2025 (1) TMI 837 - HC - GST

Imposition of a penalty under Section 129 of the GST - failure to register an additional place of business - E-way bill and the invoices were generated only after the detention was made on 15.03.2022 at about 10.25 a.m. - HELD THAT - The excuse of the petitioner that the additional place of business at Sothupakkam Village, Redhills, Chennai was not registered by the petitioner and that the same was only the procedural irregularities can be accepted as there is only technical and venial breach of the provisions. That apart, order of detention was made in Form GST MOV-06 dated 15.03.2022 at about 10.25 a.m and it was followed by a Notice issued under Section 129(3) of the respective enactments in Form GST MOV-07. The Eway bill which has been filed by the petitioner along with the typed set of papers indicates that it has been generated on the previous date i.e., on 14.03.2022 at about 6.28 p.m. There appears to be a procedural irregularities committed by the petitioner inasmuch as the transaction covered by the goods seized / detained vide Detention Order dated 15.03.2022 in Form GST MOV-06 was pertaining to the same goods covered by the aforesaid invoice dated 14.03.2022 and the E-way bill dated 14.03.2022 - Unless there was a variance between quantity in the invoice and the E-way bill and the actual seizure made, the question of imposing penalty under Section 129(3) of CGST Act, 2017 would be harsh under the given facts and circumstances of the case. Conclusion - Procedural irregularities without fraudulent intent do not warrant harsh penalties under Section 129 of the GST enactments. The impugned order is quashed due to the procedural nature of the irregularities and the absence of fraudulent intent. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the imposition of a penalty under Section 129 of the GST enactments for failing to register an additional place of business is justified.
Whether the procedural irregularities regarding the e-way bill and registration of the additional place of business warrant the quashing of the Impugned Order.
Interpretation of relevant circulars and their applicability to the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Imposition of Penalty under Section 129

Relevant Legal Framework and Precedents: Section 129 of the GST enactments deals with the detention, seizure, and release of goods and conveyances in transit. The petitioner cited Circular No.64/38/2018-GST and Circular No.10/2019, which provide guidelines on when penalties should not be levied.
Court's Interpretation and Reasoning: The court noted that the failure to register the additional place of business was a procedural irregularity and not intended to evade taxes. The court emphasized the technical and venial nature of the breach.
Key Evidence and Findings: The additional place of business was not registered, and the e-way bill was generated before the detention. The goods were seized at an unregistered location.
Application of Law to Facts: The court applied the guidelines from the circulars, noting that the irregularities were procedural and did not indicate fraudulent intent.
Treatment of Competing Arguments: The respondent argued that the imposition of the penalty was justified due to the lack of registration and the timing of the e-way bill. The court found these arguments insufficient to justify the penalty.
Conclusions: The imposition of a penalty was deemed harsh given the circumstances, leading to the quashing of the Impugned Order.

Issue 2: Procedural Irregularities and Quashing of Impugned Order

Relevant Legal Framework and Precedents: The court referred to previous decisions, including M/s.Smart Roofing Private Limited and Algae Labs Private Limited, which dealt with similar issues of procedural irregularities.
Court's Interpretation and Reasoning: The court found that the procedural irregularities, such as the failure to register the additional place of business, were not sufficient grounds for the imposition of a penalty.
Key Evidence and Findings: The e-way bill was generated on the previous day, and there was no variance in the quantity of goods as per the invoice and the actual seizure.
Application of Law to Facts: The court applied the principles from the cited circulars and case law, emphasizing the lack of fraudulent intent.
Treatment of Competing Arguments: The respondent's argument regarding the necessity of registration was countered by the court's focus on the procedural nature of the breach.
Conclusions: The procedural irregularities did not justify the penalty, and the Impugned Order was quashed.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The excuse of the petitioner that the additional place of business... was only the procedural irregularities can be accepted as there is only technical and venial breach of the provisions."
Core Principles Established: Procedural irregularities without fraudulent intent do not warrant harsh penalties under Section 129 of the GST enactments.
Final Determinations on Each Issue: The court allowed the writ petition, quashing the Impugned Order due to the procedural nature of the irregularities and the absence of fraudulent intent.

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