2025 (7) TMI 547 - HC - GST

GST penalty upheld after driver caught transporting goods without proper authorization from company signatory

The Calcutta HC dismissed a writ petition challenging penalty imposition under GST provisions. The petitioner's consignment was intercepted from a driver ... Jurisdiction of the respondents in dealing with the issue and imposing penalty upon the petitioner - existence of mens rea or not - HELD THAT:- Since the consignment was intercepted from the driver who was in charge of the goods and produced the relevant documents before the authority, the notices were issued upon him and the physical verification done in his presence. Umesh Kumar Yadav has been referred to as the driver of the vehicle in all the documents issued by the respondents. The petitioner responded to the show cause notice through his chartered accountant by mail but did not physically appear before the authority to defend his cause. It was found upon verification of the registration details of the company that the petitioner was the only declared authorized signatory of the concern. The contention of the petitioner disclosed through mail was considered by the adjudicating authority as well as the appellate authority before raising the demand. The driver of the vehicle can, therefore, under no stretch of imagination be said to be the authorized signatory of the petitioner’s company. The petitioner was granted reasonable opportunity of hearing by both the authorities. He chose to place his contention before the adjudicating authority through mail and was represented by his learned advocate before the appellate authority. The orders impugned were passed upon consideration of the submission made on behalf of the petitioner. The appellate authority, in affirming the order of the adjudicating authority, has dealt with entire issue elaborately and has passed a reasoned order which does not call for interference. With regard to the issue of mensrea, it is not in dispute that in a case of wilful or deliberate violation of the law in order to evade tax, there is no liability to establish mensrea. This Court is inclined to deal with the judgments relied upon by the parties. In the judgment in ASIAN SWITCHGEAR PRIVATE LIMITED [2023 (12) TMI 236 - CALCUTTA HIGH COURT], the Hon’ble Division Bench has observed that there cannot be an automatic imposition of penalty under the scheme of Section 129 of the Act of 2017 without granting opportunity to the delinquent to defend his cause - Such situation has not arisen in the present case since reasonable opportunity of hearing was granted to the petitioner prior to adjudication and the petitioner was adequately represented before both the authorities. In the authority in Vardan Associates Private Limited [2024 (2) TMI 189 - SUPREME COURT], the issue which fell for consideration before the Hon’ble Supreme Court was transportation of the consignment after expiry of valid e-way bill. The ratio decidendi of the said judgment is not applicable in the fact situation of the present case. The judgment is squarely applicable herein. The impugned order is set aside - this Court is of the view that the writ petition is devoid of any merit and is liable to be dismissed - petition dismissed. The core legal questions considered by the Court in this matter include:(a) Whether the State Tax Authority of West Bengal had jurisdiction to detain and impose penalty on the consignment passing through West Bengal en route from Jharkhand to Meghalaya;(b) Whether the petitioner's depiction as an unregistered person (URP) in the e-way bill and delivery challan, despite being a registered taxable person under the GST laws of Jharkhand, amounted to a violation warranting penalty under Section 129 of The West Bengal Goods and Services Tax Act, 2017;(c) Whether the delivery challan and invoice signed by the driver of the vehicle, who was not an authorized signatory of the petitioner, were valid documents under the GST regime;(d) Whether the petitioner was afforded adequate opportunity of hearing and whether the penalty was rightly imposed considering the facts and law;(e) The applicability and relevance of precedents relied upon by the parties, including the interpretation of mens rea in tax evasion cases under the GST framework.Issue-wise Detailed AnalysisJurisdiction of West Bengal AuthoritiesThe legal framework invoked includes notifications issued by the Commissioner, State Tax, West Bengal (No. 24/WBGST/PRO/17-18 dated 14th December 2017 and No. 09/WBGST/PRO/2019 dated 20th November 2019), which empower State Authorities to exercise jurisdiction over goods in transit within the territorial jurisdiction of the Bureau of Investigation units. The Court interpreted these provisions to mean that interception and enforcement actions by West Bengal authorities on goods passing through the State are valid, provided the vehicle is intercepted within their territorial jurisdiction.The Court found that the consignment was physically intercepted within West Bengal by the Bureau of Investigation, North Bengal, Alipurduar Zone, and thus the State had jurisdiction to detain the goods and initiate proceedings. The contention that West Bengal had no jurisdiction because the goods were merely in transit was rejected as contrary to the statutory empowerment.Validity of Documents and Representation by DriverThe petitioner's delivery challan and e-way bill depicted him as an unregistered person (URP) despite his registered status under the GST laws of Jharkhand. The driver of the vehicle produced these documents during interception but was not the authorized signatory of the petitioner's company. The petitioner contended that the driver was authorized to sign and represent him; however, the Court noted that no formal authorization was on record designating the driver as an authorized representative.Rule 55 of the West Bengal GST Rules mandates that delivery challans be issued and signed by the consignor or an authorized representative. The Court found that the driver's signature alone did not satisfy this requirement. The petitioner's attempt to treat the driver as his authorized representative was not supported by evidence, and the authorities' issuance of notices to the driver did not equate to acceptance of his authorization.The Court emphasized that the driver was merely in charge of the goods and not empowered to execute the relevant documents on behalf of the petitioner. Consequently, the consignment was not accompanied by valid documents as required under the GST law.Misrepresentation in E-way Bill and Delivery ChallanThe petitioner's explanation that he was referred to as an unregistered person because he was not registered under Meghalaya GST laws was found unsatisfactory. The Court held that since the petitioner was the supplier of the machinery and was registered under Jharkhand GST, it was incumbent upon him to disclose his GSTIN in the e-way bill and delivery challan. The omission was not a mere irregularity but a material misrepresentation that could be construed as an attempt to evade tax.The Court rejected the petitioner's contention that no sale was involved and that the transaction was a rental of machinery, noting that the GST regime applies to such supplies and that the proper disclosure of registration status is mandatory.Opportunity of Hearing and Procedural FairnessThe Court noted that the petitioner was granted reasonable opportunity of hearing by both the adjudicating and appellate authorities. Although the petitioner did not appear in person before the adjudicating officer and submitted his reply through mail via his chartered accountant, he was represented by counsel before the appellate authority. The authorities considered the petitioner's submissions before passing the impugned orders.The Court found that the procedural safeguards under Section 129 of the Act of 2017 were complied with and that the petitioner's reliance on a Division Bench judgment emphasizing the necessity of hearing before penalty imposition was inapplicable here, as the petitioner was indeed heard.Mens Rea and Liability under Section 129The Court reiterated the principle that in cases of willful or deliberate violation of GST laws to evade tax, the liability to pay penalty arises irrespective of the need to establish mens rea. The petitioner's misrepresentation in the e-way bill and delivery challan was held to constitute such violation.Treatment of Competing JudgmentsThe petitioner relied on a recent Division Bench judgment that cautioned against automatic penalty imposition without hearing. The Court distinguished that case on facts, noting the petitioner here was given hearing.The respondents relied on a Supreme Court judgment concerning transportation after expiry of an e-way bill, which the Court found inapplicable to the present facts. Instead, the Court found a more recent Division Bench judgment on similar facts applicable and consistent with its conclusions.ConclusionsThe Court concluded that the State Tax Authority of West Bengal had jurisdiction to detain the goods and impose penalty under Section 129 of the Act of 2017. The petitioner's misrepresentation of registration status in the e-way bill and delivery challan was a material violation. The delivery challan and invoice signed by the driver, who was not authorized, were invalid. The petitioner was afforded adequate opportunity of hearing. The penalty imposed was therefore justified and sustainable.Significant HoldingsThe Court held: 'The respondents have been bestowed with the jurisdiction with regard to the goods and conveyance in transit. Therefore they were well within their authority in intercepting the consignment and such interception/detention cannot be said to be illegal for lack of jurisdiction.'On validity of documents: 'Since the consignment was intercepted from the driver who was in charge of the goods and produced the relevant documents before the authority... the driver of the vehicle can, therefore, under no stretch of imagination be said to be the authorized signatory of the petitioner's company.'On misrepresentation: 'The petitioner not being registered under the GST laws at the consignee's end is irrelevant. Such suppression cannot be termed as an inadvertent error but may be a device to conceal the identity of the petitioner who is in fact a registered person and thereby evade payment of tax on supply of the goods.'On mens rea: 'In a case of wilful or deliberate violation of the law in order to evade tax, there is no liability to establish mens rea.'On procedural fairness: 'Reasonable opportunity of hearing was granted to the petitioner prior to adjudication and the petitioner was adequately represented before both the authorities.'Accordingly, the Court affirmed the order of the appellate authority dismissing the petitioner's appeal and dismissed the writ petition, holding the penalty and detention lawful and justified.