Vehicle breakdown requiring goods transfer to new truck with different number constitutes minor e-way bill error under Section 129 GST Act

Gujarat HC quashed detention order under Section 129 GST Act where goods were detained due to incorrect vehicle number in e-way bill. Petitioner explained original truck broke down requiring goods transfer to another vehicle. Court held this constituted minor error under Circular 64/38/18 warranting only Rs. 500 penalty under Section 125 GST Act and Rs. 1,000 under IGST Act. Since goods were being transferred between petitioner's branches without any sale transaction, and chassis numbers matched invoices, detention was without jurisdiction. Tax demand of Rs. 18,74,972 and equal penalty was set aside.

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Issues Involved:

1. Validity of detention order under Section 129 of the GST Act.
2. Applicability of the circular dated 14.09.2018 issued by the Central Board of Indirect Taxes and Customs.
3. Jurisdiction and legality of the tax and penalty demand.

Issue-wise Detailed Analysis:

1. Validity of Detention Order under Section 129 of the GST Act:

The petitioner challenged the detention order dated 11.01.2020 and subsequent order dated 14.01.2020 under Section 129 of the GST Act, claiming that the goods were accompanied by a valid tax invoice and e-way bill. The petitioner argued that the mismatch in the vehicle number was due to an emergency replacement truck following a breakdown. The e-way bill mentioned the correct chassis number of the car, establishing that the goods were properly accounted for. The court found that the petitioner had no intention to evade tax, and the error in the vehicle number was a minor procedural breach, not justifying detention under Section 129 of the GST Act.

2. Applicability of the Circular Dated 14.09.2018:

The petitioner relied on the circular dated 14.09.2018, which clarifies that minor errors in the e-way bill should not lead to detention under Section 129 of the GST Act. The circular lists specific minor errors, such as mistakes in the vehicle number, that should only attract a token penalty under Section 125 of the GST Act. The court agreed with the petitioner, noting that the minor error in the vehicle number fell within the scope of the circular, thus making the stringent action under Section 129 inappropriate.

3. Jurisdiction and Legality of the Tax and Penalty Demand:

The petitioner contended that the demand for tax and penalty was arbitrary and illegal, as the goods were moving from Gujarat to Maharashtra, constituting an inter-state supply. The court observed that the goods were accompanied by a valid e-way bill and tax invoice, and the only discrepancy was the vehicle number due to a breakdown. The court found that the respondent's reliance on the circular was misplaced, as the circular supported the petitioner's case. The court held that the respondent's order demanding tax and penalty was without jurisdiction and set aside the impugned order, directing a refund of any deposited amount.

Conclusion:

The court quashed the impugned orders dated 11.01.2020 and 14.01.2020, finding that the detention and demand for tax and penalty were without jurisdiction. The court ruled that minor errors in the e-way bill, such as a vehicle number mismatch due to a breakdown, should be addressed with a token penalty under Section 125 of the GST Act, as per the circular dated 14.09.2018. The court ordered the refund of any amount deposited by the petitioner and made the rule absolute to the stated extent, with no order as to costs.

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