GST update No 272 on imposition of penalty for failure to revalidate

The main objective of introduction of eway bill mechanism in the GST regime was to do away with the concept of Inspector Raj system and ensure hassle free movement of goods. However, it has been observed that the taxpayers have to face maximum litigation with respect to implementation of e-way bill mechanism till date. The revenue authorities often initiate proceedings for minor procedural lapses in e-way bill and there had been various cases in the past wherein the Court has adopted a lenient approach and delivered decisions in the favour of the assessee. Recently, similar issue was reported before Kerala High Court in the case of M/S SANSKRUTHI MOTORS V/S JOINT COMMISSIONER. The decision imparted in this case is subject matter of discussion of our present update. The petitioner is engaged in transportation of goods which is driven on various destinations as required by the company. However, in the present case the vehicle was intercepted anddetained by the Assistant Officer and a show cause notice was issued as on 09.07.2019 at 12:20 p.m. It was noticed that the e-way bill was expired as on 08.07.2019. The petitioner moved to Court and the lorry was directed to be released on production of bank guarantee. Following the directions of the Court, the order was issued as on 16.08.2017 imposing a penalty of Rs. 5,24,017/- along with a demand for IGST for the same amount making a total demand of Rs. 10,48,034/- on the petitioner. Therefore, an appeal was further preferred against the said order under Section 107 of CGST Act, 2017 which was however, returned stating that appeal cannot be entertained since no pre-deposit amount was paid.The Counsel of petitioner argued that there was no requirement of imposing any penalty in the present case and there is no suppression of facts or evasion of tax. The e-way bill was valid upto 11:59 pm as on 08.07.2019 and the vehicle was intercepted the next day. It is clearly mentioned in the order that the vehicle was intercepted as on09.07.2019 at 12:20 am. It was argued that the vehicle failed to cross the check post on 08.07.2019 due to some technical problems and had to be taken at a workshop. It was argued that due to minor lapses, huge penalty should not be imposed. Reliance was placed on decision of Madras High Court and Madhya Pradesh High Court in this respect. Further refence was drawn to the decision of Telangana High Court in the case of M/s Satyam Shivam Papers Pvt. Ltd. & Another V/s Asst. Commissioner (ST) and others. It was argued that there is no concrete evidence which suggest that there is evasion of tax and hence, the power under Section 129 of the CGST Act, 2017 is wrongly invoked and hence, there is abuse of powers. It was further argued that the decision of Telangana High Court was further affirmed by the Apex Court.The Counsel of respondent argued that detention was at 12:20 pm and not at 12:20 am, indication of the same in the order is a genuine mistake. Reliance was placed on decision of Division Bench in the case of Ranjilal Damodaran V/s Asst. State Tax officer and another, Single Judge of this Court in the case of Podaran Foods India Pvt. Ltd. and others V/s State of Kerala and otherswherein it was held that goods cannot be transported without extending the validity of e-way bill. Thus, there is no jurisdictional error in the hands of this Court under Article 226 of the Constitution of India. It was argued that the referred decision has completely different facts and hence, are not applicable in the present case. The Court held that demand of tax and huge penalty in the present case is without jurisdiction. Reference was drawn to the various decisions relied on by the petitioner. The expiry of e-way bill in the present case does not support the fact that there is evasion of tax on the part of the taxpayer. It was therefore held that the revenue officer was bound to consider the explanations given by the petitioner. Hence, the order was quashed. The matter was remanded back directing the respondent to reconsider the amount of penalty imposed and keeping in mind the observations and findings of the Court after providing an opportunity of hearing to the assessee.The above favourable decision is illustrating the fact that heavy penalties cannot be imposed on account of minor lapses. At times, due to unavoidable andcontingencies, it is not possible to extend the validity of e-way bill or generate new e-way bill such as breakdown of the vehicle. As such, lenient view needs to be taken in the cases where there is no malafide intention to evade tax and there is mere procedural irregularity as regards expiry of the validity of e-way bill.

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GST update No 272 on imposition of penalty for failure to revalidate

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