GST Update No 181 on minor penalty for bonafide mistakes in E-way bill

GST law promoted the ideology of ease of doing business. The concept of e-way bill was introduced to avoid unnecessary hassle faced by the industry during movement of goods from one place to another resulting into elimination of prolonged road permit system. However, looking at the other side of the coin, e-way bill mechanism proved to be a constant source of pain which increased hardships of taxpayers to manifolds since they were subjected to heavy penalties for minor slip-ups in compliance leading to increase in litigations. The question regarding legality of action taken by tax officials and how to proceed further has always been a point of dispute. One of such issue was raised before Kerala High Court in the case of GREENLIGHTS POWER SOLUTIONS V/S STATE TAX OFFICER wherein goods were detained on account of minor lapse in E-way bill. The analysis of the decision is the subject matter of discussion of our present update. The petitioner is registered under GST and carries on business in electrical works contract. The goods were being transported through vehicle in connection with work of a hospital at Assam. The goods were intercepted since they were transported on 02.03.2021 while date of invoice was 03.02.2021. The petitioner held that the error occurred due to default in computer formatting system. It was contended that instead of dd-mm-yyyy format, the computer-generated bill in the mm-dd-yyyy format. As a result, instead of 02.03.2021, invoice mentioned 03.02.2021. The counsel of the petitioner relied on CBIC Circular No. 64/38/2018 dated 14.09.2018 and contended that hefty penalty should not be imposed on account of minor mistakes. The Counsel of revenue argued that alternate remedy was available and therefore, this writ petition should not be admitted. It was argued that change in format in e-way bill and invoice was done purposely to avoid tax by the CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??5 taxpayer. Reliance was placed on Assistant Commissioner of State Tax and Others v. Commercial Steel Limited [(2021) SCC Online SC 884]. The court held admitted the petition despite of alternate remedy available with the petitioner. The Court analysed various situations covered under CBIC Circular and held that the circular is issued to remove hardships faced by taxpayers on account of procedural lapses. It was held that the circular is binding on the tax officers and therefore, the taxpayers cannot be penalised on account of minor discrepancies. Furthermore, it was held that the present situation is nowhere covered under aforesaid circular. The analysis of the circular represents the fact that the instances covered are on account of bonafide mistakes. In the present case, it was stated that except other details, there was discrepancy only in case of date of invoice and e-way bill. Reliance was placed on the decision of Madras High Court in the case of Tvl. R. K. Motors v/s State Tax Officer [(2019) 72 GST 501 (Madras). Therefore, it was held that only minor penalty should be levied on account of procedural lapses. As it is said, “To err is human” is famous proverb that should be kept in mind by the revenue authorities while detaining any goods as practically there are lot of inadvertent mistakes in preparation of e-way bills. There had been plethora of cases wherein courts have opined that procedural lapses should not be taken as a ground of imposing penalty. However, time and again the revenue authorities are reluctant to follow the rulings imparted. A strict action from Government’s end is anticipated to reduce unnecessary harassment of business community.

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GST Update No 181 on minor penalty for bonafide mistakes in E-way bill

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