Excavator Seizure Dispute: Tax Notice Challenged, Conditional Release Granted Under CGST Act Section 129(1)(a)

HC examined a challenge to a tax notice regarding E-way bill discrepancies during transportation of an excavator. The court found the penalty invocation under CGST Act Section 129(1)(a) potentially misplaced, given no actual supply occurred. The court directed the petitioner to pay Rs. 2,50,000 as security, mandated bond submission, and ordered the release of the seized excavator, effectively allowing the writ petition with protective conditions for both parties.

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Issues:
Challenge to impugned notice under Section 129(3) of CGST Act, discrepancy in E-way bill, imposition of penalty under Clause A of Sub Section 1 of 129 of CGST Act, invocation of penalty, alternative remedy of writ petition, premature filing of writ petition.

Analysis:
The petitioner challenged an impugned notice issued under Section 129(3) of the Central Goods and Services Tax Act, 2017, calling for a show cause as to why a penalty should not be imposed under Clause A of Sub Section 1 of 129 of the Act. The petitioner's excavator was seized while in transit due to an alleged discrepancy in the E-way bill generated for its movement from Kerala to Odisha for a new contract. The petitioner contended that there was no supply under the CGST Act or IGST Act, and any penalty for E-way bill mistakes should be limited to Rs. 1000 based on circulars from the Central Board of Indirect Taxes and Customs. Reference was made to relevant circulars and legal precedents, including a decision of the Kerala High Court and other cases from the same court.

The respondents argued that the petitioner acquiesced to the notice under Section 129(3) and had an alternative remedy instead of rushing to court prematurely. The court considered both parties' arguments and found that the invocation of penalty under Section 129(1)(a) seemed misplaced as there was no supply as defined in the Acts. The court emphasized that the purpose of E-way bills is to prevent revenue leakage during goods transportation. While directing the petitioner to participate in the proceedings, the court noted that detention of the excavator needed for the Odisha project might not be necessary if the petitioner agreed to provide adequate security for the proposed penalty.

As a resolution, the court directed the petitioner to pay Rs. 2,50,000 to the respondents and furnish a bond for the remaining amount. Upon compliance, the respondents were ordered to release the seized excavator and lorry. This payment was without prejudice to the petitioner's rights in the ongoing proceedings. The writ petition was allowed with these directions, and upon compliance, the excavator and lorry were to be released immediately. The connected Miscellaneous Petition was closed as a result of the judgment.

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