Penalties under Section 129 of the CGST Act must not apply to minor infractions without intent to evade tax, emphasizing moderation and rectifiability of documentation errors.

JUDGMENT : 

YASHWANT VARMA, J.

1. The writ petitioners have approached this Court aggrieved by the demands raised by the respondents in purported application of the provisions enshrined in Section 129 of the Central Goods & Services Tax Act, 2017 (Act) and which have subsequently come to be affirmed by the appellate authorities. The Order-in-Original which is impugned by Kamal Envirotech Pvt. Ltd. (Kamal Envirotech) is dated 26 September 2020 and which ultimately came to be affirmed by the appellate authority in terms of its decision rendered on 15 January 2022. In the matter of M/s Zeon Life Sciences Ltd. (Zeon Life Sciences), a demand originally came to be created against that writ petitioner by an order dated 12 January 2021, and which too was upheld by the appellate authority by its order of 15 February 2022. The demands themselves emanate from an allegation levelled against the writ petitioners of goods having been transported under an incomplete E-way Bill (EWB), Part B whereof was incomplete or missing. The factum of taxes leviable on such goods having been duly paid is not disputed.

2. The respondents, however, would bid us to hold that Section 129 is a penal provision that necessarily entails a levy and demand of tax. They view that provision as envisaging a compulsory exaction or impost. In fact, they urge us to recognize that provision as being one which contemplates the levy of a statutory penalty. They would contend that notwithstanding the absence of mens rea, fraudulent motive or an intent to evade tax, where goods are sought to be transported in contravention of the provisions of the Act, a demand of tax would inevitably arise. It is the correctness of the aforesaid view which is questioned by the writ petitioners.

3. For the purposes of evaluating the challenge that stands raised, we deem it appropriate to notice the essential facts as they appear in W.P.(C) 12142/2022 and which flow along the following lines.

4. Kamal Envirotech is stated to have imported goods from Italy under Bill of Entry No. 8906095 on which Customs and Integrated Goods and Services Tax (IGST) had been duly paid. Those goods were being transported to its factory at Neemrana, Rajasthan under Goods and Services Tax (GST) Invoice No. KEPL/DEL/021. Undisputedly, while Part A of the EWB had been duly filled out, the transporter appears to have failed to generate and complete Part B thereof. In the course of transit, the conveyance was intercepted on 24 September 2020. The GST Officer is stated to have noticed the discrepancy in the EWB as noted above and thus detained the goods for physical verification and inspection. It is the case of the writ petitioner that the discrepancy in the EWB upon being discovered was immediately rectified on 25 September 2020 and a corrected Part B generated that day itself. Post- verification of goods, the GST Officer proceeded to pass an order of detention on 26 September 2020. The said officer proceeded to raise a demand of Central GST (CGST) and State GST (SGST) amounting to INR 19,80,000/- together with penalty of an equivalent amount. It is asserted by the petitioner that it was compelled to get the goods released by submitting a bond under protest on 05 October 2020 whereafter the goods came to be handed over on the next day. Aggrieved by the order in terms of which a tax liability stood created, the petitioner instituted an appeal which came to be dismissed and led to the institution of the present writ petition.

5. Similar facts obtain in W.P.(C) 12042/2022. Suffice it to note that the goods of Zeon Life Sciences are stated to have been interceptedin the course of transportation on 02 February 2021. It is the case of the writ petitioner that at the time when the vehicle was stopped, they still had time as per the Second and Third Provisos to Rule 138(10) of the CGST Rules, 2017 (Rules) to apply for an extension of the EWB and thus overcome the delay caused in the course of transit. It is thus their case that