2022 (9) TMI 92 - HC - GST

Major penalty under Section 129 CGST Act for expired e-way bill held without jurisdiction when other documentation valid

Kerala HC held that imposing major penalty under Section 129 CGST Act for expired e-way bill was without jurisdiction. The vehicle carried proper invoice ... Detention under Section 129 - expiry of e-way bill - absence of evasion or suppression of tax - minor discrepancies and mitigation by statutory circular - requirement of opportunity of hearing and reasoned exercise of power - remand for reconsideration of penalty quantumDetention under Section 129 - expiry of e-way bill - absence of evasion or suppression of tax - minor discrepancies and mitigation by statutory circular - Whether the order detaining the vehicle and imposing tax and a major penalty was sustainable where the e-way bill had expired but there was no material to show evasion of tax and the consignment was accompanied by invoice and other documents - HELD THAT: - The Court held that the sole ground for invoking Section 129 was expiry of the e-way bill. The consignement was accompanied by an invoice showing the taxable value and IGST and other particulars matched the e-way bill. There was no finding of any attempt to evade tax. The statutory Circular relied upon by this Court (addressing minor discrepancies and prescribing limited penalties) is binding on officers and demonstrates that minor or bona fide discrepancies which do not affect tax liability should not attract harsh detention and major penalty. Where detention is used as machinery to guard against evasion, it cannot be invoked in the absence of materials indicating evasion; the machinery provisions must be strictly construed. Applying these principles and the precedents on similar facts, the Court found the demand of tax and imposition of a major penalty to be without jurisdiction and quashed the impugned adjudication order.Impugned order imposing tax and major penalty for expiry of the e-way bill was quashed as being without jurisdiction in the absence of any material suggesting evasion; writ petition allowed.Requirement of opportunity of hearing and reasoned exercise of power - remand for reconsideration of penalty quantum - Whether the matter should be remitted for fresh consideration of the penalty to be imposed after applying the Court's legal findings - HELD THAT: - Although the adjudication order was quashed, the Court did not finally determine the appropriate penalty on merits. Instead, having held that detention and the major penalty were not justified on the record, the Court remanded the matter to the adjudicating authority with directions to reconsider and determine the penalty amount in light of the Court's findings and the observations in the earlier Ext.P6 judgment, after affording the petitioner an opportunity of hearing. The Court declined to decide procedural questions relating to the appeal pre-deposit conditions, as remand for reassessment of penalty rendered such examination unnecessary at this stage.Matter remitted to the first respondent to reconsider and quantify the penalty, after hearing the petitioner and applying the Court's findings and the principles set out in the cited circular and precedent.Final Conclusion: Writ petition allowed; adjudication order imposing tax and a major penalty quashed for want of jurisdiction in the absence of any material of tax evasion, and the matter remanded to the adjudicating authority to determine an appropriate penalty after hearing the petitioner and in accordance with this judgment and the applicable circular/precedent. Issues Involved:1. Validity of the penalty imposed due to the expiry of the e-way bill.2. Jurisdictional error in imposing tax and penalty.3. Applicability of alternative remedy under Section 107 of the CGST/SGST Acts.4. Validity of the conditions for maintaining the appeal under Section 107 of the CGST/SGST Acts.Issue-wise Detailed Analysis:1. Validity of the penalty imposed due to the expiry of the e-way bill:The petitioner, engaged in the transportation of goods, was penalized because the e-way bill for transporting a tipper lorry from Tamil Nadu to Kozhikode expired on 8.7.2019, and the vehicle was detained on 9.7.2019. The petitioner argued that the vehicle couldn't cross the check post due to mechanical issues and the closure of the Bandipur Highway at night. The petitioner cited judgments from various High Courts to argue that minor discrepancies should not attract major penalties, especially when there is no intent to evade tax. The Court noted that the vehicle was accompanied by an invoice showing the value and IGST, and the only discrepancy was the expired e-way bill. It emphasized that the officer did not find any attempt to evade tax, and the explanation for the delay was not adequately considered.2. Jurisdictional error in imposing tax and penalty:The Court held that the imposition of a major penalty and demand for IGST was without jurisdiction. It referenced the judgment in Podaran Foods India Pvt. Ltd., which emphasized that detention of goods and vehicles should only occur if there is a possibility of tax evasion. The Court reiterated that Section 129 of the CGST/SGST Acts should be strictly construed and that detention should be justified only if there is a contravention of the Act's provisions related to transportation or storage of goods. The Court found that the detention in this case was solely due to the expired e-way bill, without any indication of tax evasion.3. Applicability of alternative remedy under Section 107 of the CGST/SGST Acts:Despite the availability of an alternative remedy, the Court decided to grant relief because the demand for tax and the imposition of a major penalty were clearly without jurisdiction. The Court emphasized that the statutory Circular No.64/38/2018, issued by the Central Board of Direct Taxes and Customs, aimed to mitigate hardships caused by minor discrepancies, which had no bearing on tax liability. The Court noted that the discrepancy in this case was minor and did not justify the imposition of a major penalty.4. Validity of the conditions for maintaining the appeal under Section 107 of the CGST/SGST Acts:The Court did not find it necessary to examine the validity of the conditions stipulated in Ext.P5 for maintaining Ext.P4 appeal, given its findings on the other issues. The Court quashed Ext.P3 and remanded the matter to the 1st respondent to reconsider the penalty, taking into account the findings in the judgment and providing an opportunity for the petitioner to be heard.Conclusion:The writ petition was allowed, and Ext.P3 was quashed. The matter was remanded to the 1st respondent to reconsider the penalty, with the Court emphasizing that minor discrepancies should not attract major penalties and that the explanation for the expired e-way bill should be adequately considered. The Court's decision was influenced by the binding precedent set by the Telangana High Court, affirmed by the Supreme Court, which held that the power of detention under Section 129 was wrongly invoked in cases where there was no intent to evade tax.