How much penalty can be charged for minor clerical error in e-way bill?
An E-Way bill is basically short for Electronic Way Bill. It is a document which is generated electronically for movement of goods from one place to another. This movement may be interstate or intra-state. E-Way bill is mandatory to be issued where the consignment value exceeds Rs 50,000 every registered person who causes movement of goods. Let us refer to the case of Tirthamoyee Aluminium Products Vs. State of Tripura (High Court of Tripura), where the question under consideration was that how much penalty can be charged for minor clerical error in e-way bill?
Facts of the Case:
- Petitioner was a proprietary concern and was engaged in the business of manufacturing aluminium utensils.
- The petitioner purchased certain aluminium products from Hindalco Industries Ltd, a Government of India company for a sum of Rs.19,46,014/- and would be supplied from Kolkata to be transported to Agartala by road.
- Invoice was generated by Hindalco which showed that the goods would be transported from Kolkata and would be delivered at the petitioner’s unit at Agartala.
- In terms of the provisions of the GST Act and Rules thereunder, the consignor also generated the E-way bill from the official portal of the State agencies.
- According to the petitioner, due to a clerical error the distance from the place of origin to the ultimate destination i.e. from Howrah to Agartala, was shown as 470 Kms instead of actual distance which was 1470 Kms.
- When the goods arrived at Tripura border at Churaibari Check Post, the inspecting agency intercepted the goods and issued a memo of detention on the ground that the transporter had not produced valid E-way bill.
- A show cause notice was issued by the Inspector of State Taxes calling upon the petitioner to pay total GST of Rs.2,96,850/- and penalty of Rs.8,24,582/- under sub-clauses (a) and (b) of Section 129(1) of the CGST Act, 2017.
- He required the petitioner to appear before him. However, the Inspector of State Tax passed the impugned order itself and confirmed the principal tax demand with penalties as noted.
- The petitioner challenged on the ground that validity of the E-way bill had expired on account of a clerical error which would not result into any tax liability.
- According to the petitioner, the penalty obviously was wrongly demanded
Observations of HC on CBIC Circular
- HC did not think that the Inspector of State Tax had the power to demand GST with penalty.
- Central Board of Indirect Taxes and Customs (CBIC) had issued a circular dated 14th September, 2018 to clarify the manner in which such clerical errors would be dealt with.
- According to the said circular, various representations were received regarding imposition of penalty in case of minor discrepancies in the details mentioned in the e-way bill although there were no major lapses in the invoices accompanying the goods in movement.
- The matter was examined. In order to clarify this issue and to ensure uniformity in the implementation of the provisions of the law across the field formations, CBIC, in exercise of its powers conferred under Section 168 of the CGST Act clarified that in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under Section 129 of the CGST Act may not be initiated, inter alia, in error in one or two digits of the document number mentioned in the e-way bill
- In case of the above situation, penalty to the tune of Rs.500 each under section 125 of the CGST Act and the respective State GST Act should be imposed (Rs.1000/- under the IGST Act) in FORM GST DRC-07 for every consignment.
- A record of all such consignments where proceedings under section 129 of the CGST Act were not invoked in view of the situations listed shall be sent by the proper officer to his controlling officer on a weekly basis.
- As per this circular thus in case the goods were accompanied by an invoice as also an E-way bill, proceedings under Section 129 of the CGST Act, 2017 should not be initiated if there was an error of one or two digits in a document number mentioned in the E-way bill.
- In such a situation, at best, penalty of Rs. 500 & 1000/- under State and Central GST may be collected under Section 125 of the Act.
Conclusion by HC
In view of such facts, HC did not find that it a fit case where they should relegate the petitioner to appeal remedy, more importantly when the order passed by the Inspector of State Tax suffered from gross irregularity of no hearing been granted to the petitioner.
The said authority issued a notice of personal hearing making it returnable on 19.11.2018, long before that however, on 05.11.2018 i.e. a date on which he issued the notice; he passed a separate order confirming the demand of tax with penalty. This was wholly impermissible since he did not treat this order as a tentative demand but as a mandatory demand.
In the result, impugned order was set aside. In simple words, maximum penalty of Rs 1000 can be charged for minor clerical error in e-way bill