2025 (8) TMI 152 - HC - GST

Penalty under Section 129(3) of GST Act set aside for delay in e-way bill re-validation due to vehicle breakdown

The HC set aside the penalty imposed under Section 129(3) of the WBGST/CGST Act for failure to re-validate the e-way bill within 8 hours, where the ... Levy of penalty u/s 129(3) of WBGST/CGST Act, 2017 - failure of the petitioners to re-validate the e-way bill within the period of 8 hrs - case of petitioner is that breakdown of the vehicle was caused and that the petitioner had no intention to commit any tax fraud - HELD THAT:- It is found that having regard to the Judgment delivered in the case of Asian Switchgear Private Limited (supra) and the Judgment delivered by this Court in the case of M/s. Maa Amba Builders & Anr. [2024 (5) TMI 363 - CALCUTTA HIGH COURT] ordinarily, when a defence is set up the concerned authorities are required to take note of such defence. Although in the instant case, the petitioner did not set on a defence at the time of seeking release, the petitioner did prefer an appeal from the order passed under Section 129(3) and had categorically pleaded that there had been breakdown of the vehicle in paragraph 6 of the statement of facts filed in connection with the appeal. The appellate authority has brushed aside such contention by recording that the petitioners has failed to file any supporting documents. Having regard to the case made out by the petitioners in relation to breakdown and attempts made to repair the same enroute, by a mechanic ordinary, documents may not be available. Further taking note of the fact that there had been only 15 hrs. delay, having regard to the peculiar facts, considering the petitioners’ case that its vehicle had suffered a break down and there being no allegation or material on record to show that the petitioners were involved in wilful misconduct while transporting the goods, the penalty ought not to have been imposed. It is thus, proposed to and do hereby set aside the orders dated 27th December, 2023 passed under Section 129(3) of the said Act as also the appellate order dated 29th August, 2024 including the demand raised in GST APL 04. The petitioners having paid the penalty will be at liberty to apply for refund, which shall be considered by the authorities within two weeks from filing such application. Petition disposed off. ISSUES: Whether penalty under Section 129(3) of the WBGST/CGST Act, 2017 can be imposed for failure to re-validate an e-way bill within the prescribed time when delay is caused by a vehicle breakdown.Whether the appellate authority is required to consider the defence of bona fide breakdown and absence of mens rea before imposing penalty under the said Act.Whether the absence of documentary evidence supporting the defence of vehicle breakdown justifies dismissal of such defence.The scope of judicial review regarding imposition of penalty under Section 129(3) in light of established precedents concerning bona fide defence. RULINGS / HOLDINGS: The Court held that 'having regard to the peculiar facts' and the petitioners' case of vehicle breakdown causing delay, 'and there being no allegation or material on record to show that the petitioners were involved in wilful misconduct,' the penalty under Section 129(3) ought not to have been imposed.The appellate authority erred in 'brushing aside such contention by recording that the petitioners has failed to file any supporting documents,' as 'by a mechanic ordinary, documents may not be available' in such circumstances.The Court emphasized that 'ordinarily, when a defence is set up the concerned authorities are required to take note of such defence,' and failure to consider bona fide defence amounts to an error.The Court set aside the orders imposing penalty and directed refund of the penalty paid, holding that the imposition of penalty 'cannot be sustained' where bona fide defence is established. RATIONALE: The Court applied the legal framework under Sections 107 and 129 of the WBGST/CGST Act, 2017, which govern e-way bills and penalties for non-compliance.The Court relied on precedent judgments, including Asian Switchgear Private Limited v. State Tax Officer and M/s Maa Amba Builders & Anr. v. The Assistant Commissioner of Revenue, which establish that 'when a defence is set up the concerned authorities are required to take note of such defence.'The Court noted a Division Bench's interference with the earlier judgment in Pushpa Devi Jain, clarifying that 'as there was no lack of bona fide of the appellant the authority could not impose penalty on the appellant.'The Court recognized that the absence of documentary evidence is not determinative where the nature of the defence (vehicle breakdown and repair delay) inherently precludes formal documentation.The decision reflects a doctrinal emphasis on the requirement of bona fide and absence of wilful misconduct as prerequisites for penalty imposition under Section 129(3), marking a careful judicial scrutiny of penalty orders in GST enforcement.