Penalty cannot be imposed for expired E-way bills in the absence of intent to evade taxes

[CA Bimal Jain]

The Hon’ble Calcutta High Court (Circuit Bench at Jalpaiguri) in M/S. MAA AMBA BUILDERS & ANR. VERSUS THE ASSISTANT COMMISSIONER OF REVENUE, STATE TAX, BUREAU OF INVESTIGATION NORTH BENGAL HQ & ORS.  - 2024 (5) TMI 363 - CALCUTTA HIGH COURT set aside the order of detention and held that there was no material record available, therefore, no presumption can be drawn that there was the intention of the tax evasion. Taking into the consideration, within 24hrs from the expiry of the validity of the e-way bill, there was material to show that was involved in the tax evasion.

Facts:

M/s Maa Amba Builders (“The Petitioner”) had in course of its usual business, dealings transactions received orders from M/s City Developers Private Limited for the supply of 32.200mt. of TMT Bar (“contracted goods”) and for the execution of the contract they had placed an order to M/s N.N. Ispat Private Limited in the West Bengal.

The tax invoice was generated by M/s N.N. Ispat Private Limited. Simultaneously, for the transportation of the goods E-way bill was also generated from Burdwan to the Siliguri. The E-way bill which was generated by the Petitioner remained valid till May 17, 2023. Simultaneously, the Petitioner had also raised e-tax invoice bearing barcode. Before the consignment could reach the M/s City Developers Private Limited, the e-way bill generated by the Petitioner remained valid up to May 12, 2023, 11.59 P.M.

Unfortunately, before the consignment could reach M/s City Developers Private Limited, the e-way bill which remained valid till 11.59 P.M., of May 12, 2023 expired. Incidentally, the goods in question were intercepted on May 13, 2023 before the validity of the said e-way bill could be extended by the Petitioners.

An Order dated May 15, 2023 was passed for physical verification, wherein it was found "E-way bill not tendered for the goods in movement". Subsequently, an Order of Detention dated May 15, 2023 was issued under Section 129(3) of the CGST Act. The reason for detention was identified as "goods not covered by valid documents". The same was followed up by a Show Cause Notice issued under Section 129(1) of the CGST Act.

The Petitioners in terms of Section 129(1)(b) of the CGST Act applied for release of goods and paid the amount of penalty, got the goods released. The Petitioner by reasons of payment of penalty, did not file response to the SCN. Subsequently, an Order under Section 129(3) of the CGST Act was passed on May 18, 2023 (“the Impugned Order-1”), to pay the penalty.

The Petitioner filed an appeal under section 107 of the CGST Act, 2017 challenging the impugned order passed by the Appellate Authority which was dismissed by an Order dated September 13, 2023 (“the Impugned Order-2”), on the grounds that detention of goods and imposing of penalty in accordance with the provisions of law.

Hence, aggrieved by the Impugned Orders 1 and 2, the present writ petition was filed by the Petitioner.

Issue:

Whether penalty can be imposed for expired E-way bills in the absence of intent to evade taxes?

Held:

The Hon’ble Calcutta High Court in M/S. MAA AMBA BUILDERS & ANR. VERSUS THE ASSISTANT COMMISSIONER OF REVENUE, STATE TAX, BUREAU OF INVESTIGATION NORTH BENGAL HQ & ORS.  - 2024 (5) TMI 363 - CALCUTTA HIGH COURT held as under:

• Observed that, simply because there was no extension of the e-way bill, the same does not pre-supposes that there was an intention to evade tax. There is no finding either by the adjudicating officer or by the appellate authority as regards the intent of evasion of tax. There appears to be no material available to conclude evasion of tax.
• Relied on, Hon'ble Supreme Court in the case of VARDAN ASSOCIATES PVT. LTD. VERSUS ASSISTANT COMMISSIONER OF STATE TAX CENTRAL SECTION & ORS. - 2024 (2) TMI 189 - SUPREME COURT observed that the appellant cannot shirk from its responsibilities to comply with the requirements in law to generate a fresh e-way bill or to seek extension thereof. But the observations made by the Hon'ble Supreme Court in the said judgment are in relation to a challenge as regards payment of tax and penalty and not in relation to the factum of presumption being drawn on the intention to evade tax on the non-extension of the validity of the e-way bill.
• Held that, taking into consideration the fact that the goods were intercepted within 24 hours from the expiry of the validity of the e-way bill, including there being no material on record to show that the petitioners were involved in evasion of tax and the peculiar facts of the case, the Impugned Order 1 and 2 were set aside.

Our Comments:

In a Pari Materia case of M/S GLOBE PANEL INDUSTRIES INDIA PVT. LTD. VERSUS STATE OF U.P. AND OTHERS - 2024 (2) TMI 363 - ALLAHABAD HIGH COURT, the penalty order and the subsequent order was quashed by the Hon’ble Allahabad High Court. The Court observed that goods in the vehicle were for two e-invoices and two E-Way Bills and only one E-Way Bill had expired. There was no dispute with regard to the consignor and consignee nor any dispute with regard to the description of the goods in the vehicle. In relation to the e-Invoices and the E-Way Bills, the authorities could not indicate any intention whatsoever on behalf of the petitioner to evade tax. Indubitably, there is a technical violation that has been committed by the petitioner.

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