2024 (12) TMI 210 - HC - GST

E-way bill penalty set aside for procedural lapse without tax evasion intent or malicious purpose

Excellent Polycon Private Limited Versus The State Tax Officer, Bureau of Investigation, (South Bengal), Kharagpur Zone & Ors.

Calcutta HC set aside penalty imposed for transporting goods after e-way bill expiry. Court held that penalties for procedural lapses without evidence of ... Levy of penalty for transporting goods after the expiry of the e-way bill - HELD THAT:- Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court opines that while procedural compliance under the GST framework is crucial, penalties imposed purely for procedural lapses without evidence of tax evasion or malicious intent may not serve the legislative intent. Given the absence of any attempt to divert the goods or evade tax, and based on the petitioner’s compliance record, this Court observes that imposing a penalty was unwarranted in this instance. This Court therefore, emphasizes that rules, including those on e-way bill validity, should be applied contextually, taking into account the facts and intentions involved. For the foregoing reasons and the judgment in Progressive Metals (P.) Ltd. v. Deputy Commissioner, State Tax [2022 (4) TMI 1542 - CALCUTTA HIGH COURT], this Court finds that the penalty imposed by the respondents to be excessive and not aligned with the principles of natural justice. This Court, therefore, set aside the orders of the Appellate and Adjudicating Authorities, holding that the penalty imposed on the petitioner was unwarranted given the petitioner’s established compliance and the absence of intent to evade tax. Applications are accordingly disposed of. Issues:Challenge to order imposing penalty for transporting goods after expiry of e-way bill.Analysis:The petitioner, a registered company engaged in manufacturing plastic products, faced penalties for transporting goods with an expired e-way bill. The petitioner's compliance history was impeccable, with no prior tax evasion issues. The incident occurred when goods were in transit, and the e-way bill expired due to unforeseen circumstances. The authorities intercepted the vehicle, issued a show-cause notice proposing penalties, and later confirmed the penalties despite the petitioner's submissions and extenuating circumstances. The petitioner contended that penalties were imposed solely on procedural lapses, exceeding statutory authority, and were arbitrary and unwarranted.The petitioner argued that the goods were intended for a specific customer, all documentation was accurate, and the purpose of the e-way bill system was fulfilled. The transaction was duly recorded in books and tax returns, eliminating any suspicion of tax evasion. The authorities' actions were deemed excessive and lacking jurisdiction, as both e-way bill and e-invoice were generated, and no tax evasion was evident. The petitioner highlighted that penalties were imposed on technical grounds without considering the actual compliance and financial impact on revenue.The respondent authorities justified the penalties citing the e-way bill validity extension provision, which the petitioner failed to utilize. They argued that the petitioner had the opportunity to extend the e-way bill validity electronically at any time, regardless of holidays, and transporter's responsibility to ensure compliance. The authorities maintained that the petitioner's negligence in extending the e-way bill validity could set an undesirable precedent, justifying the penalty imposition.The Court emphasized the importance of contextual application of rules, considering facts and intentions involved. Referring to previous judgments, the Court noted that penalties should not be imposed without evidence of tax evasion or malicious intent. In line with principles of natural justice, the Court found the penalties excessive and unwarranted, setting aside the orders of the Appellate and Adjudicating Authorities. The Court ruled in favor of the petitioner, considering their compliance record and absence of intent to evade tax, highlighting that penalties should align with legislative intent and compliance history.