GST Authority quashes tax penalty for expired e-way bill, rules intent to evade tax must be proven

The Appellate Authority GST, Himachal Pradesh quashed the tax and penalty order imposed under section 129 of CGST/HPGST Act for expired e-way bill during vehicle inspection. The Authority held that mere expiry of e-way bill without proving intent to evade tax cannot justify penalty imposition, especially when IGST was already paid and tax invoice was properly issued. The original order lacked reasoning and failed to consider that transaction details were available with GST authorities through the online portal. However, the Authority imposed Rs. 15,000 penalty under section 125 of HPGST/CGST Act and directed refund of balance amount to the appellant.

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Issues Involved:
1. Imposition of tax and penalty under Section 129 of HPGST/CGST Act, 2017.
2. Validity and extension of the e-way bill.
3. Alleged violation of natural justice principles.
4. Determination of tax liability and double payment of IGST.
5. Procedural lapses by the Proper Officer.
6. Applicability of Supreme Court judgment in similar cases.

Detailed Analysis:

1. Imposition of Tax and Penalty under Section 129 of HPGST/CGST Act, 2017:
The Proper Officer imposed a tax and penalty of Rs. 5,84,766/- on the Appellant under Section 129 of HPGST/CGST Act, 2017, read with Section 20 of IGST Act, 2017. The Appellant argued that the tax and penalty were imposed without proper notice or an opportunity to be heard, which violates the principles of natural justice. The judgment emphasized that granting an opportunity to be heard is a fundamental principle and not a mere formality.

2. Validity and Extension of the E-Way Bill:
The e-way bill was initially valid until 28.06.2019 but was revalidated and extended until the midnight of 30.06.2019. The Proper Officer, however, failed to verify the extended validity and incorrectly noted that the e-way bill had expired on 12.05.2019. The judgment highlighted the procedural error and the fact that the vehicle was checked on 01.07.2019, a day after the e-way bill's extended validity had expired.

3. Alleged Violation of Natural Justice Principles:
The Appellant contended that the notice issued by the Proper Officer directed the supplier and recipient to appear on the same date and time the vehicle was intercepted, effectively denying any opportunity to be heard. The judgment found this to be a clear violation of natural justice principles, emphasizing that the Proper Officer had passed the order without proper application of mind.

4. Determination of Tax Liability and Double Payment of IGST:
The Appellant argued that IGST amounting to Rs. 2,92,383/- had already been paid on the transaction, leading to a double payment of IGST. The judgment found that the Proper Officer had not considered this aspect and failed to provide any reasoning for the additional tax and penalty imposed.

5. Procedural Lapses by the Proper Officer:
The Proper Officer did not follow the due procedure as outlined in the Circular No. 41/18/2018-GST regarding the interception of conveyances, inspection of goods, and imposition of penalties. The judgment noted the failure to upload the physical verification report in Form GST MOV-04 and MOV-09 on the common portal, and the lack of proper opportunity for the Appellant to be heard.

6. Applicability of Supreme Court Judgment:
The judgment referenced the Supreme Court ruling in M/s. Satyam Shivam Papers Pvt. Ltd. Vs. Asst. Commissioner (ST) and others, which held that tax/penalty under Section 129 of CGST/HPGST Act, 2017, cannot be imposed merely on the basis of the expiry of the e-way bill without proving the intention to evade tax. The judgment concluded that the Proper Officer failed to establish any willful or deliberate attempt by the Appellant to evade tax.

Conclusion:
The appeal was allowed, and the impugned order passed by the Proper Officer was quashed and set aside. A penalty of Rs. 15,000/- was imposed under Section 125 of HPGST/CGST Act, and the Respondent was directed to recover this amount and refund the balance to the Appellant. The judgment underscored the importance of adhering to procedural norms and ensuring that principles of natural justice are upheld.

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