Goods transport detained for missing delivery challan despite invoices and e-way bills; s.129 penalty set aside as no evasion

Detention and penalty under s.129 CGST Act for non-availability of a delivery challan was held unsustainable where the consignments were accompanied by invoices, e-way bills and bilty, tax had been duly paid, and there was no tax evasion or intent to evade. Interpreting ss.129, 122(xiv) and 130, the HC held that s.129 (pre-amendment) was intended to address situations involving a tax element linked to detention and release, whereas mere transport without specified documents, absent any evasion, attracts penalty under s.122. Since the alleged lapse was only non-compliance with s.55(5)(b) and the delivery challan would not have added material information, the impugned orders under s.129 were quashed and the writ petition was allowed.

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Issues Involved:
1. Legality of the penalty imposed under Section 129 of the Central/State Goods and Services Tax, 2017.
2. Compliance with procedural requirements under the 2017 Rules.
3. Application of Section 122 versus Section 129 of the Act.

Summary:

Issue 1: Legality of the Penalty Imposed under Section 129 of the Act

The challenge in these petitions is to the orders dated 09.06.2023 passed by the Assistant Commissioner State Tax/Tax Officer, imposing penalties under Section 129 of the Central/State Goods and Services Tax, 2017. The petitioner argued that the imposed penalty is illegal as it was passed without appreciating that the petitioner had ensured all compliances under the Act except the delivery challan. The petitioner contended that the non-availability of the delivery challan is a mere procedural impropriety or irregularity without any element of tax evasion. The court noted that the facts are admitted and there is no dispute regarding the tax payment.

Issue 2: Compliance with Procedural Requirements under the 2017 Rules

The petitioner had generated e-way bills and was carrying invoices and bilty. The vehicles were intercepted for not carrying delivery challans as required under Rule 55 (5) (b) of the 2017 Rules. The court observed that the delivery challan does not contain any additional information that was not already available in the other documents. The court emphasized that the statutory provisions should be interpreted harmoniously to avoid conflicts and give effect to all provisions.

Issue 3: Application of Section 122 versus Section 129 of the Act

The court examined whether the situation warranted invoking Section 129 of the Act. It was noted that Section 129, prior to its amendment, included an element of tax, which has now been removed. The court reasoned that not every non-compliance with document requirements should attract Section 129. Instead, Section 122, which deals with penalties for transporting goods without specified documents, should be applicable in cases of mere non-compliance without tax evasion or fraudulent intent. The court referred to Circular 94, which suggests that minor breaches should be addressed under Section 126 of the Act.

Conclusion:

The court concluded that the impugned orders under Section 129 were not in accordance with the law and should be set aside. The GST authorities were directed to refund the amount deposited by the petitioner and were given the liberty to proceed under Section 122 of the Act if deemed necessary. The writ petitions were allowed, and the orders dated 09.06.2023 were set aside.

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