Ms Prestress Steel LLP vs. Commissioner Uttarakhand State GST

Held

The Court held that the impugned orders imposing penalty under Section 129 of the Act were not in accordance with law. The primary reasoning was that the non-compliance, specifically the absence of a delivery challan, did not involve any element of tax evasion or fraudulent intent. The Court emphasized that while Section 129 deals with detention, search, and seizure, its application depends on the facts and circumstances. In cases where there is no evasion of tax and no intention to evade tax, and all other information, including tax payment and e-way bills, is in order, the provisions of Section 122 of the Act should be applied. Section 126 of the Act, which provides guidelines for penalties, cautions against imposing penalties for minor breaches that are easily rectifiable and made without fraudulent intent or gross negligence. The Court found that the petitioner had complied with all other requirements, including paying the tax and generating e-way bills, and the absence of a delivery challan provided no additional information to the GST authorities. Therefore, the Court set aside the impugned orders and directed the refund of the deposited penalty amount. However, the authorities were granted liberty to proceed under Section 122 of the Act.

Facts

The petitioner, M/s Prestress Steel LLP, engaged in manufacturing PC wires and other steel products, purchased raw material from SAIL, Kolkata. The goods were transported to Kanpur via railway. For onward transportation from Kanpur to Bazpur, two vehicles were used, and e-way bills were generated. Upon interception by the Assistant Commissioner, State Tax, Mobile Squad, Rudrapur, 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 orders dated 09.06.2023 were passed under Section 20 read with Section 129 of the Central/State Goods and Services Tax, 2017, imposing penalties. The petitioner challenged these orders and sought a refund of the penalty amount deposited on 10.06.2023.

Key Issues

1. Whether the imposition of penalty under Section 129 of the Central/State Goods and Services Tax Act, 2017, is legally sustainable when the only non-compliance is the absence of a delivery challan, with no allegation or possibility of tax evasion? (Question of law) Petitioner's arguments: - The absence of a delivery challan is a procedural irregularity, not indicative of tax evasion. - The penalty imposed under Section 129 is disproportionate, as per Section 126 of the Act, for a rectifiable error without fraudulent intent. - Harmonious interpretation of statutory provisions suggests that Section 122 of the Act, which deals with penalties for non-compliance with documentation requirements, should be applied instead of Section 129. - Reliance was placed on Circular No. 64/38/2018/GST, arguing that Section 129 should not be invoked for minor infractions. - Precedents like 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, Tirunelveli, and Varun Beverages Vs. State of UP were cited. Revenue's arguments: - The judgment records no specific arguments made by the respondents.