M/S Sun Flag Iron And Steel Company Limited vs. State Of U.P. And 3 Others

Held

The Court held that the penalty imposed under Section 129 of the CGST Act was not justified. The Court noted that the goods were accompanied by a valid e-tax invoice and an e-way bill that was valid until June 1, 2023. The delay in reaching the destination was attributed to circumstances beyond the petitioner's control, specifically the vehicle getting stuck in mud and a subsequent mechanical breakdown, as evidenced by the driver's affidavit and supporting documents. The Court emphasized that for proceedings under Section 129 and Section 130 of the CGST Act, an intent to evade tax is a mandatory prerequisite. Since the authorities below did not observe any intent to evade tax on the part of the petitioner, the proceedings under Section 129 were inappropriate. The Court cited the Apex Court's judgment in M/s Satyam Shivam Papers Private Limited, which held that no intent to evade tax was found when goods could not reach the destination within time due to reasons beyond the control of the petitioners. The Court also referred to other High Court judgments supporting this view. Therefore, the impugned orders were quashed, and the authorities were directed to refund any amount deposited by the petitioner.

Facts

M/s Sun Flag Iron And Steel Company Limited (the petitioner) dispatched a consignment of 30 tons of non-alloy steel from Maharashtra to Rajasthan. The goods were accompanied by a valid e-tax invoice and an e-way bill valid until June 1, 2023. While passing through Uttar Pradesh on May 28, 2023, the vehicle carrying the consignment got stuck in mud due to its heavy load. Despite efforts, the vehicle could not be moved until May 29, 2023, when a crane was used. A breakdown occurred, requiring spare parts from Jhansi. The vehicle was intercepted on the night of June 2/3, 2023, after the e-way bill had expired. A show cause notice was issued, and the petitioner's explanation regarding the breakdown was not accepted. An order imposing a penalty of Rs. 8,43,456/- was passed by respondent no. 4 on June 9, 2023. The petitioner's appeal was rejected by respondent no. 3 on June 17, 2023. The petitioner assails these orders.

Key Issues

1. Whether the penalty imposed under Section 129 of the CGST Act is justified when the delay in transit was due to circumstances beyond the petitioner's control (vehicle breakdown and getting stuck in mud) and there was no intention to evade tax? The petitioner argued that the goods were accompanied by valid documents, including an e-way bill valid until June 1, 2023. The delay was caused by the vehicle getting stuck in mud and subsequent mechanical breakdown, as detailed in the driver's affidavit and supported by documentary evidence like spare part purchase receipts. The petitioner contended that the authorities below failed to record any finding regarding an intent to evade tax, rendering the penalty unjustified. They relied on the principle that intent to evade tax is a prerequisite for penalty under Section 129. The respondent State argued that proceedings were initiated under Section 138(1) of the GST Act. They asserted that the e-way bill accompanying the goods had expired at the time of inspection, constituting a violation of the prescribed rules. The State contended that the petitioner failed to justify not filing documentary evidence at the time of detention and that the penalty was justified due to the violation of provisions.