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IN THE HIGH COURT OF KERALA AT ERNAKULAM
GOPINATH P., J.
M/S. T.P. METALS & ROOFINGS, PARAPPANPOYIL – Petitioner
Versus
ASSISTANT TAX OFFICER (INT) MALAPPURAM – Respondent
WP (C) No. 26645 of 2021
Decided On : 30-07-2024
Penalty - CGST/SGST - Sections 122, 126, 129 - The court interpreted Sections 122 and 129 of the CGST/SGST Acts, emphasizing that penalties for minor breaches should not be severe unless there is intent to evade tax, influencing the decision to impose a lesser penalty.
Fact of the Case:
The petitioner, a registered dealer, sold roofing pipes and was penalized for transporting goods with an expired e-way bill. The authorities initiated proceedings under Section 129 of the CGST/SGST Acts, imposing a significant penalty despite the absence of tax evasion.
Finding of the Court:
The court found that while there was a technical violation due to the expired e-way bill, there was no evidence of tax evasion. It ruled that the penalty imposed was excessive and should be reduced to a minimum amount as per Section 122.
Issues: Whether the imposition of a significant penalty under Section 129 was justified in the absence of any attempt to evade tax, given the expired e-way bill.
Ratio Decidendi: The court held that penalties for minor procedural violations should be proportionate and not automatically severe unless there is clear intent to evade tax, aligning with the principles of fairness and justice.
Result: The writ petition is allowed, and the penalty is reduced to Rs. 10,000.
JUDGMENT :
1. The petitioner is a registered dealer under the CGST/SGST Acts and is engaged in the sale of roofing sheets, pipes etc. According to the petitioner, it sold 12,080 Kg of roofing pipes to M/s. Koyasons Building Materials Pvt. Ltd. Palakkad vide Sale Invoice No. TWS/2022/232 dated 23.10.2021 for a total value of Rs.10,46,732/- (Ten lakhs forty-six thousand seven hundred thirty-two only). The goods were then despatched to the purchaser along with the Tax Invoice bearing No. TWS/2022/232 and e-way bill bearing No. 5613 0699 2337 dated 23.10.2021. The vehicle in which the goods were being transported was intercepted by the 1st respondent on 25.10.2021 at 09:59 A.M. at Melmuri, Malappuram, and on the finding that the e-way bill referred to above had expired on 24.10.2021 proceedings were initiated against the petitioner under Section 129 of the CGST/SGST Acts. The proceedings culminated in Ext.P10 order imposing upon the petitioner the liability to pay tax and penalty totalling Rs.3,76,824/- (Three lakhs seventy-six thousand eight hundred twenty-four only).
2. Sri. Hrithwik D. Namboodiri, the learned counsel appearing for the petitioner would submit that there is no finding in Ext.P10 that there was any attempt to evade tax. It is submitted that the only finding in Ext.P10 is that the e-way bill referred to above (which was generated on 23.10.2021 at 10:00 P.M), had expired at the time of detention. Learned counsel referred to the provisions of Sub-rule (10) of Rule 138 of the CGST/SGST Rules and to the third proviso to that Rule to contend that since the e-way bill was generated at 10:00 P.M on 23.10.2021, it expired by 10:00 P.M on 24.10.2021 (considering the distance involved in the transport of goods) and the petitioner had time till 06:00 A.M on 25.10.2021 to extend the e-way bill. It is submitted that since the distance from the premises of the petitioner to the place of supply was only 107 km, the e-way bill was generated only for one day as contemplated by the provisions of Rule 138(10) of the CGST/SGST Rules. Learned counsel also referred to the provisions of Section 126 of the CGST/SGST Acts to contend that penalties should not be imposed for technical violations and the officers were required to follow the general disciplines related to penalty set out in Section 126 of the CGST/SGST Acts. Learned counsel further submitted, with reference to the provisions of Section 122(xiv) of the CGST/SGST Acts that, even if it were to be held that the transport of goods, in the facts of the present case, without extending the validity of the e-way bill, was illegal, the only penalty that could be imposed was Rs.10,000/- (Ten thousand only). Learned counsel also placed reliance on the judgment of this Court in Sanskruthi Motors v. The Joint Commissioner (Appeals), 2022 (4) KLT Online 1294 to contend that this Court, after relying on the judgment of a Division Bench of the Telangana High Court in Satyam Shivam Papers Pvt. Ltd v. Assistant. Commissioner, S.T and Ors. 2021 SCC Online TS 698 and on finding that the Special Leave Petition against the said judgment had been dismissed by a speaking order and also taking note of the observations of this Court in Podaran Foods India Pvt. Ltd. (M/s.) and Others v. State of Kerala and Others, 2021 (1) KHC 471, came to the conclusion that merely because there was a failure to revalidate an e-way bill and in the absence of any finding that there was an attempt to evade tax, the maximum penalty, as contemplated by the provisions of Section 129 of the CGST/SGST Acts should not be imposed. It is submitted that the judgment of this Court in Sanskruthi Motors (supra) was also upheld by a Division Bench through judgment dated 19.12.2022 in W.A. No. 1932 of 2022 (2022 KER 77429). Learned counsel, therefore, prays that Ext.P10 order may be quashed as being illegal and without jurisdiction.
3. Smt. Jasmine M. M, the Learned Government Pleader vehemently opposes the grant of any relief to the peti
Penalties for minor breaches under the CGST/SGST Acts should be proportionate and not severe unless there is intent to evade tax.
The expiration of an e-way bill during transit, without any intent to evade tax, does not justify severe penalties under the CGST Act; penalties must be proportionate to the offense committed.
The imposition of penalties for minor discrepancies in tax-related documents without intent to evade tax is not justified under the CGST/SGST Acts.
Penalties under GST Act require evidence of intent to evade tax; mere technical omissions do not warrant penalties when tax has been duly paid.
Minor documentation discrepancies do not imply intent to evade tax, and valid transport documents render penalty imposition inappropriate.
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.
For imposition of penalties under the GST Act, intent to evade tax must be established; mere expiration of documents does not suffice.
Expiration of an e-Way Bill during transit does not invoke penalties under Section 129 without evidence of intent to evade taxes.
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