HC reduces CGST penalty from Rs. 11.8 lakh to Rs. 25,000 for non-generation of Part-B e-way bill under Section 129(1)

Gujarat HC modified penalty under Section 129(1) CGST Act from Rs. 11,80,150 to Rs. 25,000 for non-generation of Part-B e-way bill. Petitioner had generated Part-A and paid IGST on goods transported from port to manufacturing place. Court found violation technical and venial as no tax evasion intent existed. Though petitioner voluntarily paid original penalty without objection, HC reduced it considering the contravention was merely procedural non-compliance rather than substantive tax violation.

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Issues Involved:

1. Legality of the penalty imposed under Section 129(1) of the CGST Act for non-generation of Part-B of the E-way bill.
2. Procedural compliance concerning E-way bill generation and its implications.
3. Application of Circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) regarding minor discrepancies in documentation.
4. Justification for the imposition and quantum of penalty under the CGST Act.

Detailed Analysis:

1. Legality of the Penalty Imposed under Section 129(1) of the CGST Act:

The petitioner challenged the order confirming a penalty of Rs. 11,80,150/- under Section 129(1) of the CGST Act, arguing that the non-generation of Part-B of the E-way bill was a procedural lapse due to technical glitches. The petitioner contended that there was no intention to evade tax since the goods were imported after paying IGST and were being transported from the port to the manufacturing site. The court acknowledged that the petitioner had no intention to evade tax, as the goods were cleared by customs and were accompanied by necessary documentation, except for Part-B of the E-way bill, which was generated shortly after the interception.

2. Procedural Compliance Concerning E-way Bill Generation:

The petitioner argued that the failure to generate Part-B of the E-way bill was a minor procedural lapse, not warranting a hefty penalty. The court noted that Part-A of the E-way bill was generated before the interception, and Part-B was generated shortly after, indicating no intent to contravene the law. The court considered this a minor lapse and not a substantial violation of the CGST Act.

3. Application of CBIC Circulars on Minor Discrepancies:

The petitioner relied on CBIC Circular No. 64/38/2018, which provides guidelines for handling minor discrepancies in documentation. The circular suggests that proceedings under Section 129 may not be initiated if a consignment is accompanied by an invoice and an E-way bill, even if there are minor discrepancies. The court found that the petitioner's case fell within the scope of this circular, as the goods were accompanied by the necessary documents, and the lapse was minor.

4. Justification for Imposition and Quantum of Penalty:

The court examined the provisions of Section 129(1) of the CGST Act, which allows for detention and penalty if goods are transported in contravention of the Act. The court observed that while the petitioner paid the penalty voluntarily, the contravention was venial and technical. Considering the petitioner's compliance with other requirements and the minor nature of the lapse, the court modified the penalty to Rs. 25,000/-, deeming it a more appropriate sanction for the procedural lapse.

Conclusion:

The court concluded that the imposition of a penalty of Rs. 11,80,150/- was excessive given the minor procedural lapse and absence of intent to evade tax. The penalty was reduced to Rs. 25,000/- in light of the facts and applicable CBIC circulars. The court emphasized the importance of proportionality in penalties and the need to consider the intent and nature of the contravention. The rule was made absolute to the extent of modifying the penalty, with no order as to costs.

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