2025 (9) TMI 803 - HC - GST

Appeal allowed: documents proved lawful job-work stock transfer, deleted penalty under s.129 and released bank guarantee

Jagat Saha Versus State Of West Bengal And Ors.

The HC allowed the appeal, holding that documents (invoice, e-way bill, stock transfer voucher and transporter document) established lawful job-work stock ... Levy of penalty u/s 129 - appellant had produced the necessary documents in Form GST-MOV-01 or not - absence of mens rea to evade tax - HELD THAT:- The goods were transported from the Steel Authority of India Ltd. upon completion of job work. An invoice has been raised by the job worker dated 6th May, 2024, which also clearly sets out all the details as well the buyer's name, namely, the appellant. An E-Way bill has been generated for the purpose of stock transfer from the job worker's premises at Dankuni to the factory of the appellant at Chapduar, Raiganj, Uttar Dinajpur. Stock transfer voucher dated 14th May, 2024, has also been generated, which has not been disputed by the department and the stock transfer is supported by the document issued by the transporter, namely, Mr. Subrata Sarkar dated 14th May, 2024, where the goods have been shown, where the consigner is the appellant, the address given is that of the job worker, consignee is the appellant and the place to be transported is Rajgunj, Uttar Dinajpur. Thus, all the details will clearly reveal that there was absolutely no intention on the part of the appellant to evade payment of tax which has been admitted by the appellate authority but, however, the appellate authority did not set aside the penalty but reduced the penalty. Taking note of the peculiar facts and circumstances of the case, which has been set out, it is found that this is not a case where any penalty could have been imposed. The appeal along with the application and the writ petition are allowed and disposed of and the order passed by the appellate authority as well as the adjudicating authority is set aside and the penalty imposed is deleted - The appellant shall cancel the bank guarantee furnished in favour of the department and accordingly, the same shall stand released. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether penalty under section 129(3) of the relevant GST law could be validly imposed where the transport of goods was accompanied by tax invoice, E-Way bill and stock transfer documentation, despite the appellate authority treating the destination as not being an additional place of business. 2. Whether absence of mens rea to evade tax negates the imposition of penalty under section 129(3) where documentary evidence supports lawful movement/stock transfer. 3. Whether reduction of penalty by the appellate authority was legally sustainable when factual findings showed production of requisite documents but record entries contained apparent clerical or material inconsistencies. 4. Whether an order directing continuance/renewal of a bank guarantee pending disposal of the writ petition should remain when the underlying penalty liability is found to be untenable. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of imposing penalty under section 129(3) despite production of invoice, E-Way bill and stock transfer documents Legal framework: Section 129(3) authorises levy of penalty for movement of goods without documents as required; compliance is determined by documentary proof (invoice, E-Way bill, stock transfer vouchers) produced at interception or in adjudication. Precedent treatment: No prior authorities were invoked in the judgment; the Court decided on the facts and statutory scheme. Interpretation and reasoning: The Court examined the record and annexures showing production of tax invoice, E-Way bill reflecting quantity and destination, stock transfer voucher, job-worker invoice and transporter's receipt. The appellate authority itself recorded that the documents produced were correct and that production was recorded in the prescribed moving form (Form GST-MOV-01). The tribunal noted that an annexure where documents should have been attached was marked to indicate absence; however, that entry was factually incorrect given the contemporaneous documents on record. On the factual matrix the Court held that documentary compliance was established and therefore the foundational premise for imposing penalty under section 129(3) - transportation without documents - did not subsist. Ratio vs. Obiter: Ratio - where documentary evidence incontrovertibly shows lawful movement/stock transfer, imposition of penalty under section 129(3) cannot stand. Obiter - the Court's remarks noting clerical inaccuracy in an annexure are explanatory of the finding but ancillary to the core ratio. Conclusion: Penalty under section 129(3) could not validly be imposed in the facts before the Court because prescribed documents were produced and recorded. Issue 2 - Role of mens rea in imposition of penalty under section 129(3) Legal framework: Penal consequences under the GST regime relate to statutory breach; assessment of mens rea is relevant to mitigation or exclusion of punitive measures where movement appears bona fide and documents exist. Precedent treatment: The Court relied on its factual assessment rather than on prior authorities addressing mens rea. Interpretation and reasoning: The appellate authority conceded absence of mens rea to evade tax. The Court treated that concession as significant in context: where there was no intention to evade tax and documentary support existed demonstrating a legitimate job-work and stock transfer chain (supplier to job worker to recipient), imposition of penalty was impermissible. The Court emphasised that punitive measures are inappropriate where the contravention, if any, arises from a misconception about registration of an additional place of business rather than deliberate tax evasion. Ratio vs. Obiter: Ratio - absence of mens rea combined with documentary proof negates imposition of penalty in comparable fact situations. Obiter - observations on the distinction between clerical omission and deliberate concealment are supportive but not decisive beyond the facts. Conclusion: Absence of mens rea, on the conceded facts, militated against the imposition of penalty and supported cancellation of the penalty. Issue 3 - Appellate authority's reduction of penalty versus setting aside penalty entirely when documents were available but record contains inconsistencies Legal framework: Appellate fora may modify penalties after re-appraisal of facts and law; however, a reduction is not appropriate where the foundational basis for any penalty is absent. Precedent treatment: No precedents were relied upon; the Court evaluated reasonableness of the appellate authority's approach. Interpretation and reasoning: The Court found the appellate authority's approach internally inconsistent: it recognised production of documents yet maintained that because the destination was not a registered additional place of business, transportation must be treated as without proper documentation. The Court held this reasoning to be legally untenable on the materials - the documents demonstrated a lawful stock transfer/job-work relationship and the invoice and E-Way bill detailed the consignment and parties. The factual finding that documents existed and were correct nullified the legal basis for any penalty; mere irregularity in registration categorisation did not convert lawful consignments into documentless movement warranting penalty. Ratio vs. Obiter: Ratio - administrative or clerical inconsistencies in ancillary records cannot sustain a penalty when primary statutory documents demonstrate lawful movement. Obiter - the Court's criticism of the manner of recording in Form GST-MOV-01 is explanatory and may guide future adjudicatory care. Conclusion: The appellate reduction of penalty was not legally sustainable; the appropriate course was to set aside the penalty entirely given the established documentary compliance and absence of intent. Issue 4 - Continuance/renewal and release of bank guarantee when penalty is found untenable Legal framework: Security instruments furnished to meet provisional or prospective tax liabilities may be directed to be kept alive by courts during litigation; where the underlying liability is quashed, the security should be released. Precedent treatment: The judgment applied principle to facts without referring to earlier decisions. Interpretation and reasoning: Having set aside the penalty imposed by adjudicating and appellate authorities, the Court directed cancellation and release of the bank guarantee furnished in favour of the department. The Court's release order followed directly from the conclusion that no penal liability subsisted and the bank guarantee was no longer requisite. Ratio vs. Obiter: Ratio - when penalty is quashed, attendant directed securities (bank guarantees) furnished as security for the penalty must be released. Obiter - directions concerning priority issuance of certified copy are administrative adjuncts. Conclusion: The bank guarantee stood released upon the Court's setting aside of the penalty; any prior direction to keep the guarantee alive was superseded. Cross-references 1. Issue 1 and Issue 2 are interlinked: documentary compliance (Issue 1) and absence of mens rea (Issue 2) together formed the decisive basis for quashing the penalty. 2. Issue 3 flows from Issues 1 and 2: appellate modification without congruent legal reasoning was overturned in light of the facts established under Issues 1 and 2. 3. Issue 4 is consequential to Issues 1-3: release of security follows the deletion of the penal obligation. Final Disposition (ratio succinctly stated) The Court held that where the tax invoice, E-Way bill, stock transfer voucher and transporter's receipt establish lawful movement/stock transfer and there is no mens rea to evade tax, penalty under section 129(3) cannot be sustained; the appellate authority's reduction was insufficient and the penalty was set aside, with directed release of the bank guarantee.