2022 (4) TMI 752 - HC - GST

Detention of goods - seeking release of Bank Guarantee - minor discrepancies in the invoice/e-way bill etc. - section 129(3) of CGST Act - Circular No.64/38/2018 dated 14- 09-2018 - HELD THAT - A reading of the statutory Circular reveals that the purpose of issuing such a Circular was to mitigate the hardships being caused to taxpayers for minor discrepancies, which had no bearing on the liability to tax or on the nature of goods being transported. The circular is statutory in nature and is binding on the Tax Officers. Thus minor discrepancies cannot be penalized contrary to the mode and procedure contemplated under the Circular - the Circular refers to only six instances of minor discrepancies. Strictly speaking, the present situation is not covered by the six instances mentioned in the Circular. However, the analysis of the six instances reveals those discrepancies which have no bearing on tax liability and are caused on account of bonafide mistakes like typographical errors, or otherwise are regarded as minor discrepancies. In the instant case, the discrepancy pointed out is only on the date of invoice which is shown as 03.02.2021 while that shown in the e-way bill was 02.03.2021. All other details in the invoice and the e-way bill including the nature of goods transported, the details of consignor and consignee, the GSTIN of supplier and recipient, place of delivery, invoice number, value of goods, HSN code, vehicle number etc. tallied and had no discrepancy. Thus the error noticed is insignificant and not of any consequence for invoking the power conferred under section 129 of the Act to impose tax and penalty. The situation arising in the instant case, warranted imposition of only a minor penalty as contemplated under the Circular. In view of the above, the imposition of tax and penalty upon the petitioner to the extent imposed in Ext.P6 is perverse and illegal, warranting interference under Article 226 of the Constitution of India. Petition allowed.

Summary

Issues:
Challenge to final order under section 129(3) of the Central Goods and Service Tax Act, 2017 for imposing tax and penalty based on discrepancy in e-way bill date. Petitioner seeking release of bank guarantee. Interpretation of Circular No.64/38/2018 regarding penalties for minor discrepancies in invoices/e-way bills. Applicability of Circular to the present case. Consideration of alternative remedy under Article 226 of the Constitution of India.

Analysis:

1. The petitioner challenged a final order under section 129(3) of the CGST Act, 2017, which imposed a tax and penalty due to a discrepancy in the e-way bill date. The petitioner, engaged in electrical contract works, transported goods for a hospital project, but a formatting error in the invoice date led to the detention of goods by the first respondent. The petitioner sought the release of the bank guarantee, arguing that the error was due to the default computer formatting system.

2. The petitioner contended that the penalty was unjustified for a minor discrepancy and cited Circular No.64/38/2018 issued by the CBIC, which outlined situations where penalties should not be imposed for minor errors in documents. The government pleader argued that the petitioner should seek remedy through the appellate forum instead of a writ petition, suggesting the error could be intentional for tax evasion.

3. The court considered the petitioner's arguments despite the availability of an alternative remedy, emphasizing the need to address hardships caused by minor discrepancies. The Circular aimed to prevent penalizing taxpayers for insignificant errors not affecting tax liability. Although the specific error in the case was not explicitly covered by the Circular, it fell under the broader scope of permissible minor discrepancies.

4. The court noted that the discrepancy in the invoice date did not impact tax liability or the nature of goods transported, aligning with the intent of the Circular. Referring to a similar case in the Madras High Court, relief was granted to the taxpayer based on the Circular's principles. Consequently, the court found the imposition of tax and penalty in the present case as excessive and illegal, directing the first respondent to reconsider the order in line with the Circular and the court's observations within a specified timeframe.

5. The judgment quashed the original order and instructed a fresh review, emphasizing adherence to the Circular's guidelines and providing the petitioner with a hearing opportunity. Ultimately, the writ petition was allowed, granting relief to the petitioner based on the interpretation and application of the Circular to the specific circumstances of the case.