2023 (10) TMI 863 - HC - GST

Non-filling of Part B e-way bill in stock transfers leads to quashing of penalty where no intent to evade tax.

Penalty for non-filling of Part B of an e-way bill in a stock transfer was challenged on the ground of bona fide intention. The authority failed to ... Detention, seizure and release of goods under section 129 - penalty under section 129(3) of the UPGST Act - intention to evade payment of tax - stock transfer within State - absence of taxable event - e-way bill Part B non-compliance and subsequent rectificationE-way bill Part B non-compliance and subsequent rectification - detention, seizure and release of goods under section 129 - intention to evade payment of tax - Validity of initiation and confirmation of penalty proceedings under section 129(3) in respect of goods in transit where Part B of the e-way bill was not filled initially but was filled up before seizure and where the consignment was a stock transfer between the assessee's units. - HELD THAT: - The Court found that the consignment was a stock transfer from the petitioner's Agra unit to its Mathura unit and was accompanied by stock transfer challan and consignment note; only Part A of the e-way bill was initially filled while Part B was not, and Part B was completed and produced along with the reply before the authority prior to passing the seizure/penalty order. In these circumstances the authority ought to have taken a lenient view because no intention to evade tax was demonstrated. The Court relied on the principle that proceedings under the provisions dealing with detention, seizure and related penalties require a finding of intent to evade tax and that mere procedural or technical non-compliance which is rectified without any evidence of evasive intent does not justify initiation and confirmation of penalty under section 129(3). The Court also noted that when goods are being moved by way of intra-State stock transfer and there is no taxable event or tax liability, the mere interception for a defect in the e-way bill (which was rectified) cannot sustain a penalty order. Having not been shown any provision or material establishing tax evasion in the facts, the impugned orders were vitiated and liable to be set aside. [Paras 9, 10, 11, 14, 15]Impugned penalty and confirming orders set aside as there was no intent to evade tax and the procedural defect was rectified before seizure; authorities' proceedings under section 129(3) unsustainable.Final Conclusion: Writ petition allowed; orders dated 16.05.2018 and 23.02.2019 quashed. Any fine/penalty deposited shall be refunded to the petitioner within one month of certified copy of the order, with interest at 8% per annum for delay, and authorities may recover such interest from the erring officer. Issues involved:The issues involved in the judgment are the constitution of GST Tribunal in Uttar Pradesh and the challenge against penalty orders under section 129(3) of the UPGST Act.Issue 1: Constitution of GST Tribunal in Uttar PradeshThe petitioner filed a writ petition challenging penalty orders due to the absence of a GST Tribunal in Uttar Pradesh. The Court entertained the petition as no GST Tribunal had been constituted in the state as per the central government's notification.Issue 2: Challenge against Penalty Orders under Section 129(3) of the UPGST ActThe petitioner, a registered company dealing in production, faced penalty orders for a transportation incident where part 'B' of the e-way bill was not filled. The petitioner argued that it was a transporter's mistake, promptly rectified. The authorities upheld the penalty despite no intent to evade tax and the goods being stock transferred within the state.The Court observed that the goods were stock transferred from one unit to another within the state, accompanied by proper documents except for the incomplete part 'B' of the e-way bill. The petitioner rectified the discrepancy before the seizure order was passed, showing no intent to evade tax. The Court highlighted the lack of provision for taxing stock transfers within the state.The Court referred to previous judgments emphasizing the necessity of intent to evade tax for penalty proceedings under the CGST Act. It held that since there was no intention to evade tax in the present case, the penalty orders were unjustified and quashed them.The Court allowed the writ petition, ordering the refund of any fines or penalties deposited by the petitioner. The respondents were directed to comply with the refund within a month, with interest payable if delayed. The authorities were permitted to recover interest from the responsible officer.The matter was listed for review after two months for the filing of an affidavit confirming the refund compliance.