2020 (1) TMI 170 - HC - GST

Levy of penalty - Principles of natural justice - service of notice - notice was not served on the person on whom penalty was levied, but on the driver of vehicle - as a result opportunity of hearing could not be availed off - Imposition of penalty u/s 129(3) of the West Bengal Goods and Services Tax Act, 2017 - HELD THAT - The notice for imposition of penalty requires to be served upon the person on whom the penalty is to be imposed. Furthermore, an opportunity of hearing has to be granted. In the event, such hearing is not granted, the same would definitely amount to violation of principles of natural justice. Audi alterem partem no person should be judged without a fair hearing is the minimum necessity that is required to be followed as per the above provision - when the respondent authorities had in their possession documents such as invoice and challan that showed as to who was the owner of the goods, it was incumbent upon them to serve a copy of the notice upon the owner of the goods. It is trite law that the Circular issued by the Central Board of Indirect Tax and Customs is only binding upon the authorities and not upon the assessee. I have to mention here that the Circular and the Form are not complying with the mandatory provision of giving notice to the person who is the owner of the goods and upon whom the imposition of penalty is to be made - in the present case, the petitioner-company is having its registered office at Siliguri, Darjeeling District. Therefore, the reason for non-service of the notice by the Assistant Commissioner of State Goods and Service Tax, Siliguri upon the petitioner-company that was located within 15 kms. remains unexplained. Thus, it is clear that in the present case, there has been more than a technical infringement of the statutory provision as no hearing whatsoever was granted to the petitioner. Having not been granted an opportunity of hearing, the petitioner was unable to put his case before the concerned authority. Surprisingly, the notice in FORM GST MOV-07 was served upon the driver but the order passed in FORM GST MOV-09 was served upon the driver and the petitioner-company. The notice required to be served under Section 129 (3) has not been served properly. Accordingly, there has been a clear violation of the principles of natural justice - the impugned order is set aside - the Assistant Commissioner of State Tax, Goods and Services Tax directed to issue a fresh notice upon the petitioner, and thereafter, grant an opportunity of hearing and pass a reasoned order.

Summary

Issues Involved:
1. Detention by the proper officer.
2. Timing of e-waybill generation.
3. Server malfunction affecting waybill generation.
4. Presence of other necessary documents.
5. Proper notice for penalty imposition.

Issue-Wise Detailed Analysis:

1. Detention by the Proper Officer:
The petitioner challenged the detention of goods on the grounds that the detention was not carried out by a proper officer. The court examined Section 129 of the WBGST Act, 2017, which mandates that any goods transported in contravention of the Act are liable to detention or seizure by a proper officer. The court concluded that the officer who detained the goods was indeed a proper officer under the Act.

2. Timing of E-waybill Generation:
The petitioner argued that the e-waybill was generated before the detention order was passed on March 25, 2019. The court noted that the vehicle was intercepted at 5:00 p.m. on March 23, 2019, and the e-waybill was generated at 5:10 p.m. The court found that the petitioner had made efforts to comply with the e-waybill requirements, but the vehicle was detained before the e-waybill was generated.

3. Server Malfunction Affecting Waybill Generation:
The petitioner contended that the server malfunction of the GST Portal prevented the timely generation of the e-waybill. The court observed that the respondents did not sufficiently counter the petitioner's claim regarding the server malfunction. The court emphasized that the specific allegation about the server being non-functional before 4:25 p.m. on March 23, 2019, was not addressed by the respondents.

4. Presence of Other Necessary Documents:
The petitioner argued that all necessary documents, including the invoice, challan, and insurance policy, were present with the goods, indicating no intent to evade tax. The court agreed, noting that the presence of these documents negated any mens rea for tax evasion. The court referred to previous judgments to support the argument that imposition of penalty requires mens rea and culpability for tax evasion.

5. Proper Notice for Penalty Imposition:
The petitioner claimed that the penalty was imposed without proper notice and opportunity for a hearing. The court examined Section 129(3) and (4) of the WBGST Act, 2017, which require notice and an opportunity for hearing before imposing a penalty. The court found that the notice was served only on the driver, not the petitioner, which violated the principles of natural justice. The court emphasized that the notice must be served on the person on whom the penalty is to be imposed, and an opportunity for a hearing must be provided.

Conclusion:
The court quashed and set aside the impugned order dated April 03, 2019, due to the violation of principles of natural justice. The court directed the Assistant Commissioner of State Tax, Goods and Services Tax to issue a fresh notice to the petitioner, grant an opportunity for a hearing, and pass a reasoned order. The court did not delve into the aspect of mens rea at this stage, leaving it open for the concerned officer to decide. The writ petition was disposed of with no order as to costs.