TaxTMI 
TaxTMI 
2025 (1) TMI 983
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....s impugned by Kamal Envirotech Pvt. Ltd. [Kamal Envirotech] is dated 26 September 2020 and which ultimately came to be affirmed by the appellate authority in terms of its decision rendered on 15 January 2022. In the matter of M/s Zeon Life Sciences Ltd. [Zeon Life Sciences], a demand originally came to be created against that writ petitioner by an order dated 12 January 2021, and which too was upheld by the appellate authority by its order of 15 February 2022. The demands themselves emanate from an allegation levelled against the writ petitioners of goods having been transported under an incomplete E-way Bill [EWB], Part B whereof was incomplete or missing. The factum of taxes leviable on such goods having been duly paid is not disputed. 2. The respondents, however, would bid us to hold that Section 129 is a penal provision that necessarily entails a levy and demand of tax. They view that provision as envisaging a compulsory exaction or impost. In fact, they urge us to recognize that provision as being one which contemplates the levy of a statutory penalty. They would contend that notwithstanding the absence of mens rea, fraudulent motive or an intent to evade tax, where goods a....
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....sed in the course of transit. It is thus their case that at the time of seizure, no infraction could be said to have occurred. An order of detention thereafter came to be passed on 05 February 2021 together with a proposal for imposition of tax and penalty thereon. Those proceedings ultimately culminated in the writ petitioner being forced to deposit INR 5,28,000/- pursuant to a final order dated 12 February 2021 which came to be passed by the GST officer. Aggrieved by the said demand, Zeon Life Sciences is stated to have moved the appellate authority on 08 March 2021. That appeal came to be dismissed on 15 February 2022 constraining Zeon Life Sciences to institute the instant writ petition. 6. Appearing for the writ petitioners, learned counsels firstly submitted that since the solitary ground for a demand of tax rested on an allegation of goods being transported without the cover of requisite documents, the only penalty which could have been imposed upon them would have been INR 10,000/- as contemplated under Section 122 (1) (xiv) of the Act. It was their submission that since the respondents do not rest their case on an allegation of evasion of tax or furnishing of false info....
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....ith the provisions of sub-section (1) of Section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax; (vi) fails to collect tax in accordance with the provisions of sub-section (1) of Section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) of Section 52; (vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder; (viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of Section 20, or the rules made thereunder; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; (xi) is liable to be register....
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....(ii) allows an inter-State supply of goods or services or both through it by a person who is not eligible to make such inter-State supply; or (iii) fails to furnish the correct details in the statement to be furnished under sub-section (4) of Section 52 of any outward supply of goods effected through it by a person exempted from obtaining registration under this Act, shall be liable to pay a penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved had such supply been made by a registered person other than a person paying tax under Section 10, whichever is higher.] (2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,- (a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher; (b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liabl....
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....any information or return which he knows to be false, he shall be punishable with a fine which may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to one hundred rupees for each day after the first day during which the offence continues subject to a maximum limit of twenty-five thousand rupees." 12. Section 125 which is titled 'General penalty' reads as under: "125. General penalty. -Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees." 13. While learned counsels representing the writ petitioners had alluded to that provision, we do not find any merit in that submission since Section 125 would come into play only if the case be of a penalty not leviable under any other provision of the Act. Undisputedly, the respondents rest their case on Section 129 and which we propose to notice hereinafter. 14. Reverting then to our discussion, the general principles relating to the imposition of penalty stand embodied and spelt out in Section....
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....ure, shall be released,- [(a) on payment of penalty equal to two hundred per cent of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty; (b) on payment of penalty equal to fifty per cent of the value of the goods or two hundred per cent of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;] (c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed: Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods. (2) [* * *] [(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of suc....
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.... if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under Section 122. (2) Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit: Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon: Provided further that the aggregate of such fine and penalty leviable shall not be less than the [penalty equal to hundred per cent of the tax payable on such goods]: Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon. (3) [* * *] (4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity ....
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....pes Ltd. 2023 SCC OnLine SC 428 we had held as follows: "22. It appears to us, and which view is reinforced with the respondents seeking to draw support for their submissions from the judgment in Saw Pipes Ltd, that they appear to read Section 86 (10), (14) & (15) as envisaging the levy of a statutory penalty. However, in our considered opinion, the aforesaid premise and on which the case of the respondents appears to be founded, is wholly incorrect. As noticed hereinabove, sub-sections (10), (14) & (15) embody the principles of mens rea when they speak of "false, misleading or deceptive" conduct of an assessee. It would thus be wholly incorrect to construe those provisions as being representative of penalties statutorily leviable. 23. We note that there are other sub-sections of Section 86 which embody the principles of a statutory penalty. For instance, sub-section (5) deals with the contingency of an assessee failing to comply with Section 21(1). The aforesaid provision obliges a registered dealer to apprise the Commissioner of circumstances which may warrant amendments in its registration. A similar example of a statutory penalty stands embodied in sub-section....
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....le to act in the manner prescribed by the statute." 25. We also take note of the reiteration of the aforesaid position in law as appearing in the decision of the Supreme Court in Pratibha Processors. While the respondents had sought to derive support for their submissions in this respect from the decision of the Supreme Court in Saw Pipes Ltd., we find that those submissions proceed in ignorance of the evident fact that Sections 45 (6) and 47 (4A) of the 1969 Act constituted instances of statutory penalties. 26. The penalty under Section 45 (6) of the said statute which formed the subject matter of consideration became automatically leviable upon a failure of the assessee to pay the amount of tax as assessed or re-assessed. Similarly, section 47 (4A) of the 1969 Act provisioned for the levy of a penalty in a situation where a dealer failed to pay tax within the time prescribed. Those provisions thus contemplated the levy of a penalty and the assessee becoming liable to face penal action in case of an admitted failure to adhere with statutory obligations. The penalty contemplated under Section 45 (6) and 47 (4A) of the 1969 Act thus did not rest on a discretion whi....
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....extend to" INR 25,000/-. Section 124 stands couched in similar terms, and which too uses the expression "which may extend to". Similar is the position which obtains in Section 125. What we seek to emphasise and underscore is the phrase "which may extend to" clearly envisaging a discretion vested in the proper officer to examine the extent of penalty that may be imposed on a person dependent upon the nature of the infraction that may be alleged to have been committed. 23. When we proceed further to examine Section 126, we find that the said provision represents an embodiment of a statutory mandate requiring the officer to desist from imposing a penalty in respect of either a minor breach, contravention of a procedural requirement, an omission or a mistake in documentation which may be rectifiable and all of which may have occurred without any underlying fraudulent intent or be the outcome of gross negligence. Of significance is sub-section (2) of Section 126 which stipulates that the penalties that may come to be imposed under the Act should be commensurate with the degree and severity of the breach. 24. We have chosen to describe the principles enshrined in Section 126 as bei....
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....aining "no officer under this Act shall impose any penalty from minor breaches...". The moderation which the statute contemplates is further underlined by Section 126 (2) which bids officers administering the Act to bear in mind that penalty should be imposed dependent on the facts and circumstances of each case and be commensurate with the degree and severity of the breach. 28. The respondents, however, would argue that the non-obstante clause, and with which Section 129 (1) commences, is liable to be read as overriding and eclipsing all other provisions contained in Chapter XIX, including Section 126 of the Act. In our considered opinion, the aforesaid submission proceeds on a fallacious understanding of the extent to which the legislative device of a non-obstante may be intended to extend. Regard may be had to the fact that the non-obstante clause in Section 129 is not ordained to operate in respect of any particular provision or set of provisions contained in the Act. If the submission as addressed by the respondents in absolute terms were to be accepted, Section 129 would be liable to be recognized as being one which overrides all other provisions and thus being the reposit....
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.... "While recognising the force of this argument it is however necessary to observe that although ordinarily there should be a close approximation between the non-obstante clause and the operative part of the section, the non-obstante clause need not necessarily and always be co-extensive with the operative part, so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of the words thereof a non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment." (emphasis supplied) In Union of India v. G.M. Kokil [1984 Supp SCC 196 : 1984 SCC (L&S) 631], it was observed as under: (SCC p. 203, para 11) "It is well-known that a non obstante clause is a legislative device which is usually employed to give overriding eff....
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.... directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law and the setting in which the clause to be interpreted occurs." It is also well settled that the Court should examine every word of a statute in its context and to use context in its widest sense. In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [(1987) 1 SCC 424] it is observed that: "That interpretation is best which makes the textual interpretation match the contextual." In this case, Chinnappa Reddy, J. noting the importance of the context in which every word is used in the matter of interpretation of statutes held thus: (SCC p. 450, para 33) "Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then sectio....
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....ules themselves. The amendment cannot be read as abrogating all other Special Rules in respect of all departments. In a given case where there are no Special Rules then naturally the General Rules would be applicable. Just because there is a non-obstante clause, in Rule 3 (2) it cannot be interpreted that the said amendment to the General Rules though later in point of time would abrogate the special rule the scope of which is very clear and which co-exists particularly when no patent conflict or inconsistency can be spelt out. As already noted Rules 1 (3) (a), 3 (1) and 4 of the General Rules themselves provide for promotion by selection and for enforceability of the Special Rules in that regard. Therefore there is no patent conflict or inconsistency at all between the General and the Special Rules." 31. In a decision rendered thereafter in JIK Industries Ltd. v. Amarlal V. Jumani (2012) 3 SCC 255, the Supreme Court succinctly observed as follows: "61. On the device of non obstante clause, William Blackstone in his Commentaries on the Laws of England (Oxford: The Claredon Press, 1st Edn. 1765-69, p. 331) observed that the device was "... effectually demolished....
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....ts were introduced to deal with large number of cases which were pending under the NI Act in various courts in the country. Considering the said pendency, a Working Group was constituted to review Section 138 of the NI Act and make recommendations about changes to deal with such pendency. Pursuant to the recommendations of the Working Group, the aforesaid Bill was introduced in Parliament and one of the amendments introduced was "to make offences under the Act compoundable". Pursuant thereto Section 147 was inserted after Section 142 of the old Act under Chapter II of Act 55 of 2002. 68. It is clear from a perusal of the aforesaid Statement of Objects and Reasons that offence under the NI Act, which was previously non-compoundable in view of Section 320 sub-section (9) of the Code has now become compoundable. That does not mean that the effect of Section 147 is to obliterate all statutory provisions of Section 320 of the Code relating to the mode and manner of compounding of an offence. Section 147 will only override Section 320(9) of the Code insofar as offence under Section 147 of the NI Act is concerned. This is also the ratio in Damodar [(2010) 5 SCC 663 : (2010) 2 SCC....
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....mplated to eclipse the other parts of the enactment completely. If the contention as advanced by the respondents were to be accepted, it would amount to us recognizing Section 129 as casting an unshakable shadow over all other provisions contained in Chapter XIX of the Act. We thus find ourselves unable to accord such an interpretation or read Section 129 in the manner as suggested. 35. It becomes pertinent to note that Section 129 is primarily concerned with the detention, seizure and release of goods while in transit. Those are subjects which are not specifically dealt with or regulated by Sections 122 to 124, and which provisions are concerned more with specific instances of a transgression of a provision of the Act. Although clause (xiv) appearing in Section 122(1) does allude to the subject of transport of taxable goods, it deals with a situation where the goods are being transported without the cover of documents at all and as may be mandatorily required. What thus needs to be borne in mind is that Section 129 is intended to merely regulate the subject of detention and release of goods, and which is one not considered in or factored for in any of the other provisions place....
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....nd omissions which could be easily rectified. In fact, and as would be manifest from the discussion which ensues, even the Central Board of Indirect Taxes and Customs [CBIC] had understood Section 129 as being tempered by the limits that the statute itself imposes while seeking to moderate the power to levy a penalty. 39. The decision of the Gujarat High Court in Synergy Fertichem P. Ltd. v. State of Gujarat 2019 SCC OnLine Guj 6127, was one which provided an occasion for that High Court to examine the scope and interplay between Sections 129 and 130 of the Act. The petitioners before the Gujarat High Court had argued that a purposive interpretation of Section 129 would lead one to the irresistible conclusion that it would apply only to cases where it was established that the contravention of the Act was with an intent to evade tax. The applicability of Section 129, it was contended, would only be in respect of a "substantial contravention and which may have resulted in a loss of tax revenue". It was thus contended that every contravention, even if it be minor or technical in character, would not justify the imposition of a penalty under Section 129. After chronicling the submis....
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.... "... the non obstante clause is no doubt a very potent clause intended to exclude every consideration arising from other provisions of the same statute or other statute but 'for that reason alone we must determine the scope' of that provision strictly. When the section containing the said clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the whole Act and stands all alone by itself. A search has, therefore, to be made with a view to determining which provision answers the description and which does not." 41. The Gujarat High Court also had an occasion to take into consideration the decision in R.S. Raghunath, relevant passages whereof have been extracted hereinabove. Of equal significance were the principles enunciated by the Supreme Court in A. G. Varadarajulu v. State of Tamil Nadu (1998) 4 SCC 231 and which were noticed in paragraph 70 of the report and are reproduced below: "70. In A. G. Varadarajulu v. State of Tamil Nadu (1998) 4 SCC 231, the Supreme Court relied on Aswini Kumar Ghose's case AIR 1952 SC 369. The court ....
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....age employed in each. (See for relevant discussion in para 20 in Shri Swaran Singh v. Shri Kasturi Lal (1977) 1 SCC 750). 73. Normally the use of the phrase by the Legislature in a statutory provision like "notwithstanding anything to the contrary contained in this Act" is equivalent to saying that the Act shall be no impediment to the measure (See Law Lexicon words "notwithstanding anything in this Act to the contrary"). Use of such expression is another way of saying that the provision in which the non obstante clause occurs usually would prevail over the other provisions in the Act. Thus, the non obstante clauses are not always to be regarded as repealing clauses nor as clauses which expressly or completely supersede any other provision of the law, but merely as clauses which remove all obstructions which might arise out of the provisions of any other law in the way of the operation of the principle enacting provision to which the non obstante clause is attached. (See Bipathumma v. Mariam Bibi (1966) 1 Mysore Law Journal 162, at page 165)." 43. In our considered opinion, the law on the subject has been correctly enunciated in Synergy Fertichem and where Pardiwala J. ....
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....or percentage for purposes of quantification of penalty, as was noticed above, is one which the Act adopts principally in sub-sections (1), (1A), (1B) and (2) of Section 122. We have already found that the transgressions which are spoken of in Section 122 (1) can neither be said to be trivial nor rectifiable. Section 126 (6) would thus operate only insofar as transgressions would fall within the ambit of the sub-sections referred to above. All the other provisions comprised in Chapter XIX either use the expression "which may extend to" or "shall not exceed". Those are thus instances where the penalty in any case cannot be described to be a fixed sum or one expressed as a fixed percentage. 46. Section 126 (6) of the Act provides that its provisions will not apply in cases where the penalty under the Act is specified as a fixed sum or as a fixed percentage. This is further reflective of the Legislature seeking to distinguish between discretionary penalties and those that are predetermined. By excluding fixed penalties from the scope of this section, the law ensures clarity and consistency in its application, underscoring the principle that certain penalties are non-negotiable and ....
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....for the purpose of detention and seizure of the goods and conveyances in transit. The contravention could be trivial or it may be quite serious sufficient enough to justify the detention and seizure. This litigation is nothing but an outburst on the part of the dealers that practically in all cases of detention and seizure of goods and conveyance, the authorities would straightway invoke section 130 of the Act and thereby would straightway issue notice calling upon the owner of the goods or the owner of the conveyance to show-cause as to why the goods or the conveyance, as the case may be, should not be confiscated. Once such a notice under section 130 of the Act is issued right at the inception, i.e, right at the time of detention and seizure, then the provisions of section 129 of the Act pale into insignificance. The reason why we are saying so is that for the purpose of release of the goods and conveyance detained while in transit for the contravention of the provisions of the Act or the rules, the section provides for release of such goods and conveyance on payment of the applicable tax and penalty or upon furnishing a security equivalent to the amount payable under clause (a) ....
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....t any justifiable grounds or reasons to believe, the authorities may not be justified to straightway issue a notice of confiscation under section 130 of the Act. For the purpose of issuing a notice of confiscation under section 130 of the Act at the threshold, i. e., at the stage of section 129 of the Act itself, the case has to be of such a nature that on the face of the entire transaction, the authority concerned is convinced that the contravention was with a definite intent to evade payment of tax. We may give one simple example. The driver of the vehicle is in a position to produce all the relevant documents to the satisfaction of the authority concerned as regards payment of tax, etc., but unfortunately, he is not able to produce the e-way bill, which is also one of the important documents so far as the Act, 2017 is concerned. The authenticity of the delivery challan is also not doubted. In such a situation, it would be too much for the authorities to straightway jump to the conclusion that the case is one of confiscation, i.e, the case is of intent to evade payment of tax. 103. We take notice of the fact that practically in all cases, after the detention and seizure ....
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....d goods. 49. It would also be relevant to notice the important message and note of guidance which was conveyed by the CBIC in its Circular No. 64/38/2018-GST dated 14 September 2018, relevant parts whereof are extracted below: "3. Section 68 of the CGST Act read with rule 138A of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as 'the CGST Rules') requires that the person in charge of a conveyance carrying any consignment of goods of value exceeding Rs. 50,000/- should carry a copy of documents viz., invoice/bill of supply/delivery challan/bill of entry and a valid e-way bill in physical or electronic form for verification. In case such person does not carry the mentioned documents, there is no doubt that a contravention of the provisions of the law takes place and the provisions of section 129 and section 130 of the CGST Act are invocable. Further, it may be noted that the non-furnishing of information in Part B of FORM GST EWB-01 amounts to the e-way bill becoming not a valid document for the movement of goods by road as per Explanation (2) to rule 138(3) of the CGST Rules, except in the case where the goods are transported for a distance of up....