Imposition Of Penalty Under Section 129 Without Considering The Contention Raised By the Assessee And Without Application Of Mind Not Sustainable – E-Way Bill 

Facts of the Case: –

• The Petitioner is engaged in the business of transportation of goods and logistic services across India and is registered taxpayer in the State of Jharkhand under GST Act.
• That the order impugned has been passed in the pursuance of the show cause notice in Form GST MOV-7, issued to the petitioner alleging that the goods were transported without E-Way Bill.
• That an E-Way bill was issued for transportation of goods from warehouse of ITC Limited at Howrah, West Bengal to their warehouse at Jamshedpur by vehicle bearing registration no. HR 55 AC 8504 on 27th June, 2018 and valid up to 30th June, 2018.
• The said vehicle was intercepted on 6^th July, 2018 at 8:25 a.m. at NH 33 under Section 68(3) of the CGST Act and on finding that the goods were being transported without E-Way Bill, the impugned notice dated 7^th July, 2018 was issued and the driver was asked to reply within seven days as to why the proposed tax and penalty should not be imposed. The driver was also directed to appear on 10^th July, 2018.
• The petitioner-company filed a reply to the said show cause notice on 12^th July, 2018 before the State Tax Officer, IB, GST Department, Jamshedpur Division, submitting that the vehicle had reached ITC Limited warehouse at Asanbani Jamshedpur during the validity of E-way bill, however due to shortage of space, it was not unloaded and was brought back to their premises at Bhilaipahari, 15 Kms away from the warehouse of the ITC.
• It was also submitted in the reply that upon availability of space at the warehouse on 5^th July, 2018, the driver was informed to park the vehicle. While vehicle was in transit from their facility to the warehouse of ITC Limited, it was intercepted and detained on the allegation of expiry of E-way Bill, and apart from the said allegation, there was no allegation such as tax evasion or carrying illegal documents to doubt the genuineness of the bills in respect of which tax was already paid. Further, it was submitted that the expiry of e-way bill was caused due to ignorance on the part of illiterate/semi-literate driver, who was not familiar with the requirements under the GST Laws. 
• To support its stand GPS report for the period 28^th June, 2018 till 5^th July, 2018 was also submitted, to show that the vehicle was standing at their premises.
• Thereafter, the impugned order was passed on 12^th July, 2018, stating that in response to the notice for penalty, the driver/transporter has submitted reply that expiry of the validity of E-way bill is caused due to ignorance on the part of illiterate/semi-literate driver, which is not satisfactory. The State Tax Officer after discussing the facts of the case that e-way bill had expired on 30th June, 2018 and that during interception on 6th July, 2018, the vehicle was found transporting the goods in question in contravention of the provisions of Section 68(2) of JGST Act and Rule 138(2) thereof, imposed the penalty amounting to Rs. 8,25,828/- in terms of Section 129(1)(b) of the JGST Act, 2017.  Pursuant to which, the order of demand of tax and penalty in Form GST MOV-09 was issued and served on the driver on 12^th July 2018.
• Being aggrieved, the petitioner furnished a bank guarantee having validity up to 31^st October equivalent to the amount of penalty imposed for release of vehicle and goods in question and thereafter, preferred an appeal in Form GST APL-1 under Section 107 of the JGST Act, 2017.
• That apart from the submissions already made, the petitioner contended in the appeal that the consignment was duly supported by all requisite documents i.e., Tax Invoice, E-Way Bill and Lorry receipt. The transaction was reported by ITC Limited in GSTR-1 return for the month of June, 2018 filed on 7^th June, 2018 which evidences the bonafide of the consignor of goods. Since the transaction was reported in GSTR-1 of the consignor, it automatically got translated into GSTR-2A of the consignee.  However, the appeal was dismissed by the appellate authority upholding the order passed by the State Tax Officer.

Petitioner’s Submissions: –

• Now, before this Court it has been submitted on the behalf of the petitioner that the State Tax Officer and the appellate authority failed to examine the fact that the verification of GPS report shows that that the vehicle had reached the consignor’s destination at ITC warehouse, Asanbani, Jamshedpur on 28^th June, 2018 before expiry of E-Way bill on 30^th June, 2018 and since 28th June, 2018 it was standing at the petitioner’s warehouse at 15 Kms. away at Bhilaipahari. There is no mention of the GPS report in the order of State Tax Officer, and the appellate authority has wrongly recorded that the GPS report was not placed before it.
• That there is no allegation of any mismatch in the quantity of goods in relation to invoices issued, however, it has been wrongly contended in the counter affidavit of the State that at the time of interception on 6^th July, 2018 by the State Tax Department, Investigation Bureau, it was found that there was mismatch between the quantity mentioned in the tax invoice and quantity loaded in the conveyance.
• Relying on the amendment to Rule 138(3) by Notification by Notification dated 30^th March, 2018 with effect from 7^th March, 2018, whereunder it has been provided that where the goods are transported for a distance of less than 50 Kms. within the State or Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the transporter may not furnish the details of conveyance in Part-B of FORM GST EWB-01. Therefore, based on this amendment, which was carried out before impugned proceedings were initiated, it is contended that generation of e-way bill was not required in respect of goods being transported within the State of Jharkhand for a distance of 50 Kms. From the place of business of transporter to the place of business of consignee.
• That none of the above issue was properly discussed and appreciated by the State Tax Officer or the Appellate Authority while imposing the impugned penalty. Lastly, it is submitted that since the GST regime is electronic based and it took time for all the stakeholders including vehicle owner and the drivers to get themselves to familiarize with the working of the provisions of GST Act and Rules, imposition of penalty without any intention to evade tax is not proper in the eye of law.  In support of its contention that there was no intent to evade payment of tax, certain decisions on provisions of Section 129 have also been referred.

Respondent’s Submissions: –

• On the other hand, it was submitted on the behalf of the respondents that upon the physical verification report in Form GST MOV-04 date 7^th July, 2018, the notice in FORM MOV-07 and the impugned order dated 12^th July, 2018 passed by the State Tax Officer, was issued upon the driver.
• Referring to the findings of the appellate authority order dated 26^th July, 2019, it was submitted that since the transportation of goods of consigner from ITC Limited, Howrah in the State of West Bengal to its warehouse at Asanbani, Jamshedpur was being undertaken, the same was to be delivered within the validity of e-way bill i.e., 30th June, 2018. However, when the vehicle was intercepted on 5^th July, 2018, it was in the process of transporting the same goods after expiry of e-way bill. Therefore, in terms of Section 129 of JGST Act read with Section 68(2) and Rule 138(2) of JGST Rule, 2017 the proceedings were initiated after service of notice in the proper form GST MOV-07.
• That the State Tax Officer after taking into account the plea raised by the driver/transporter that the driver was illiterate/semi-literate, has rejected the contention and rightly imposed the penalty. The Appellate Authority has also rightly confirmed it as no infirmity was pointed out.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and documents on record, took note of the provisions of Section 68, Section 129 of the CGST Act, 2017 as well as law & requirements stated in Rule 138 of the CGST Rules.
• On perusal of the impugned order dated 12^th July, 2018, it was found by the Hon’ble Court that the State Tax Officer while passing the order has only taken into consideration one out of the several pleas taken by the driver/petitioner transporter of illiteracy or semi-literacy on the part of the driver in transporting the goods after expiry of validity of e-way bill. However, the GPS tracking report for the vehicle referred by the petitioner, showing the location of the vehicle on 28th June, 2018 was varying from about 10.02 kilometres from check post border Jagarnathpur, Dalbhum, Singhbhum, Jamshedpur and about 1.6 k.m. approximately from Tinplate, Jamshedpur, and the vehicle has remained at a distance of about 1.6 km from Tinplate Jamshedpur from 28th June till 6th July, 2018, was neither verified by the State Tax Officer nor by the Appellate Authority, which has vitiated the impugned orders on facts.
• That the tracking reports submitted, confirm the plea raised by the petitioner that the consignment had reached ITC warehouse at Asanbani, Jamshedpur before expiry of e-way bill and on account of paucity of space for the next seven days, it was standing at one location i.e, the warehouse of the petitioner /transporter at Bhilaipahar.
• It was found by the Hon’ble Court that it is quite evident that neither the State Tax Officer nor Appellate Authority has examined the plea raised by the petitioner based on GPS tracking report of the vehicle, and the impugned orders have been passed without taking into consideration the explanation and defence taken by the petitioner in their reply before the Tax Officer in response to the show-cause notice under GST MOV 07.
• That the State Tax Officer has only taken into consideration one of the pleas that the driver was illiterate/semi-literate and did not realize the consequences of expiry of e-way bill. Moreover, the impugned order also does not reflect due consideration of plea taken by the petitioner based on GPS tracking report of the vehicle.
• Therefore, it was held by the Hon’ble Court that the impugned orders have been passed without proper application of mind and without dealing with the contention raised by the petitioner, and suffer from violation of principles of natural justice.
• Further, the statement made in the counter affidavit regarding the mismatch in the quantity of goods with the Invoices are not substantiated by the physical verification report issued by the department in Form GST MOV- 04.
• Lastly, it was held by the Hon ’ble Court that the impugned action has resulted in imposition of penalty without due consideration of the plea raised by the petitioner and without proper application of mind. Hence, both the orders, one passed by the State Tax Officer dated 12^th July, 2018 and the another passed by appellate authority dated 26^th July, 2018 are set aside.

The Hon’ble Court with the above findings, allowed the writ petition by setting aside the impugned orders and remitted the matter back to the State Tax Officer to consider the plea raised by the petitioner in its reply and the plea based upon the amended Rule 138(3) of JGST Rules, 2017 brought into force with effect from 7th March, 2018 by notification dated 30th March, 2018, in accordance with law.  Further, the Bank Guarantee furnished by the petitioner if not encashed, be also returned to the petitioner in the aforesaid circumstances.

To read the complete judgment 2022 Taxo.online 588