Is Penalty under Sec 129 to the tune of 200% justifiable, in case of e-waybill (for assesees whom E-invoice is applicable) not generated by mere negligence?
Rule 48(4) of the CGST rules, a specific class of registered assesee (whose annual turnover in any preceding financial year from 2017-18 onwards exceeds the prescribed limit) is mandated to prepare an invoice by uploading the specified particulars of the invoice (using FORM GST INV-01) onto the Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).
E-Invoice is a system where B2B invoices are electronically authenticated by the GST Network (GSTN) for further use on the common GST portal. Under this electronic invoicing system, an identification number is assigned to each invoice by the Invoice Registration Portal (IRP), managed by the GSTN.
All invoice data is automatically transferred from the einvoice1.gst.gov.in portal to both the GST portal and the e-way bill portal in real-time. This seamless transfer eliminates the need for manual data entry when filing GSTR-1 returns and generating part-A of the e-way bills, as the information is directly relayed by the IRP to the GST portal.
Since the e-invoice and the sensitive data concerning the purchase and sale are already been integrated into the GSTN network. It is imperative to note that the data available for PART-A of the E-Waybill portal is interlinked. This eliminates the intention to evade Tax as all the Data from the e-invoice portal is directly captured as Part A in E-waybill.
There are many case laws which support the fact that when there is no intention to evade Tax then penalty under Sec 129 cannot be levied.
List of Case laws
- Sanjay Sales agency Vs State of UP [2023] 156 taxmann.com 298 (Allahabad)[09-10-2023: In Sanjay Sales Agency vs. State of U.P. and Another, the Allahabad High Court addressed a penalty under Section 129(1)(b) of the GST Act imposed on the petitioner by the Assistant Commissioner, Ghaziabad. The penalty of Rs. 37,59,792/- was contested by the petitioner, who argued that the goods in transit were accompanied by valid tax invoices, e-way bills, and bilty, indicating no intention to evade tax. The court noted that the intention to evade tax is essential for imposing a penalty under Section 129 and found that the petitioner was incorrectly deemed not the owner of the goods. The court set aside the penalty order, aligning with the precedent set in M/s Sahil Traders vs. State of U.P., and directed the authorities to reconsider the penalty under Section 129(1)(a), recognizing the petitioner’s ownership and the accompanying valid documents.
- Assistant Commissioner (St) vs M/S Satyam Shivam Papers Pvt. Limited (Supreme Court), 12-01-2022: In the case of Assistant Commissioner (St) vs M/S Satyam Shivam Papers Pvt. Limited, the Supreme Court upheld the High Court of Telangana’s decision from June 2, 2021, finding no basis for interference. The case involved the improper imposition of penalties on Satyam Shivam Papers due to an expired e-way bill, which was unjustly interpreted by the authorities as tax evasion. The High Court criticized the petitioner No.2 for detaining goods at a relative’s house and for failing to consider legitimate reasons for delivery delays. Consequently, the High Court annulled the Rs. 69,000 tax and penalty while imposing a Rs. 10,000 cost on petitioner No.2. The Supreme Court, acknowledging the harassment faced by the writ petitioner, increased the costs by an additional Rs. 59,000, emphasizing the arbitrary and abusive actions of the petitioner. The petition was dismissed, and the costs are to be recovered from the responsible individuals within four weeks.
- Balaji Traders vs. State of UP [2023] 156 taxmann.com 256 (Allahabad): In the case of Balaji Traders and Another vs. State of U.P., the Allahabad High Court quashed the penalty imposed on Balaji Traders under Section 129(1) of the UPGST Act. The petitioner, a firm dealing in cigarettes, pan-masala, and food spices, faced a penalty after their goods, intercepted outside a railway station on an e-rickshaw, lacked an e-way bill due to a technical glitch. Despite explaining that the delay was due to arranging railway receipt documentation, the authorities confiscated the goods and issued a penalty. The court found no intent to evade tax, criticized the authorities for their hasty actions, and ordered the refund of the penalty amount with interest, along with a nominal cost imposed on the respondents for their conduct.
Conclusion: While penalties under Sec 129 are stringent, case law suggests they should align with intent to evade tax. Negligent non-generation of e-waybills by applicable assessees requires careful consideration to avoid unjustified punitive measures.
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