Penalty under Section 129 not imposable due to improper E-Way bill when no intention to evade payment of tax

The Hon'ble Allahabad High Court in the case of Ram Krishna Gupta v. State of UP [Writ Tax No. 728 of 2023 dated July 09, 2024] allowed the writ petition and set aside the penalty order under Section 129 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") thereby holding that penalty under Section 129 should not be imposed merely based on technical error in filing of e-way bill i.e. e-way bill not complete when there is no intention to evade payment of tax.

Facts:

Ram Krishna Gupta ("the Petitioner") has filed a writ petition against order dated February 02, 2023 ("the Impugned Order") wherein the penalty was imposed upon the Petitioner on the ground that Part-B of the e-way bill was not duly filled.

The Petitioner submitted that Petitioner possessed all the required documents during transportation. Also, non-filling of the Part-B, was mere technical error and there was no intention to evade payment of tax.

Issue:

Whether penalty under Section 129 is imposable due to technical error in e-way bill when there is no intention to evade payment of tax?

Held:

The Hon'ble Allahabad High Court in the case of Writ Tax No 728 of 2023 held as under:

• Noted that, all the required documents were duly possessed. Also, there was no discrepancy in the quality and quantity of goods. Further, no material has been brought on record to show that there was any evidence regarding evasion of tax especially on the mere point that Part-B of the e-way bill was not filled.
• Relied upon the case of Citykart Retail Pvt. Ltd. v. Commissioner Commercial Tax U.P. Gomti Nagar [Writ. C No. 22285 of 2019 dated September 6, 2022] wherein it was noted that "7. In view of the contentions of the parties and the material placed on record, it is clear that the only allegation levelled against the petitioner leading to seizure of the goods was that Part-B of the e-way bill was not filled up. There is no allegation that the goods being transported were being transported without payment of tax. The explanation offered by the petitioner for not filling the Part-B of e-way bill, is clearly supported by the Circulars issued by the Ministry of Finance wherein the problem arising in filling the part-B of e-way bill was noticed and advisories were issued. 8. In the present case, prima-facie no intent to evade the duty can be ascertained, only on the allegation that Part-B of the e-way bill was not filled, more so, in view of the fact that the vehicle in which the goods were being transported on a Delhi number, the said issue being decided in the judgment dated 13.04.2018 in the case of VSL Alloys India Pvt. Ltd. (supra) covers the issue raised in the present case also, as such, for the reasoning recorded above, the impugned order dated 18.04.2018 and the appellate order dated 14.05.2019 are set aside."
• Opined that, the Impugned Order is not sustainable
• Held that, the writ petition is allowed and the Impugned Order is liable to be set aside.

Relevant Provisions:

Section 129 of the CGST Act

Section 129:Detention, seizure and release of goods and conveyances in transit

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, 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.

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(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).

(4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):

Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:

Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED