Penalty quashed under Section 129(3) where taxpayer carried digital tax invoice and e-Way Bill on mobile device

The Allahabad HC quashed penalty orders under Section 129(3) of GST Act where taxpayer's goods were detained despite carrying digital copies of tax invoice and e-Way Bill on mobile device. The court held that revenue authorities failed to verify authentic documents available on their portal, and cannot impose penalty for their own verification default. Since all required documents were produced during inspection and no irregularities were found in the bills, detention and penalty were unjustified. The court rejected revenue's argument that payment of demand disentitled taxpayer from appealing penalty order, clarifying that Section 129(1) provides option to either provide security or make payment without affecting appeal rights.

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Issues Involved:
1. Validity of the penalty imposed under Section 129(3) of the GST Act.
2. Legitimacy of the appellate authority's decision upholding the penalty.
3. Compliance with GST documentation requirements during transportation.
4. Right to appeal after penalty payment under Section 129(1) of the GST Act.

Summary:

1. Validity of the penalty imposed under Section 129(3) of the GST Act:
The petitioner challenged the penalty of Rs. 1,83,442/- imposed by the Assistant Commissioner, Commercial Tax, Mobile Squad-VII, Ghaziabad on 04.01.2023 under Section 129(3) of the GST Act. The penalty was based on the grounds that the vehicle driver failed to produce a signed tax invoice and other valid documents at the time of interception, leading to the conclusion that the goods were transported without valid documentation in violation of the GST Act.

2. Legitimacy of the appellate authority's decision upholding the penalty:
The appellate authority, by order dated 09.05.2023, upheld the penalty, reiterating that the petitioner did not generate and download the e-Way Bill before transporting the goods, and that the driver failed to produce any document apart from the tax invoice at the time of interception. The appellate authority concluded that the petitioner intended to evade tax, thus justifying the penalty.

3. Compliance with GST documentation requirements during transportation:
The petitioner argued that the e-Invoice and e-Way Bill were generated and provided in digital form to the vehicle driver, who produced these documents at the time of inspection. The petitioner further contended that the hard copies of the documents were presented during the proceedings. The Court found that the driver was indeed in possession of a digital tax invoice and e-Way Bill, and that the revenue authorities failed to verify these documents, which were accessible on the GST portal. The Court noted that the requirement for signatures on digital invoices is dispensed with under Rule 46 of the C.G. & S.T. Rules, 2017.

4. Right to appeal after penalty payment under Section 129(1) of the GST Act:
The Court rejected the revenue's argument that the petitioner could not appeal the penalty after making the payment. It held that under Section 129(1) of the GST Act, the assessee has the option to either provide security or make payment, and making the payment does not preclude the right to appeal.

Conclusion:
The Court quashed the orders dated 04.01.2023 and 09.05.2023, finding that the petitioner had produced all required documents at the time of inspection, and there was no cause for detention, seizure, or imposition of the penalty. The amount deposited by the petitioner was ordered to be refunded. The Court criticized the revenue authorities for misdirecting themselves in law and unnecessarily harassing an honest taxpayer, and suggested regular training and dissemination of relevant judgments to the officers.

Order:
The writ petition was allowed, and the impugned orders were quashed. The amount deposited by the petitioner was ordered to be refunded. The Court emphasized the need for proper training and awareness among revenue officers to prevent such issues in the future.

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