Penalty is not levied for valid e-way bill expiry

Facts and Issue of the Case

The case of petitioner is that petitioner is a registered Government contractor and registered dealer holding Goods and Service Tax Identification No as 23BDRPS9015A1ZK. The petitioner received a work order from Divisional Project Engineer of Public Works Department (PIU), Dindori for construction of additional laboratory and class room at Chandravijay College, Dindori. The petitioner received quotation from Mittal Steels for supply of TMT bars. In turn, petitioner placed order to Mittal Steels, Raipur for supply of TMT bars. Mittal Steels in furtherance of petitioner’s order/demand raised commercial invoice on 17.05.2022 charging IGST @ 18% i.e. Rs. 3,41,011.37/-.

Mittal Steels being supplier of goods in compliance of Section 68 of the Central Goods and Services act R/W Rule 138-A generated an E-Way Bill for movement of goods from Raipur to Dindori on 17.05.2022 on 06:08 PM. The E-Way Bill No 8212 2755 0219 is filed. The vehicle which was carrying TMT bars on 18.05.2022 and was travelling from Raipur to Dindori suffered a problem and clutch-plates of vehicle got damaged. The proprietor of ‘Maa Rewa Transport’ sent a vehicle for servicing to ‘Rama Moto Cooperation’, Raipur on 18.05.2022. Copy of Customer Job Card is filed.

On 19.05.2022, the vehicle bearing No. CG04MW3477 got repaired and tax invoice raised for changing parts is filed as Annexure-P/6. The vehicle after getting gate pass, started movement with related documents from Raipur to Dindori . It is averred in the petition that said vehicle reached Dindori on 19.5.2022 between 10.30 to 10.45 pm well within the time mentioned in the E-Way Bill. After reaching the destination, i.e. Dindori, the truck driver called the petitioner and informed that the truck has reached the destination. The petitioner told the truck driver to take the vehicle to Weigh Bridge. While the vehicle was moving towards Weigh Bridge, the Assistant Commissioner at 4.35 AM on 20.5.2022 stopped the vehicle and demanded the relevant documents. The truck driver produced all the relevant documents necessary for the purpose of transportation. The Assistant Commissioner was satisfied by all the documents produced by truck driver except the E- way Bill. The Assistant Commissioner opined that E-way Bill got expired on 19.5.2022 at 12:00 AM. The repeated requests of truck driver and transporter to Assistant Commissioner that the goods reached Dindori before 12:00 AM and unintentional delay occurred thereafter went in vain.

The Assistant Commissioner issued FORM GST MOV-02 stating that E-way Bill got expired. The vehicle was detained in the custody of the City Police Station, Dindori. The petitioner submitted his written reply on and requested that material detained be supplied to him which is necessary for construction of the class room and laboratory. The said written submission was not accepted and FORM GST MOV-06 was issued. The same was followed by GST FORM MOV- 07 specifying the penalty amount of Rs.6,82,030.00,. Criticizing the impugned notice and order Shri Abhishek Dhyani, learned counsel for the petitioner urged that proceedings initiated under Section 29 of the GST Act were not justifiable. The respondents have not followed the principles of natural justice, which is part of statutory requirement of Section 126 of the said Act which clearly provides that no penalty should be imposed for ‘minor breaches’ or procedural requirements or omission etc. The petitioner was not found guilty of any fraudulent intent or gross negligence. Thus, imposition of penalty to the tune of Rs.6,82,030.00 was totally disproportionate and unwarranted.

The respondents have failed to see that there was no revenue loss. The intention of introducing E-Way Bill mechanism was to keep a check on the movement of goods without tax invoice or and to regulate tax evasion but penalty notice issued for expiry of E-Way Bill was unjustifiable and runs contrary to the scheme and object of said mechanism.

Observation by the Court

The High Court set aside FORM GST MOV-09 and action of levying tax and penalty on the petitioner because the department could not establish any evasion of tax by the petitioner. Mere lapsing of time mentioned in the E-Way Bill is not sufficient for invoking penalty clause. Learned counsel for the petitioner then placed reliance on a judgment of Calcutta High Court and urged that the facts of the present case have similarity, if compared with the facts involved in the case before Telangana High Court and Calcutta High Court.

On the strength of this circular, which was considered by the Division Bench of this court and it was held that imposition of penalty tax and penalty for clerical error is bad in law. The Division Bench judgment of this court was not interred with and was dismissed by the Supreme Court. Thus, the impugned notice and penalty order may be set aside. Since the petitioner has deposited the amount of penalty before the department in obedience of court’s order dated, the department be directed to refund the same. Shri Darshan Soni, learned counsel for the Department/respondents supported the impugned notice/order. On a specific query from the Bench, Shri Soni, categorically admitted that singular flaw/deficiency found in the documents provided by the truck driver was that E-way Bill stood expired and vehicle was intercepted almost 4-5 hours. No other discrepancy/deficiency was found in the documents produced by the truck driver. Shri Darshan Soni, learned counsel for the respondents urged that the action taken by the Department is in consonance with the enabling provisions and no fault can be found in the impugned notice/order.

Learned counsel for the parties further apprised the Court that the Statutory Appellate Forum under the GST Act has not been constituted till date. Thus, the only remedy at present available to the petitioner is the remedy before this Court. No other point is pressed by learned counsel for the parties.The court heard learned counsel for the parties and perused the record. In view of aforesaid stand of parties, it is clear that the E-way Bill of the petitioner and truck was intercepted at Dindori. The specific contention of learned counsel for the petitioner that there was no element of tax evasion, fraudulent intent and negligence on his part was not rebutted by learned counsel for the respondents. It is apt to reproduce the relevant para of judgment of Telangana High Court. The writ petition was allowed by the High Court and action of levying of tax and penalty was set aside. The respondents were directed to refund the said amount with interest.

The court find the substantial force in the arguments of learned counsel for the petitioner that present case has similarity with that of the above cases decided by Telangana and Calcutta High Court. The respondents could not establish that there exist any element of evasion of tax, fraudulent intent or negligence on the part of the petitioner. In this backdrop, the impugned notice/order could not have been passed. The principles of natural justice were statutorily recognized and ingrained in Section 126(1)(3) of the Act. The Law Makers have taken care of doctrine of proportionality while bringing sub-section (1) of Section 126 in the Statute Book. The punishment should be commensurate to the breach is the legislative mandate as per sub- section (1) of Section 126. In the instant case, the delay of almost before which E-way Bill stood expired appears to be bonafide and without establishing fraudulent intent and negligence on the part of petitioner, the impugned notice/order could not have been passed. Resultantly, the penalty imposed by the order is set aside. The amount of penalty already deposited by the petitioner be refunded back to him within 30 days failing which it will carry 6% interest till the time of actual payment.