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2025 (1) TMI 983 - HC - GSTInterpretation of statute - Section 129 of the Central Goods Services Tax Act 2017 (CGST Act) constitutes a statutory penalty provision that overrides other penalty provisions in the Act - It is submitted that Section 129 being a provision creating a statutory penalty and intended to override the scheme of Chapter XIX of the Act by virtue of the non-obstante clause that it incorporates does not appear to be sound for reasons - incomplete E-way Bills (EWBs) without any fraudulent intent - applicability and interpretation of Sections 122 125 and 126 concerning minor breaches and procedural errors - HELD THAT - The non-obstante clause in Section 129 cannot possibly be interpreted as being intended to override what had been specifically provided in Section 126 or annihilate the rules of guidance which stood embodied therein. Section 129 is principally concerned with the release of goods and conveyances which may have been detained or seized. That is clearly not a subject which is regulated or controlled by any of the other provisions contained in Chapter XIX of the Act. The use of the non-obstante clause is thus liable to be appreciated and construed in the aforesaid light. In our considered opinion since the subject of levy of penalty in connection with goods being transported in contravention of the Act had not been previously dealt with the Legislature thought it fit and appropriate to deploy the non-obstante in order to deal with that subject. The extent of the notwithstanding phrase which introduces Section 129 into the statute book is thus liable to be construed in that light and thus the limit of its essay acknowledged accordingly. We also find ourselves unable to read Section 129 as embodying an intendment of the Legislature to either override or completely supersede and obliterate Section 126. Accepting such an interpretation would clearly amount to depriving a person of the benefit of the principles of moderation and modulation which Section 126 introduces and enjoins to be borne in consideration while considering the levy of a penalty. The provisions contained in sub-section (6) of Section 126 also cannot possibly be read as whittling down the application of sub-sections (1) and (2) of Section 126 when it ordains that it would not apply to cases where penalties stand specified either as a fixed sum or percentage. Section 126 (6) of the Act provides that its provisions will not apply in cases where the penalty under the Act is specified as a fixed sum or as a fixed percentage. This is further reflective of the Legislature seeking to distinguish between discretionary penalties and those that are predetermined. By excluding fixed penalties from the scope of this section the law ensures clarity and consistency in its application underscoring the principle that certain penalties are non-negotiable and uniformly applicable irrespective of the circumstances of the breach. It would also be pertinent to note that in Synergy Fertichem 2019 (12) TMI 1213 - GUJARAT HIGH COURT the Gujarat High Court emphasized that authorities must distinguish between trivial breaches and serious contraventions under the Act. The High Court clarified that confiscation is penal in nature and should only apply in cases of a clear intent to evade tax as opposed to mere procedural lapses such as an incomplete EWB when other valid documents are present. Further issuing confiscation notices under Section 130 at the initial stage without proper grounds or evidence of an intent to evade tax the High Court held would be unjustified and would render Section 129 ineffective. The Court ultimately came to conclude that a reasoned and fair approach is essential to avoid an unnecessary detention of goods and conveyances. We are in complete agreement with the view expressed by the Gujarat High Court and which correctly explains the interplay between Sections 129 and 130 of the Act. The harsh consequences which would follow a confiscation clearly warrant the provisions of the Act being accorded an interpretation which would be fair reasonable and in consonance with the requirement of Article 14 of the Constitution. In any event Section 129 can neither be construed as envisaging an inevitable levy of tax nor the imposition of a penalty. As noticed hereinabove the said provision is primarily concerned with the release of seized and detained goods. Conclsuion - The levy of penalties under the Act must be guided by the salutary principles which stand embodied in Section 126. That statutory provision is undoubtedly an embodiment of the legislative intent of levy of penalties being guided by principles of moderation restraint and reasonableness. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Nature and Scope of Section 129
Issue 2: Imposition of Penalties for Procedural Lapses
3. SIGNIFICANT HOLDINGS
The court's decision underscores the importance of interpreting statutory provisions in a manner that aligns with principles of fairness, moderation, and reasonableness, particularly in the context of procedural lapses under the CGST Act.
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