Ms Prestress Steel LLP vs. Commissioner Uttarakhand State GST

Held

The Court held that the impugned orders imposing penalties under Section 129 of the Act were not in accordance with the law. The Court reasoned that while Section 129 deals with detention, search, and seizure, it does not mandatorily require proceedings under it for every interception involving non-compliance. The Court distinguished Section 129 from Section 130 (confiscation for intent to evade tax) and Section 122 (penalties for various offenses, including transporting goods without specified documents). It was observed that Section 129, especially before its amendment, had an element of 'applicable tax', implying a connection to tax evasion. The Court found that in the present case, there was no evasion of tax, no intention to evade tax, and all necessary information was available to the GST authorities, with tax already paid. The absence of a delivery challan was considered a minor infraction, rectifiable and made without fraudulent intent or gross negligence, aligning with the principles of Section 126. Therefore, the Court concluded that proceedings should have been initiated under Section 122 of the Act instead of Section 129. The ratio decidendi is that for minor procedural lapses without intent to evade tax, where tax has been paid and information is available, Section 129 is not the appropriate provision, and Section 122 or 126 should be considered. The Court set aside the impugned orders and directed the refund of the deposited amounts, while granting liberty to the respondents to proceed under Section 122.

Facts

The petitioner, M/s Prestress Steel LLP, engaged in manufacturing PC wires and ACSR Core Wire, challenged orders dated 09.06.2023 passed by the Assistant Commissioner, State Tax, Mobile Squad, Rudrapur. The petitioner purchased raw material from SAIL, Kolkata, and transported goods from West Bengal to Kanpur via railway. For onward transportation to Bazpur, two vehicles were used, with e-way bills generated. Upon interception, it was found that the vehicles were not carrying delivery challans as required by Rule 55(5)(b) of the Central/State Goods and Services Rules, 2017. Consequently, separate penalties were imposed on each vehicle under Section 129 of the CGST/SGST Act, 2017. The petitioner had paid the penalty and sought its refund, arguing that all other compliances were met and there was no intent to evade tax.

Key Issues

1. Whether the imposition of penalty under Section 129 of the Central/State Goods and Services Tax Act, 2017, is justified when the only non-compliance is the absence of a delivery challan, with no intent to evade tax, and all other documents and tax payments are in order? Petitioner's arguments: The petitioner contended that the absence of a delivery challan was a procedural irregularity, not indicative of tax evasion. They argued that Section 126 of the Act, dealing with general penalties for minor breaches without fraudulent intent, should apply. They relied on the principle of harmonious interpretation of statutes, emphasizing that provisions should not be read to make others redundant. The petitioner cited Circular No. 64/38/2018/GST, suggesting Section 129 is for e-way bill non-compliance, not minor infractions. They also referred to various High Court judgments, including Satyam Shivam Papers Pvt. Ltd. Vs. Assistant Commissioner ST, Daya Shanker Singh Vs. State of Madhya Pradesh, Smart Roofing Private Limited Vs. State Tax Officer, Algae Labs Private Limited Vs. State Tax Officer-I, and Varun Beverages Vs. State of UP, to support the argument that penalties under Section 129 are not applicable in cases lacking intent to evade tax. Revenue's arguments: The judgment does not record specific arguments made by the revenue or state.