Penalty u/s 129(3) not automatic where defence ignored and natural justice violated in e-way bill detention

HC held that penalty proceedings u/s 129(3) of the West Bengal GST Act, 2017 were vitiated by violation of principles of natural justice. The adjudicating authority failed to consider the taxable person's written defence, particularly that the e-way bill for the consignment was still valid when the substituted vehicle was detained, and passed a non-speaking order. HC clarified that, despite absence of mens rea requirement, penalty under s.129 is not automatic and the authority must evaluate the explanation on merits after affording a hearing as mandated by ss.129(3)-(4). The orders of the adjudicating and appellate authorities were set aside, as was the Single Judge's order, and the matter was disposed of accordingly.

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Issues Involved:
1. Validity of the penalty imposed under Section 129 (3) of the West Bengal Goods and Services Tax Act, 2017.
2. Compliance with principles of natural justice by the Adjudicating Authority.
3. Evaluation of defenses raised by the appellant.

Summary:

Issue 1: Validity of the penalty imposed under Section 129 (3) of the West Bengal Goods and Services Tax Act, 2017.

The appellant challenged the penalty imposed under Section 129 (3) of the West Bengal Goods and Services Tax Act, 2017, arguing that the penalty was unwarranted as the e-way bill was valid at the time of interception. The appellant contended that the mechanical failure of the original vehicle was unforeseen and beyond their control, and there was no intention to evade tax. The court noted that the appellant had relied on several precedents where penalties were not imposed due to lack of intent to evade tax.

Issue 2: Compliance with principles of natural justice by the Adjudicating Authority.

The court found that the Adjudicating Authority failed to consider the appellant's response to the show cause notice, which explained the circumstances leading to the transfer of goods to a new vehicle. The Adjudicating Authority did not apply its mind to the response and proceeded mechanically to impose the penalty. The court emphasized that compliance with principles of natural justice is inherent in adjudicating proceedings, and the Adjudicating Authority must evaluate the merits of the defense and provide a reasoned order.

Issue 3: Evaluation of defenses raised by the appellant.

The court highlighted that the Adjudicating Authority must consider defenses such as reasonable cause, impossibility of performance, and supervening events. In this case, the e-way bill was valid when the new vehicle was detained, and the appellant's explanation that the driver was unaware of the legal requirements should have been evaluated. The court concluded that the Adjudicating Authority and Appellate Authority failed to address the defenses raised by the appellant, resulting in a violation of natural justice.

Conclusion:

The court set aside the impugned order of the Adjudicating Authority and the Appellate Authority, directing the Adjudicating Authority to decide afresh on the show cause notice, considering the appellant's response and providing an opportunity for a hearing. The impugned judgment and order of the learned Single Judge were also set aside.

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