Penalty under Section 129 CGST Act set aside for e-way bill non-updation during vehicle breakdown

Karnataka HC set aside SCN and assessment order imposing penalty under Section 129 CGST Act for non-updation of e-way bill during vehicle breakdown and goods transfer. Court found no intention to contravene CGST provisions or evade tax payment. HC invoked Section 125 CGST Act, imposing general penalty of Rs. 25,000 instead, directing respondents to refund tax paid by petitioner after deducting penalty amount. Petition allowed with modified penalty structure.

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Issues:
Petition seeking quashing of show cause notice and assessment order, validity of e-way bill, imposition of penalty under Section 129 of CGST Act, justification for non-updation of e-way bill, intention to evade tax, refund of penalty, reliance on judgment in Assistant Commissioner vs. Satyam Shivam Papers Pvt. Ltd.

Analysis:
The petitioner sought to quash the show cause notice and assessment order due to a breakdown of the subject vehicle during transit, leading to a delay in reaching the destination and expiration of the e-way bill. The petitioner argued that the non-updation of the e-way bill was unintentional and beyond its control, emphasizing no intent to evade tax. The petitioner requested the imposition of a maximum general penalty of Rs. 25,000 under Section 125 of the CGST Act and sought a refund of the penalty paid, citing the judgment in Assistant Commissioner vs. Satyam Shivam Papers Pvt. Ltd. The respondents opposed the petition.

The court examined the circumstances and concluded that the breakdown of the vehicle and the subsequent delay were not intentional or attributable to the petitioner. It found no evidence of intent to contravene CGST Act provisions or evade tax. Therefore, it deemed fit to impose a general penalty of Rs. 25,000 under Section 125 of the CGST Act, setting aside the impugned order and notice, and directing the refund of excess penalty paid by the petitioner within a month.

In a related judgment, the court referenced a case involving similar issues where the High Court set aside the tax and penalty while enhancing the costs imposed on the responsible party. The court emphasized that no intent to evade tax was found and criticized the abuse of power in collecting tax and penalty. It upheld the High Court's decision and enhanced the costs imposed in the matter, clarifying that the State could recover the costs from the responsible parties directly.

Ultimately, the court allowed the petition, setting aside the impugned notice and order, imposing a penalty of Rs. 25,000 on the petitioner, and directing the refund of excess penalty paid. The judgment highlighted the importance of considering intent and circumstances in tax-related matters and emphasized the need to prevent unnecessary litigation and abuse of power in tax collection processes.

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