial of hearing. [Paras 3, 10]Impugned order passed without affording the hearing indicated in the notice was impermissible and is set aside for procedural irregularity.Final Conclusion: Impugned order dated 05.11.2018 confirming tax and penalties under Section 129 is set aside: the tax and heavy penalties could not be imposed for a clerical error in the e-way bill in the presence of invoice and supporting documents in view of CBEC Circular No. 64/38/2018-GST, and the order was also vitiated by denial of the opportunity of hearing. Issues:Challenge to tax demand under CGST and SGST Acts based on clerical error in E-way bill validity period leading to penalty imposition.Detailed Analysis:Issue 1: Tax Demand and Penalty ImpositionThe petitioner challenged an order demanding CGST and SGST along with penalties under the CGST and SGST Acts due to a clerical error in the E-way bill. The goods were transported from Howrah to Agartala, with the E-way bill showing an incorrect distance of 470 Kms instead of the actual 1470 Kms. The Inspector of State Tax issued the demand and penalty without granting a proper hearing to the petitioner, which was contested by the petitioner.Issue 2: Legal Provisions and CircularsThe judgment highlighted the relevant provisions of the GST Act and Rules, emphasizing the importance of correct documentation for goods transportation. The Central Board of Indirect Taxes and Customs issued a circular clarifying the treatment of minor discrepancies in E-way bills, stating that penalties should not be imposed for errors like incorrect document numbers or minor lapses. This circular guided the court's decision in this case.Issue 3: Court's Analysis and DecisionAfter considering submissions from both parties and examining the documents, the court found that the clerical error in the E-way bill was a minor oversight. The court noted key undisputed facts, including the correct distance between the origin and destination, the duty paid status of the goods, and the inter-state nature of the sale. The court referred to the circular and the affidavits filed by the Central Government and the company from which the goods were purchased, supporting the petitioner's claim of a minor clerical error.Conclusion:The court ruled in favor of the petitioner, setting aside the order demanding tax and penalties. The court emphasized that the Inspector of State Tax did not have the authority to demand GST with penalties in this case, especially considering the minor nature of the error and the lack of proper hearing granted to the petitioner. The judgment concluded by disposing of the petition and any pending applications related to the case.