M/S Sangam Wires vs. The State Of Bihar

Facts

The petitioner's vehicle was intercepted on 23.02.2022, with an expired e-way bill. The proper officer levied a penalty under Section 129(3) of the CGST Act on 28.03.2022, after issuing a notice for appearance on the same date. The petitioner's appeal against this penalty order was rejected by the appellate authority on 24.03.2023. The petitioner filed a writ petition challenging both the penalty order and the appellate order. The petitioner argued that the vehicle breakdown prevented timely movement and that the notice and penalty order were issued simultaneously, violating principles of natural justice. The State contended that the e-way bill expired on 16.03.2022, and interception occurred seven days later, with no application for extension made within the permissible 8-hour window.

Held

The Court held that the notice issued under Section 129(1)(a) and the order imposing penalty under Section 129(3) were indeed issued simultaneously on 28.03.2022 by the same authority. This simultaneous issuance rendered the notice an empty formality, as no time or opportunity was allowed for the petitioner to respond before the penalty was determined. This contravened the statutory requirement under Section 129 of the CGST Act and violated the principles of natural justice, which are inherent in Section 129(4). Consequently, the order imposing penalty was found to be unsustainable and was quashed. The matter was remanded to the Joint Commissioner of State Tax, Magadh Division, Gaya, for fresh consideration. The Court also directed the refund of 25 percent of the amount deposited by the petitioner for the appeal within a week of their appearance before the proper officer on 05.05.2023. The ratio decidendi is that a penalty under Section 129 cannot be imposed without affording a proper opportunity of hearing after issuing a show cause notice.

Key Issues

1. Whether the penalty imposed under Section 129(3) of the CGST Act is illegal and unsustainable due to the simultaneous issuance of the notice under Section 129(1)(a) and the penalty order on the same date, thereby violating the principles of natural justice and the statutory requirement of providing an opportunity of hearing? 2. Whether the appellate authority erred in mechanically affirming the order of the proper officer without considering the procedural infirmities and the petitioner's submissions regarding the vehicle breakdown? Petitioner's Arguments: The petitioner argued that the proper officer failed to consider the bona fides of the petitioner, specifically the vehicle breakdown which caused the delay. Furthermore, the petitioner contended that the notice under Section 129(1)(a) and the order determining penalty under Section 129(3) were issued on the same date, rendering the notice a mere formality and violating the mandatory requirement of a show cause notice and hearing. The appellate authority was also faulted for mechanically affirming the order without due consideration. Revenue's Arguments: The State argued that the e-way bill had expired on 16.03.2022, and the vehicle was intercepted on 23.03.2022, well after the expiry. They asserted that no application for extension of the e-way bill was made within the permissible 8-hour window as per the third proviso to Rule 138(10) of the Act.