Penalty under s.129(3) GST Act quashed for technical e-way bill error without intent to evade tax

HC quashed the penalty imposed under s.129(3) of the GST Act for non-filling of Part B of the e-way bill. It held that mere non-updation of Part B, particularly due to a technical glitch, without any finding of intent to evade tax, does not justify levy of penalty. Relying on earlier Division Bench decisions in similar matters, the HC reiterated that non-filling of the e-way bill by itself is insufficient to attract s.129(3). Consequently, the impugned orders were set aside and the petition was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether mere non-filling of Part-B of the e-way bill, in absence of any finding of intention to evade tax, justifies imposition of penalty under section 129(3) of the GST Act.

1.2 Whether penalty orders under section 129(3) of the GST Act can be sustained when they are passed without assigning reasons and without recording any finding regarding intent to evade tax.

1.3 Consequential relief arising from illegality of penalty orders, including quashing of orders and refund of amount deposited.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of penalty under section 129(3) of the GST Act for non-filling of Part-B of the e-way bill

Legal framework (as discussed)

2.1 The Court proceeded with reference to section 129(3) of the GST Act, governing imposition of penalty in respect of intercepted goods in transit, and to the requirement of a duly filled e-way bill, including Part-B, under the GST regime.

Interpretation and reasoning

2.2 The goods were intercepted and seized solely on the ground that Part-B of the e-way bill was not updated, though all other documents, including tax invoice, were duly produced and the goods matched the description in the tax invoice.

2.3 The petitioner's stand that Part-B of the e-way bill could not be filled due to a technical glitch was borne out from the record and was not disputed by the authorities at any stage.

2.4 The Court noted that no authority had recorded any finding that there was intention to evade payment of tax, and no material was indicated to suggest such intention.

2.5 Relying on the Division Bench judgment holding that non-filling of e-way bill does not by itself attract penalty under section 129(3) of the GST Act, and on other coordinate Bench decisions reiterating the same view, the Court applied the principle that mere technical or procedural lapse in e-way bill particulars, absent intention to evade tax, does not warrant penalty under section 129(3).

Conclusions

2.6 Non-filling of Part-B of the e-way bill, in the circumstances where it was due to technical error and there was no intention to evade payment of tax, does not justify imposition of penalty under section 129(3) of the GST Act.

2.7 Penalty proceedings initiated solely on this ground are unsustainable in law.

Issue 2: Validity of penalty orders passed without reasons and without finding of intent to evade tax

Interpretation and reasoning

2.8 The Court recorded that the penalty order under section 129(3) contained no reasons and did not record any satisfaction or finding regarding the petitioner's intention to evade tax.

2.9 The absence of any discussion or "whisper" in the orders about intent to evade tax, coupled with the undisputed technical glitch explanation, showed that the essential jurisdictional fact for invoking section 129(3) was missing.

2.10 Given the precedents relied upon, which emphasize the necessity of intention to evade tax for sustaining penalty under section 129(3), the impugned orders, being non-speaking and lacking such finding, could not be upheld.

Conclusions

2.11 Penalty orders under section 129(3) passed without assigning reasons and without recording a finding of intention to evade payment of tax are unsustainable and liable to be quashed.

Issue 3: Consequential relief - quashing of orders and refund

Interpretation and reasoning

2.12 Having held that there was no intention to evade tax and that non-filling of Part-B due to technical error did not attract section 129(3), the Court held that the impugned orders could not be sustained in law.

2.13 As the penalty proceedings themselves were vitiated, any amount deposited in pursuance of such proceedings lacked legal basis.

Conclusions

2.14 The impugned orders of penalty and appellate affirmation were quashed.

2.15 The concerned authority was directed to refund any amount deposited by the petitioner in pursuance of the impugned proceedings within two months from the date of production of a certified copy of the order.

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