Case Law Details
Nirmal Kumar Mahaveer Kumar Vs Commissioner of Central Goods and Services Tax (Delhi High Court)
No penalty shall be imposed on any person without giving him the opportunity of being heard
The Hon’ble Delhi High Court in Nirmal Kumar Mahaveer Kumar v. Commissioner of Central Goods and Services Tax and Another [W.P. (C) 8585/2022 dated August 23, 2022] directed that the assessee needs to be given another chance to establish, as to why the subject goods did not reach their designated designation before the expiry of the e-way bill. Remanded back the matter to the assessing authority, to take a fresh decision in the matter, after giving the assessee due opportunity to produce relevant material/evidence to establish its case, that the delay in transporting the goods to their destination was on account of genuine reasons.
Facts:
Nirmal Kumar Mahaveer Kumar (“the Petitioner”) transported goods from Guwahati to Delhi. The e-way bill was prepared for those goods which was valid till September 28, 2020. The goods reached its destination on September 29, 2020, by which time the e-way bill got expired.
Accordingly, show-cause notice dated September 30, 2020 (“the SCN”) was issued by the assessing authority (“the Respondent”) to the Petitioner under Section 129(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) the reason given, “goods not covered by valid documents”. The Petitioner paid the amount demanded towards tax and penalty, as he was keen that the goods reached the designated destination at the earliest and did not avail of the opportunity of being heard.
Subsequently, the Respondent passed an Order dated December 31, 2021 (“the Impugned Order”) and imposed tax along with the penalty equal to 100% of tax payable. Being aggrieved by the Impugned order the Petitioner filed the writ petition.
Issue:
Whether or not the Petitioner is liable to pay tax along with the penalty equal to 100% of tax?
Held:
The Hon’ble Delhi High Court in W.P. No (C) 8585 of 2022 dated April 23, 2022 held as under:
- Clarified that it is not in dispute, that against the subject goods, the tax stands paid, and that the impugned demand has been raised, only for the reason that at the time of interception, the e-way bill was not valid – This is not a case where the Petitioner intended to evade tax. However, the impugned demand seeks not only the payment of tax but also a penalty.
- Further, observed that the Petitioner paid the amount demanded towards tax and penalty, as he was keen that the goods reached the designated destination at the earliest but the Petitioner did not avail of the opportunity to demonstrate, that the goods could not reach their destination before the expiry of the validity period of the e-way bill.
- Therefore, the Court set aside the Impugned order and remanded the matter to the assessing authority, to take a fresh decision in the matter, after giving the Petitioner due opportunity to produce relevant material or evidence to establish its case, that the delay in transporting the goods to their destination was on account of genuine reasons. Further, stated that while carrying out this exercise, the concerned officer to bear in mind, the provisions of Section 126 of the CGST Act which inter alia adverts to omission or mistake in documentation which is easily rectifiable.
Relevant Provisions:
Section 126 of the CGST Act:
“126. General disciplines related to penalty.
(1) No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.
Explanation.––For the purpose of this sub-section,––
(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than five thousand rupees;
(b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record.
(2) The penalty imposed under this Act shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach.
(3) No penalty shall be imposed on any person without giving him an opportunity of being heard.
(4) The officer under this Act shall while imposing penalty in an order for a breach of any law, regulation or procedural requirement, specify the nature of the breach and the applicable law, regulation or procedure under which the amount of penalty for the breach has been specified.
(5) When a person voluntarily discloses to an officer under this Act the circumstances of a breach of the tax law, regulation or procedural requirement prior to the discovery of the breach by the officer under this Act, the proper officer may consider this fact as a mitigating factor when quantifying a penalty for that person.
(6) The provisions of this section shall not apply in such cases where the penalty specified under this Act is either a fixed sum or expressed as a fixed percentage.”
Section 129(3) of the CGST Act:
“129. Detention, seizure and release of goods and conveyances in transit
(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”
FULL TEXT OF THE ORDER OF ITAT DELHI
1. We have heard the learned counsel for the parties at some length.
2. This writ petition is directed against the order dated 31.12.2021 passed by respondent no.2/Office of Appellate Authority (Delhi GST).
3. Respondent no.2 via the impugned order dated 31.12.2021, has sustained the demand raised by respondent no.3/Assistant Commissioner,Ward-112, Special Zone, Delhi, towards tax and penalty.
4. The amount demanded towards tax is Rs.2,33,100/-.An equal amount has been also demanded towards penalty i.e., Rs.2,33,100/-.
4.1 Thus, as is obvious, penalty has been imposed on the petitioner, at the rate of 100%.
4.2 In this regard, the respondent no. 3 appears to have taken recourse to the provisions of Section 129(3) of the Central Goods and Services Tax Act, 2017 [in short “CGST Act”].
5. What has emerged from the record, is that the impugned demand was raised against the petitioner on account of the fact that the e-way bill generated had expired. In other words, when the goods were intercepted, the e-way bill was no longer valid.
6. The record also shows, that the subject goods were being transported from Guwahati to New Delhi.
7. The e-way bill was valid till 28.09.2020.
7.1 The subject goods were intercepted on 29.09.2020 at 3:40 AM, by which time the e-way bill had expired.
8. On record, we have two e-way bills. These are marked as Annexure P-1 and Annexure P-3, appended on pages 25 and 30 of the casefile respectively.
9. A comparison of the two e-way bills, even according to Mr Gautam Narayan, who appears for respondent nos.2 and 3, shows that the vehicles were changed.
9.1 The explanation given across the bar, was that since the earlier vehicle had broken down, another vehicle was requisitioned for transporting the goods.
10. It appears, that the petitioner did not ask for extension of time for completion of journey. Resultantly, when the vehicle was intercepted, it was found that the e-way bill generated had already expired.
11. It is on this account, that a show-cause notice was issued to the petitioner on 30.09.2020 in a prescribed form i.e., Form GST MOV-07.
11.1 This was issued as required under Section 129(3) of the CGST Act.
12. The reason given for issuance of the show-cause notice was “goods not covered by valid documents”. The proposed tax and penalty were also indicated in the said show-cause notice.
12.1 However, in consonance with the principles of natural justice, the petitioner was accorded seven days to file a reply with respect to the proposed demand made towards tax and penalty, and to appear before the concerned officer for a hearing on 07.10.202
13. We are informed that the petitioner paid the amount demanded towards tax and penalty, as he was keen that the goods reached the designated destination at the earliest
13.1 The demand was liquidated on the same date on which it was made i.e., 30.09.2020.
14. Consequentially, the petitioner did not avail of the opportunity to demonstrate, that the goods could not reach their destination before the expiry of the validity period of the e-way bill.
15. It is not in dispute, that against the subject goods, the tax stands paid, and that the impugned demand has been raised, as noticed above, only for the reason that at the time of interception, the e-way bill was not valid.
16. This is not a case where the petitioner intended to evade tax. However, the impugned demand seeks not only the payment of tax, but also penalty.
17. Given the aforesaid circumstances, we are of the view, that the petitioner needs to be given another chance to establish, as to why the subject goods did not reach their designated designation before the expiry of the e-way bill.
18. Accordingly, the impugned order dated 31.12.2021 passed by respondent no. 2 is set aside.
19. The matter is remanded to respondent no. 2, to take a fresh decision in the matter, after giving the petitioner due opportunity to produce relevant material/evidence to establish its case, that the delay in transporting the goods to their destination was on account of genuine reasons.
19.1 While carrying out this exercise, the concerned officer will also bear in mind, the provisions of section 126 of the CGST Act, which inter alia adverts to omission or mistake in documentation which is easily rectifiable.
20. Needless to add, respondent no. 2 will issue a notice, in writing, to the petitioner, indicating the date and time when he intends to hear the petitioner and/or his authorized representative, in support of his case.
21. The writ petition is disposed of in the aforesaid terms.
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