2024 (6) TMI 1313 - HC - GST

Levy of penalty with regard to three consignments not being accompanied with e-way bill - Section 129 (1) of the MGST Act - mandate of Rule 138 A of the MGST Rules, 2017 not fulfilled - non-application of mind - violation of principles of natural justice - HELD THAT - By the impugned order penalty is levied under Section 129 (1) (a) as well as under Section 129 (1) (b) of the MGST Act. Both these provisions are mutually exclusive - the impugned order is passed without application of mind. These Petitions were heard on 21st June 2024 and while dictating the judgment in the Chamber, the Court came across an order dated 18th January 2022 wherein it is recorded that Petitioner has furnished a Bank Guarantee in all three Petitions for release of goods. Therefore, to ascertain the status of these Bank Guarantees, these Petitions were listed for direction on 26th June 2024. To a query raised by the Court about the status of the Bank Guarantees as recorded in the order dated 18th January 2022 given to the State GST Authority Respondent Nos. 2 and 3, Mr. Patkar informed the Court that the Bank Guarantees had already expired and they did not renew the same, nor the State GST Authority informed Petitioner about renewal - It was the obligation of Petitioner to have continued to renew the Bank Guarantees till the disposal of these Petitions, since based on these Bank Guarantees, the goods were released. Respondent No. 3 is directed to conduct enquiry, fix the responsibility and take the action against the officers / staffs who were responsible for allowing the Bank Guarantees to have lapsed. At the same time, Petitioner was also not justified in not renewing the Bank Guarantees, and therefore taking a firm view of such an inaction, this Court deems if fit to impose cost of Rs. 15 Lakhs on Petitioner to be paid to the PM Cares Fund, within a period of four weeks from the date of uploading of this order and file affidavit of compliance. The Petitioner is not liable to pay GST on movement of machinery from JNPT to its factory since same would not fall within the charging section - impugned order being Exhibit-A dated 15th December and corrigendum dated 22nd December 2020 is modified by holding that the Petitioner is liable for penalty of Rs. 25,000/- only under Section 129 (1) of the Act - Petitioner is directed to deposit Rs. 75,000/- with the State GST authority within a period of four weeks from the date of uploading of the present order. The Bank Guarantee furnished as recorded in order dated 18th January 2022 would be returned by Respondents to Petitioner only on payment of Rs. 75,000/- as directed herein - Petitioner is directed to donate Rs. 15 Lakhs to PM Cares Fund within a period of four weeks from the date of uploading of present order and file affidavit of compliance. The writ petition is disposed off.

Summary

Issues Involved:
1. Whether the Petitioner is liable for penalty under Section 129(1) of the MGST Act for transporting machinery without an e-way bill.
2. Determination of the correct limb of Section 129(1) of the MGST Act under which the penalty should be imposed.
3. Responsibility and consequences of not renewing Bank Guarantees furnished for the release of goods.

Detailed Analysis:

1. Liability for Penalty under Section 129(1) of the MGST Act:
The Petitioner imported machinery from China, exempt from Customs duty and IGST under specific notifications. The machinery was transported from JNPT Port to the Petitioner’s factory in Surat. The vehicle was intercepted in Maharashtra without an e-way bill, leading to a penalty notice under Section 129(1) of the MGST Act. The Petitioner admitted the absence of the e-way bill but argued that no GST liability arises when goods are transported by an importer to his own factory. The Petitioner contended that the penalty should be limited to Rs. 25,000 under Section 129(1) of the MGST Act.

2. Correct Limb of Section 129(1) of the MGST Act for Imposing Penalty:
The court analyzed whether the Petitioner is liable for penalty and under which limb of Section 129(1) the penalty should be imposed. Section 129(1)(a) provides for a penalty equal to 100% of the tax payable on goods detained or seized. However, in this case, no tax was payable as the machinery was exempt under the relevant notifications. The court concluded that the transportation of machinery to the Petitioner’s own factory does not constitute a "supply" under Section 7 of the MGST Act, as it lacks consideration and involves only one entity. Consequently, the charging Section 9 does not apply, and the first limb of Section 129(1)(a) is not applicable.

The second limb of Section 129(1)(a) imposes a penalty of 2% of the value of goods or Rs. 25,000, whichever is less, for exempted goods. Since the machinery was exempt from tax, the court held that the penalty should be Rs. 25,000, as it is lesser than 2% of the value of goods.

3. Responsibility and Consequences of Not Renewing Bank Guarantees:
The court noted that the Petitioner had furnished Bank Guarantees for the release of goods, which had expired without renewal. Both the Petitioner and the State GST Authority failed to ensure the renewal of these guarantees, potentially resulting in a significant loss to the state if the penalty was upheld. The court directed the State GST Authority to conduct an inquiry and take action against responsible officers/staff. Additionally, the court imposed a cost of Rs. 15 Lakhs on the Petitioner for not renewing the Bank Guarantees, to be paid to the PM Cares Fund.

Conclusion:
The court ruled that the Petitioner is not liable to pay GST on the movement of machinery from JNPT to its factory, as it does not fall within the charging section. The impugned order was modified to impose a penalty of Rs. 25,000 under Section 129(1) of the MGST Act. The Petitioner was directed to deposit Rs. 75,000 (Rs. 25,000 x 3) with the State GST authority and donate Rs. 15 Lakhs to the PM Cares Fund. The Writ Petitions were disposed of, and the case was listed for compliance on 26 July 2024.