2022 (8) TMI 814 - HC - GST

E-way bill penalty quashed due to lack of fraudulent intent in 4:30 hour delay case under Section 126

The MP HC set aside a penalty imposed for transportation with an invalid/expired E-way bill. The court held that authorities failed to establish tax ... Proportionality in imposition of penalty - expiry of E Way Bill and bona fide short delay - absence of tax evasion, fraudulent intent or gross negligence - statutory requirement of natural justice under the GST provisions - detention and penalty under the GST regime (operation of Section 129 and Section 126 principles)Expiry of E Way Bill and bona fide short delay - absence of tax evasion, fraudulent intent or gross negligence - Validity of detention and imposition of penalty where the E Way Bill had expired shortly before interception but there was no evidence of tax evasion, fraud or negligence - HELD THAT: - The Court found on the record that the E Way Bill was valid up to 19/05/2022 while the vehicle was intercepted on 20/05/2022 at 04:35 AM, and that no other documentary deficiency was pointed out by the department. The respondents did not rebut the petitioner's uncontradicted assertion that the goods reached the destination before midnight and that the subsequent short delay was not accompanied by any evidence of an attempt to evade tax, sell the goods to another or any willful conduct. The Court relied on the reasoning in the cited High Court and Supreme Court decisions that mere expiry of the validity period of an E Way Bill, without material establishing fraudulent intent or evasion, is insufficient to sustain detention, levy of tax and penal consequences. Applying those authorities to the facts, the Court held the impugned action unsustainable and set aside the penalty order. [Paras 21, 22, 23, 24, 25]Penalty and consequential orders based solely on expiry of the E Way Bill, in the absence of any material showing evasion, fraud or negligence, are not sustainable; the impugned penalty order is set aside.Proportionality in imposition of penalty - statutory requirement of natural justice under the GST provisions - detention and penalty under the GST regime (operation of Section 129 and Section 126 principles) - Application of the statutory doctrine of proportionality and natural justice in imposing penalty for procedural breach arising from an expired E Way Bill - HELD THAT: - The Court observed that subsection (1) of Section 126 incorporates the principle that punishment must be commensurate with the breach and that principles of natural justice are statutorily recognized. Having found the short delay (about four and a half hours) to be bona fide and in the absence of culpable conduct by the petitioner, the Court concluded that imposition of the penalty was disproportionate. Consequently, the Court directed refund of the penalty deposited, and provided for interest in case of delayed refund, thereby applying the proportionality and natural justice requirements to set aside the excessive punishment imposed for a procedural lapse. [Paras 26, 27, 28]Penalty was disproportionate in the circumstances and contrary to the statutory mandate of proportionality and natural justice; the penalty is set aside and the amount deposited is to be refunded with interest if not paid within the stipulated time.Final Conclusion: Writ petition allowed: impugned penalty order set aside; penalty amount deposited to be refunded to the petitioner within 30 days, failing which it shall carry interest at 6% until actual payment. Issues:1. Challenge to notice and order regarding E-Way Bill violation and penalty imposition.Analysis:The petitioner, a registered Government contractor, challenged a notice and order related to the expiration of an E-Way Bill during the transportation of goods. The petitioner received a work order for construction and placed an order for TMT bars. The supplier raised an invoice and generated an E-Way Bill for the goods' movement. However, the vehicle carrying the goods faced mechanical issues, resulting in a delay. The Assistant Commissioner stopped the vehicle, claiming the E-Way Bill had expired, leading to the detention of the goods.The petitioner contended that the penalty imposed was disproportionate and unwarranted, highlighting the absence of fraudulent intent or negligence. Citing a Telangana High Court judgment, the petitioner argued that the mere lapse of time on the E-Way Bill does not justify penalty imposition. Additionally, a Calcutta High Court judgment and a circular were referenced to support the argument against penalty for clerical errors.The Department defended the notice and penalty, acknowledging the E-Way Bill's expiry as the sole deficiency in the documents provided. However, the Department's action was deemed justifiable under the relevant provisions.After considering the arguments, the Court found that there was no evidence of tax evasion, fraudulent intent, or negligence on the petitioner's part. Referring to precedents, the Court emphasized the importance of proportionality in penalties and set aside the penalty imposed, directing the refund of the deposited amount to the petitioner.In conclusion, the Court allowed the writ petition, ruling in favor of the petitioner and ordering the refund of the penalty amount. The judgment emphasized the need for proportionate penalties and the absence of fraudulent intent or negligence in the case at hand.