Siddhi Vinayak Automobiles vs. The Commissioner Of Kerala State GST, Thiruvananthapuram

Facts

The appellant, Siddhi Vinayak Automobiles, was intercepted transporting automobile spare parts. While valid e-invoices were generated and GST paid, an e-way bill was not produced. The goods were detained, and a penalty notice (MOV-07) was issued on April 18, 2022. The goods and conveyance were released on furnishing a bond and bank guarantee. Subsequently, an order confirming the penalty (MOV-09) was passed on June 4, 2022, which was 47 days after the notice. The First Appellate Authority upheld the penalty. The appellant contended that the penalty order was passed beyond the statutory timeline prescribed under Section 129(3) of the CGST/KGST Act, 2017.

Held

The Court held that the timeline of seven days prescribed under Section 129(3) of the CGST/KGST Act, 2017, for passing a penalty order after the service of notice is mandatory. The use of the word "shall" in the provision signifies the legislature's intent for strict adherence. The Court found that the penalty order (MOV-09) was passed on June 4, 2022, which was 47 days after the notice dated April 18, 2022, thus exceeding the mandatory seven-day period. The Court reasoned that failure to comply with this statutory timeline renders the penalty order illegal and without jurisdiction. The Court also noted that the appellant had generated e-invoices and paid the applicable GST, indicating no attempt to evade tax. Consequently, the impugned Order-in-Appeal was set aside, and the appeals were allowed. The respondent was directed to release the Bank Guarantee to the appellant immediately. The Court expressly left undecided the issue of whether the e-invoice alone, without an e-way bill, constitutes a contravention attracting penalty, focusing solely on the procedural delay.

Key Issues

1. Whether the timeline of seven days prescribed under Section 129(3) of the CGST/KGST Act, 2017, for issuing a show cause notice and passing a penalty order is mandatory or directory? The appellant argued that the use of the word "shall" indicates a mandatory compliance, and as a fiscal statute, strict construction is required. The respondent did not record any specific argument on this point. 2. Whether the penalty imposed under Section 129(3) of the CGST/KGST Act, 2017, can be sustained when the order was passed beyond the prescribed period of seven days from the date of service of the notice? The appellant contended that the delay renders the order illegal and without jurisdiction. The respondent did not record any specific argument on this point. 3. Whether the Order in MOV-09, passed beyond the mandatory period of seven days under Section 129(3) of the CGST/KGST Act, 2017, is legal and valid? The appellant argued that the delay makes the order void. The respondent did not record any specific argument on this point.