GST Dept. Can't Compute Penalty Amount On Higher Value Than Invoice Value Without Proper Evidence: Calcutta High Court

The Calcutta High Court has held that the GST department cannot compute the penalty amount on a higher value than the invoice value without proper evidence and reason.

The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that a transporter or owner of the goods is bound to carry certain documents as mentioned in the Act that are to accompany the goods. In the instant case, prior to the movement of the goods, an e-way bill was generated in which the tax invoice number was duly incorporated. Proof of payment of tax has also been established, and the e-way bill was valid until September 5, 2022. The mistake committed by the appellant was not extending the e-way bill after its expiration, despite such liberty being granted under the Rules.

The petitioner has challenged an order passed by the appellate authority under the provisions of the West Bengal Goods and Services Tax Act, 2017. The appellate authority dismissed the appeal filed by the appellant challenging the order passed by the adjudicating authority imposing a penalty on the appellant on the ground that the e-way bill that was generated by the appellant had expired and, at the time when the vehicle was intercepted, four days had lapsed.

The vehicle suffered breakdowns during the course of its journey, and on the date the vehicle was intercepted on 10.09.2022, the e-way bill generated by the appellant on 02.09.2022 had expired and four days had lapsed by then. The authority who detained the vehicle, namely the State Tax Officer, Bureau of Investigation (South Bengal) Howrah Zone, while ordering for physical verification or inspection of conveyance goods and documents in Form GST MOV-02, stated that the inspection is required to be done in accordance with Section 68(3) of the WBGST Act read with the CGST Act, 2017 or under Section 20 of the IGST Act for the reason that the e-way bill expired for more than four days.

The Deputy Commissioner passed an order of detention under Section 129(1) on the ground that the e-way expired for more than four days. A show cause notice was issued under Section 129(3) of the Act, proposing to levy a 200% penalty on the grounds that the e-way had expired for more than four days and the vehicle was moving with the loaded consignment without an e-way bill.

The appellate authority rejected the appeal on the ground that the appellant could not produce any documentary evidence to justify their efforts to extend the validity of the e-way bill.

The department contended that the provisions should not be rendered redundant and something that is not contained should not be read into statute, and the case at hand is admittedly a violation of the statute in as much as the vehicle, when intercepted, did not carry a valid e-way bill, which is a statutory requirement, and this has resulted in the imposition of a penalty. It does not take much effort to extend or revalidate the e-way bill, and the appellant as well as the transporter are well aware of the procedure. Such an extension of the e-way bill can be obtained by using the mobile phone.

The assessee contended that it has been found fault for not producing documentary proof to establish their stand; except for the payment receipt for engaging services of a crane, the appellant did not produce any other document. However, there was nothing on record to show that there was an intention on the part of the appellant to evade the payment of tax.

The court noted that the case can be construed to be rather peculiar, and the imposition of a 200% penalty is harsh, and if the same is to be affirmed, it will cause grave prejudice to the appellant. However, because the appellant had not been diligent in validating the e-way bill for four days, he cannot be wholly exonerated. It is no doubt true that the statute provides for the imposition of a 200% penalty.

The court held that the appellant is liable to pay Rs. 1,00,000/-. This amount shall be retained from and out of the total amount paid by the appellant, and the balance shall be refunded to the appellant within three months.

Counsel For Appellant: Rajeev Kumar Agarwal

Counsel For Respondent: T.M. Siddiqui

Case Title: Ashish Kumar Sharma Versus The Deputy Commissioner, State Tax, Bureau Of Investigation, South Bengal, Howrah Zone And Others

Case No.: F.M.A. 504 OF 2024, I.A. NO. CAN 01 OF 2024

Click Here To Read The Order