The Hon’ble High Court of Patna vide its order dated 24.04.2023 in the matter of M/s Sangam Wires Vs. The State Of Bihar Through The Principal Secretary-Cum-Commissioner, Department of State Tax, Patna, Bihar & Others in Civil Writ Jurisdiction Case No. 4924 of 2023, held that determination of penalty under Section 129(3) is not maintainable and is in contravention of statutory requirement under Section 129 of the Act if opportunity of hearing as prescribed under Section 129(4) has not been granted.

Facts Of the Case: –

• That the petitioner’s vehicle was intercepted on 02.2022 at 09:55PM on Gaya-Dobhi Road and the E-way Bill was found expired. Since the goods were in movement without a valid e-way bill, the proper officer, under the CGST Act levied penalty on the Petitioner under Section 129(3) of the Act vide its order dated 28.03.2022.
• That prior to the issuance of the aforesaid order, a notice dated 03.2022 was issued, directing the petitioner to appear before the proper officer on 05.04.2022 at 11:00 A.M.
• Thereafter, the order of proper officer imposing penalty was challenged in appeal, and the appellate authority vide its order dated 03.2023 rejected the appeal of the petitioner.

It was submitted on the behalf of the Petitioner that due to a breakdown of the vehicle, the same could not move through the State of Bihar within the currency of its validity.  Thus, without considering the bona fides of the petitioner, the proper officer could not have imposed the penalty by impugned order dated 28.03.2022.  It was also submitted that the notice under Section 129 (1)(a) of the Act and order determining penalty under Section 129(3) are simultaneously on the same date.  Thereafter, the appellate authority mechanically affirmed the order without considering the fact that requirement of opportunity of show cause notice and hearing was mandatory under the provisions of the Act.  Therefore, the order of the Proper Officer as well as the order of the Appellate Authority are illegal and unsustainable, being in contravention of statutory requirement.

On the Other hand, it was submitted on the behalf of the respondents that the interception and detention was much after the lapse/expiry of the e-way bill as the e-way bill was valid up till 16.03.2022. Seven (7) days thereafter, the petitioner’s vehicle has been intercepted on 23.3.2022, while the goods were in movement.  The extension of the e-way bill was permissible only within a period of 8 hours from the time of its expiry, however, no application for extension of the e-way bill was ever made by the petitioner.  Therefore, the petitioner is not in a position to take any advantage of third proviso to Rule 138(10) of the Act, which provides for extension of validity of the e-way bill within 8 hours of its expiry.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the documents placed on record as well as the notice under Section 129 (1) (a) & the order imposing the penalty on the same dated i.e., 03.2022, found that it is quite evident that the notice and the order have been issued simultaneously by the same authority and the order imposing penalty does not record the fact of the petitioner’s appearance or hearing prior to passing of order.
• It was found by the Hon’ble Court that the notice issued under Section 129(1)(a) was nothing more than an empty formality as no time was granted pursuant to the notice, and immediately on the same day, penalty was imposed under Section 129(3), Thus, the determination of penalty under Section 129(3) is in contravention of the statutory requirement under Section 129 of the Act. The requisite compliance with principles of natural justice, inherent in Section 129(4) has thus been violated.
• Therefore, the order imposing penalty is unsustainable and is hereby quashed. Further, as stated on the behalf of the petitioner, the petitioner would present himself before the authority on 05.2023, along with his response to the show cause issued under Section 129(1)(a).

The Hon’ble Court with the above findings, allowed the writ petition and remanded the matter back to Joint Commissioner of State Tax with the directions that the petitioner’s response to the show cause is required to be considered after due opportunity of hearing, in accordance with the statutory provisions.  Further, it was directed to refund 25 percent of the amount earlier deposited for the purpose of maintaining the appeal.