GST Rulings

50% penalty levied for E-Way Bill violation without intent to evade taxes: SC

Brief Facts

Appellant hired a freight carrier to move machinery from Uttar Pradesh to West Bengal for own use in the execution of works contract. E-Way Bill (EWB) was generated on May 30, 2019 with validity till June 09, 2019.

However, transportation was not done within the validity period. The consignment was intercepted on June 17, 2019 at West Bengal and proceedings under Section 129 of CGST Act were initiated.

Appellant's submissions

The carrier could not make any vehicle available for transportation from the origin. This was not communicated to the appellant. Consequently, a fresh E-Way Bill was not generated.

Also, the movement was in the nature of inter-unit transfer of capital goods from one state to another, which is not a transaction of sale / purchase. Therefore, the prayer was to not impose tax and equal (100%) penalty.

Respondents' submissions

The appellant cannot plead ignorance especially if such movement was in the inter-unit transfer.

Further, in taxation, time-bound compliances (where there is no discretion to relax the timeline by either the party or authorities concerned) should be strictly adhered.

Order of the Supreme Court

The Supreme Court observed[1] that the appellant cannot shirk from the responsibility of generating a fresh E Way Bill if the consignment was not transported. Hence, the tax demand was upheld.

However, since there appears to be no intent to evade tax, penalty was quantified as 50% of the tax demand.

Importantly, the order was passed under Article 142 of the Constitution and shall not be treated as a precedent.

[1] Order dated October 31, 2023 arising from Civil Appeal No.8302 of 2023

Analysis / Comments

Readers should note the amendment in Section 129 ibid from January 01, 2022 wherein the provision to pay tax and equal penalty was substituted with payment of higher penalty without payment of tax.

The Hon'ble Supreme Court has explicitly stated that the judgment cannot be treated as a precedent. However, there are divergent views on whether mens rea is essential to invoke the penal provisions under Section 129 ibid. Hence, the development of jurisprudence on this topic remains to be seen.

Srinivasan V, Advocate

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