Dept. Failed To Establish Element Of Tax Evasion :Madhya Pradesh High Court Quashes Penalty

The division bench of Justice Sujoy Paul and Justice Prakash Chandra Gupta has observed that the delay of almost 4:30 hours before which the E-way Bill expired appears to be bona-fide and without establishing fraudulent intent and negligence on the part of the assessee, the notice/order imposing penalty could not have been passed.

The petitioner is a registered government contractor and a registered dealer. The petitioner received a work order from the Divisional Project Engineer of the Public Works Department (PIU), Dindori, for the construction of an additional laboratory and classroom at Chandravijay College, Dindori. The petitioner received a quotation from Mittal Steels for the supply of TMT bars. In turn, the petitioner placed an order with Mittal Steels, Raipur for the supply of TMT bars.

In furtherance of the petitioner's order/demand, Mittal Steels raised a commercial invoice charging 18% IGST. Mittal Steels, being a supplier of goods in compliance with Section 68 of the Central Goods and Services Act read with Rule 138-A, generated an E-Way Bill for the movement of goods from Raipur to Dindori.

The vehicle, which was carrying TMT bars on 18.05.2022 and was travelling from Raipur to Dindori, suffered a problem and the clutch-plates of the vehicle got damaged. The proprietor of 'Maa Rewa Transport' sent a vehicle for servicing to 'Rama Moto Cooperation', Raipur, on May 18, 2002. On May 19,2022, the vehicle was repaired and a tax invoice for changing parts was filed. The vehicle, after getting a gate pass, started movement with related documents from Raipur to Dindori.

The petitioner submitted that the vehicle reached Dindori on 19.5.2022 between 10.30 and 10.45 pm, well within the time mentioned in the E-Way Bill. After reaching the destination, i.e., Dindori, the truck driver called the petitioner and informed him that the truck had reached the destination. The petitioner told the truck driver to take the vehicle to the weigh bridge. While the vehicle was moving towards Weigh Bridge, the Assistant Commissioner at 4.35 AM on 20.5.2022 stopped the vehicle and demanded the relevant documents. The truck driver produced all the relevant documents necessary for the purpose of transportation. The Assistant Commissioner was satisfied with all the documents produced by the truck driver except the E-way Bill. The Assistant Commissioner opined that the E-way Bill expired on 19.5.2022 at 12:00 AM. The repeated requests of the truck driver and transporter to the Assistant Commissioner that the goods reach Dindori before 12:00 AM and unintentional delays that occurred thereafter went in vain. The Assistant Commissioner issued FORM GST MOV-02 stating that the E-way Bill had expired. The vehicle was detained in the custody of the City Police Station, Dindori.

The petitioner requested that the material detained be supplied to him, which is necessary for the construction of the class room and laboratory. The said written submission was not accepted and GST MOV-06 was issued. It was followed by GST FORM MOV-07 specifying the penalty amount of Rs. 6,82,030.

The petitioner urged that proceedings initiated under Section 29 of the GST Act were not justifiable. The respondents have not followed the principles of natural justice, which is part of the statutory requirement of Section 126. Section 126 clearly provides that no penalty should be imposed for "minor breaches" or procedural requirements or omissions etc. The petitioner was not found guilty of any fraudulent intent or gross negligence. Thus, the imposition of a penalty to the tune of Rs. 6,82,030.00 was totally disproportionate and unwarranted.

The petitioner contended that the respondents failed to see that there was no revenue loss. The intention of introducing the E-Way Bill mechanism was to keep a check on the movement of goods without a tax invoice or to regulate tax evasion, but the penalty notice issued for the expiry of the E-Way Bill was unjustifiable and runs contrary to the scheme and object of the mechanism.

The court directed the amount of penalty already deposited by the assessee to be refunded back within 30 days, failing which it will carry 6% interest till the time of actual payment.

Case Title: M/s Daya Shanker Singh Versus State Of Madhya Pradesh

Citation: 2022 LiveLaw (MP) 200

Dated: 10.08.2022

Counsel For Petitioner: Advocate Abhishek Kumar Dhayani

Counsel For Respondent: Advocate Darshan Soni

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