Penalty upheld under Section 129(1) for moving goods without e-way bill, confirming intent to evade tax

The HC upheld the levy of penalty under Section 129(1)(b) of the GST Act for transit of goods without an e-way bill, finding intent to evade tax. The petitioner admitted no e-way bill was generated during movement, and documents were produced only after seizure. The court held the penalty order valid, citing precedent that absence of e-way bill implies tax evasion intent. The tax invoice accompanied the goods, making the petitioner the owner under the GST Circular dated 31.12.2018. Although the purchaser's registration was suspended mid-transit, it was valid at dispatch, negating adverse inference. The court modified the orders to reflect proceedings under Section 129(1)(a) instead of 129(1)(b) and allowed the petition in part.

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ISSUES:

Whether penalty under Section 129(1)(b) of the GST Act is justified when goods in transit are found without an e-way bill at the time of inspection.Whether the absence of an e-way bill due to a technical glitch exempts the consignor or consignee from penalty under Section 129(1)(b) of the GST Act.Whether the presence of a tax invoice or other specified documents accompanying the goods in transit affects the applicability of Section 129(1)(a) versus Section 129(1)(b) of the GST Act.Whether suspension and subsequent restoration of the purchaser's registration affects the legality of penalty imposition under Section 129(1) of the GST Act.Whether the authorities were justified in rejecting the appeal against the penalty order.

RULINGS / HOLDINGS:

The penalty under Section 129(1)(b) of the GST Act for non-production of e-way bill at the time of inspection is upheld, as "non-generation of e-way bill could easily be the intention of evasion of legitimate payment of tax."The claim of non-generation of e-way bill due to a "technical glitch" is not accepted, since it was specifically stated that no e-way bill was generated even after the movement of goods.Where a tax invoice or other specified document accompanies the goods in transit, "either the consignor or the consignee should be deemed to be the owner," and accordingly, proceedings ought to be under Section 129(1)(a) rather than Section 129(1)(b) of the GST Act.The suspension of the purchaser's registration after movement of goods but prior to detention, followed by restoration of registration, does not render the consignor or consignee "bogus" or justify adverse inference; hence, penalty under Section 129(1)(b) on this ground is not sustainable.The appeal against the penalty order was not justified to be rejected outright; however, the penalty order itself is not illegal, but requires modification to be treated as passed under Section 129(1)(a) instead of Section 129(1)(b) of the GST Act.

RATIONALE:

The Court applied the provisions of the GST Act, specifically Sections 129(1)(a) and 129(1)(b), governing detention, seizure, and penalty for goods in transit without proper documentation.Reliance was placed on Clause 6 of the Circular dated 31.12.2018, which clarifies that if a tax invoice or other specified document accompanies the consignment, the consignor or consignee is deemed the owner of the goods.Precedents from this Court and other High Courts were followed, including judgments holding that absence of an e-way bill at the time of inspection indicates an intention to evade tax, justifying penalty under Section 129(1)(b).The Court distinguished between cases where no documents accompany the goods and those where tax invoices are present, requiring different application of Sections 129(1)(a) and 129(1)(b).The Court recognized that suspension of registration during transit, if later revoked, cannot be used to presumptively declare consignor or consignee as bogus, thus impacting the nature of penalty imposed.Accordingly, the Court modified the penalty order to align with the appropriate statutory provision, reflecting a doctrinal refinement in the application of Sections 129(1)(a) and (b) in cases involving accompanying documents and registration status.

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