Vardan Associates PVT. LTD. vs. Assistant Commissioner Of State Tax Central Section & Ors

Held

The Supreme Court upheld the tax amount of ₹54,00,000/-. While acknowledging that the law provides for penalty, the Court, in view of the factual scenario where the appellant is the owner of the consignment, was using it for its contractual obligations in both states, and no evidence suggested sale or use for another party, decided to interfere with the penalty. The Court reduced the penalty to 50% of the amount originally imposed, making it ₹27,00,000/-. The total amount payable by the appellant, subject to payments already made, was determined to be ₹81,00,000/-. Upon payment, the vehicle and consignment were to be released. The Court cautioned the appellant to be vigilant in the future. This order was passed under Article 142 of the Constitution and is not to be treated as a precedent.

Facts

Vardan Associates Pvt. Ltd. (the appellant) was engaged in work contracts for GAIL in Uttar Pradesh and West Bengal. For a work contract in Durgapur, West Bengal, the appellant engaged M/s. HFC to transport a capital goods machine from Auraiya, Uttar Pradesh. An E-way bill was generated on May 30, 2019, valid until June 9, 2019. However, the consignment was intercepted on June 17, 2019, upon entering West Bengal, as the E-way bill had expired. The Assistant Commissioner of State Tax issued a notice demanding tax of ₹54,00,000/- and a penalty of ₹54,00,000/-. The appellant filed a reply, but the demand order was confirmed. The appellant appealed after depositing 10% of the tax demand and arranging a bank guarantee. The High Court directed the release of goods upon payment of the entire GST amount in cash and 50% of the penalty in cash, with the remaining 50% by bank guarantee. The Supreme Court considered the appeal, confined to the quantum of penalty.

Key Issues

1. Whether the imposition of tax and penalty under Section 129 of the CGST Act, 2017, read with Section 20 of the IGST Act, 2017, is justified when the E-way bill expired during the inter-state movement of capital goods, as argued by the revenue. The appellant contended that while the tax liability might be upheld, the penalty should be reduced considering the factual scenario and the financial hardship it would cause. The revenue argued that the appellant failed to make out a case for interference, as there was no valid E-way bill at the time of interception, making the imposition of GST and penalty justified. They emphasized that the appellant and the transporter were aware of the E-way bill's validity period and that the delay of over a week beyond the expiry date was not a genuine difficulty. The revenue also argued that in tax matters, timelines are strict and ignorance of the law cannot be pleaded.