2025 (1) TMI 1145 - HC - GST

Challenge to order of declination to grant any interim order but directing affidavits to be exchanged - whether the appellate authority viz. the Senior Joint Commissioner of Revenue Bally Circle was justified in dismissing the assessees appeal by an order confirming the order of penalty imposed on the appellants under Section 129 (1) of the G.S.T. Act 2017? - HELD THAT - It is not clear as to how the adjudicating authority and the appellate authority had invoked Section 129 of the Act since the facts of the present case shows there appears to have been no intention to evade the payment of tax. The only reason for imposing the penalty is that in the e-way bill generated by the appellants in favour of M/s. CRM Ispat Private Limited dated 8th July 2023 for outward supply the despatch was shown to be made from Durgapur West Bengal Pin 713212. The authorities are of the opinion that the full details of the company which despatched the goods which were sent to the appellants/customer was not disclosed. However on a comparison of the e-way bill raised on 6th July 2023 alongwith the tax invoice raised by the appellants show that the goods moved in the same vehicle bearing registration No. W.B. 41D 1508. In any event the e-way bill is generated based on an application made in the portal and in Part A of the e-way bill one of the details is to be furnished is place of despatch in which the appellants had mentioned as West Bengal 713212 and this detail which was disclosed while making the application was accepted and the e-way bill stood generated. Therefore merely because the appellants did not disclose the name of the company and the full particulars of his supplier cannot be stated to be a ground that the appellants had intention to evade the payment of tax. In the peculiar facts and circumstances of the case the power under Section 129 (1) (a) of the Act could not have been invoked. Conclusion - The mere omission of certain details in an e-way bill when justified by common trade practices does not automatically imply an intention to evade tax. The penalty imposed under Section 129(1) was unjustified. The order passed by the appellate authority as well as the original authority are set aside and the appellants are entitled to apply for refund of the penalty which was remitted by them without prejudice to their rights and contentions and if such application is filed the same shall be dealt with in accordance with law - Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the appellate authority, the Senior Joint Commissioner of Revenue, Bally Circle, was justified in dismissing the appellants' appeal and confirming the penalty imposed under Section 129(1) of the GST Act, 2017. The core question revolved around whether there was an intention to evade tax, justifying the invocation of Section 129.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework centers on Section 129 of the GST Act, 2017, which deals with the detention, seizure, and release of goods and conveyances in transit. This provision is typically invoked when there is a suspicion of tax evasion. The Court examined whether the facts of the case justified the application of this section.

Court's Interpretation and Reasoning:

The Court scrutinized the rationale behind the penalty imposition, focusing on the e-way bill generated by the appellants. The adjudicating and appellate authorities had penalized the appellants for not fully disclosing the details of the supplier in the e-way bill. However, the Court noted that the appellants had provided the place of dispatch as required, and this information was accepted by the system, leading to the generation of the e-way bill.

Key Evidence and Findings:

The key evidence considered was the e-way bill generated on July 8, 2023, and the tax invoice dated July 6, 2023. Both documents indicated that the goods were transported in the same vehicle, and the place of dispatch was correctly mentioned as West Bengal, 713212. The appellants explained that it is a trade practice to mention only the place of dispatch to avoid revealing supplier details to the customer.

Application of Law to Facts:

The Court applied Section 129(1) of the GST Act to the facts, assessing whether there was a genuine intention to evade tax. Given that the e-way bill was generated with the accepted details and there was no evidence of tax evasion intent, the Court found that the invocation of Section 129 was unjustified.

Treatment of Competing Arguments:

The authorities argued that the lack of full supplier details indicated a possible intention to evade tax. However, the Court found this reasoning insufficient, given the appellants' explanation and the accepted trade practice of not disclosing full supplier details in such transactions. The Court emphasized that the mere omission of supplier details, without more, does not constitute tax evasion.

Conclusions:

The Court concluded that the penalty imposed under Section 129(1) was unwarranted given the lack of evidence indicating tax evasion. The decision to penalize the appellants was based on a misinterpretation of the requirements for generating an e-way bill and the information provided therein.

SIGNIFICANT HOLDINGS

The Court held that the power under Section 129(1)(a) of the GST Act could not be invoked in this case due to the absence of tax evasion intent. The Court set aside the orders of both the appellate and original authorities, allowing the appellants to apply for a refund of the penalty paid.

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"...merely because the appellants did not disclose the name of the company and the full particulars of his supplier, cannot be stated to be a ground that the appellants had intention to evade the payment of tax."

Core Principles Established:

The judgment underscores that the mere omission of supplier details in an e-way bill, when the place of dispatch is correctly mentioned and accepted, does not automatically imply an intention to evade tax. The application of Section 129 requires a clear demonstration of such intent.

Final Determinations on Each Issue:

The Court determined that the penalty imposed was not justified and directed that the appellants are entitled to a refund of the penalty amount, subject to legal formalities. The decision reinforces the principle that penalties under tax law must be supported by clear evidence of wrongdoing.