2024 (7) TMI 1345 - HC - GST

Principles of natural justice - no reasons are assigned for levying interest and penalty - transfer of goods between two establishments or not - HELD THAT - The respondent authority ought to have assigned reason for levy of penalty of Rs. 01,32,774/- as well as levy of tax when the goods were admittedly not by E-invoice for sell but the goods were transported from head office to Halol plant of the petitioner and therefore, it can be said to be transfer of goods between the two establishments of the petitioner. This Court in case of Dhabriya Polywood Ltd. v. Union of India 2022 (5) TMI 184 - GUJARAT HIGH COURT has relied on the Circular of the CBIC dated 14th September, 2018 and has held ' The manner in which the writ applicant has proceeded so far and also having regard to the fact that very promptly he brought to the notice of the authority concerned and admitted its mistake, we would like to give the writ applicant some benefit of doubt.' In case of Orson Holdings Company Ltd. 2023 (1) TMI 1026 - GUJARAT HIGH COURT , while considering the provisions of Section 129, it was held ' it can be gathered that there does not appear to be any ill-intent on the part of the petitioner to use the expired e-Way bill. The company is situated at Howrah, West Bengal and the place of delivery was Jamnagar, Gujarat and in transit, this e-Way bill has expired.' The respondent authorities having not assigned the reasons, the impugned orders are not sustainable and are accordingly quashed and set aside. The matter is remanded back to respondent No. 2 to pa fresh de novo order after giving opportunity of hearing to the petitioner by assigning reasons in detail taking into consideration the above decisions while passing the order in accordance with law. Petition allowed partly.

Summary

Issues Involved:
1. Validity of the E-way bill and procedural lapse in Part B.
2. Levy of tax and penalty under Section 129 of the GST Act.
3. Absence of reasons in the impugned orders.
4. Applicability of judicial precedents and circulars.

Detailed Analysis:

1. Validity of the E-way Bill and Procedural Lapse in Part B:
The petitioner argued that there was a minor lapse in Part B of the E-way bill, which is curable and does not impact any tax liability as per Rule 138 of the Central/Gujarat Goods and Service Tax Rules, 2017. The E-way bill was found invalid as Part B did not contain correct details. The petitioner corrected the E-way bill immediately upon being informed of the procedural lapse.

2. Levy of Tax and Penalty under Section 129 of the GST Act:
The GST Officer intercepted the conveyance and detained the goods and the truck under Section 68(3) and issued a show-cause notice under Section 129(3) for tax and penalty totaling Rs. 2,65,548/-. The petitioner paid the amount to release the goods and the truck. However, the petitioner contended that the levy of tax and penalty was unwarranted as the goods were being transported between its own establishments, which should not attract tax liability.

3. Absence of Reasons in the Impugned Orders:
The court noted that both the original and appellate orders did not assign any reasons for levying interest and penalty. Section 122(1)(xiv) of the GST Act provides for a penalty of Rs. 10,000/- for transporting taxable goods without the cover of specified documents. The respondent authority failed to provide reasons for imposing a penalty of Rs. 1,32,774/-. The court emphasized that the right to reason is an indispensable part of a sound judicial system, citing the Bombay High Court's decision in Velcord Textiles v. Union of India.

4. Applicability of Judicial Precedents and Circulars:
The petitioner relied on several judicial precedents and circulars, including:
- Orson Holdings Company Ltd. v. Union of India: The court held that the expiration of the E-way bill during transit cannot be the sole ground for detention and seizure.
- VSL Alloys (India) Pvt. Ltd. v. State of U.P.: The court ruled that merely not mentioning the vehicle number in Part B cannot be a ground for seizure.
- Neuvera Wellness Ventures Pvt. Ltd. v. State of Gujarat: The court quashed an unreasoned order demanding tax and penalty, emphasizing the need for a speaking order.
- Dhabriya Polywood Ltd. v. Union of India: The court relied on a CBIC circular stating that proceedings under Section 129 may not be ordinarily initiated if the consignment is accompanied by an invoice and an E-way bill.

Conclusion:
The court quashed the impugned orders due to the absence of reasons and remanded the matter back to the respondent authority for a fresh de novo order. The respondent authority is directed to pass a reasoned order after giving the petitioner an opportunity of hearing, considering the judicial precedents and circulars cited. The exercise is to be completed within 12 weeks from the date of receipt of the court's order. The petition was allowed partly, and no order as to costs was made.