2024 (2) TMI 288 - HC - GST

Levy of penalty at the rate of 200% of the tax (GST) payable - Detention of escalator machine (JCB) - JCB machine was returning from work - violation of provision of Section 68 (1) of CGST Act - failure to produce any document in support of movement of the goods, i.e, the JCB machine - demand of penalty - HELD THAT - After physical verification of the goods it was detected that the document relied upon by the driver was not signed. The details mentioned in the e-way bill did not match the delivery challan. The name and address of the person who released the goods did not match with the details of the person whose name is mentioned in the e-way bill. Because of the discrepancy in the documents, the respondent authorities concluded that the petitioner transported the goods, i.e., the machine in contravention of the provisions of law. In Bharti Airtel 2022 (10) TMI 998 - ALLAHABAD HIGH COURT the Court opined that there is no provision under Section 129 for determination of tax due, which can be done only by taking recourse to provision of Section 73 and 74 of the Act, as the case may be. In Vardan Associates 2024 (2) TMI 189 - SUPREME COURT , decision relied upon by the respondent authorities, penalty was imposed as the assessee failed to comply with the requirement to generate fresh e-way bill while transporting the goods as the e-way bill in question expired in the midst of transportation. In such a situation the Court was of the opinion that a fresh e-way bill ought to have been generated so that the transportation of the consignment could be concluded. In the present case there was a valid e-way bill in support of the transportation. It is only because of non-production of the delivery challan that the penalty has been assessed and imposed. Though possession of all document in support of transportation is the fundamental requirement of law, but as it appears that, the petitioner did not have the intention to evade tax, accordingly, imposition of penalty at the rate of 200% of the tax payable appears to be highly disproportionate and not in accordance with the provisions of law. The impugned order passed by the adjudicating authority affirmed by the appellate authority is liable to be set aside and is accordingly set aside. The adjudicating authority is directed to revisit the issue in line with the discussions made herein above and pass a reasoned order - Petition allowed.

Summary

Issues:
The issues involved in this case are the detention of an escalator machine (JCB) by officers for lack of supporting documents, imposition of penalty under Section 129 (3) of the State Goods and Services Tax Act, 2017, and the petitioner's contention regarding the evaluation and adjudication of tax under the Act.

Detention of Machine and Imposition of Penalty:
The petitioner, a registered entity under the Central Goods and Services Tax Act, had his JCB machine detained by authorities for not producing necessary documents during transportation. An order of detention was issued under Section 129 (1) of the Act, alleging a violation of Section 68 (1). The petitioner was directed to pay a penalty of Rs. 9,93,008 for contravention of the Act and Rules. The petitioner argued that the machine had a valid e-way bill and no tax was payable as it was returning after work completion.

Controversy over Penalty Calculation:
The petitioner contended that the proper officer exceeded jurisdiction by calculating tax and specifying a penalty of 200% of the tax payable. It was argued that the penalty should not exceed Rs. 25,000 as the goods were not taxable. The petitioner relied on various judgments to support the argument that penalty imposition was disproportionate.

Legal Interpretation and Precedents:
The petitioner cited judgments from different High Courts to support the contention that the authorities erred in imposing the penalty. The judgments highlighted the importance of intent to evade tax, examination of tax applicability, and the necessity of compliance with statutory provisions. The petitioner also referred to Circular no. 64/38/2018-GST for procedural guidance.

Court Decision and Directions:
After considering submissions from both parties, the Hon'ble Justice set aside the order of penalty imposition, directing the adjudicating authority to reevaluate the issue within eight weeks. The Court emphasized that while possession of all transportation documents is crucial, the penalty should be proportionate to the offense and in line with legal provisions. The writ petition was disposed of accordingly.