Kunal Aluminum Company Vs State of Himachal Pradesh & ors. (Himachal Pradesh High Court)
Brief Facts: The petitioner’s vehicle carrying aluminum scrap was intercepted due to non-production of an e-way bill. Although IGST had already been paid on the goods at the time of clearance from Customs, authorities-imposed tax and penalty under Sections 129 and 130 of the CGST Act, alleging evasion. The goods were released after the petitioner furnished a bank guarantee, and the appeal against the penalty was dismissed.
Issue Involved: Whether imposition of penalty under Sections 129 and 130 of the CGST Act is valid in absence of an intention to evade tax, merely due to non-generation of an e-way bill.
Observations of the Court:
- For imposing penalty under Section 129, the provisions of Section 130 must be read together, and mens rea (intent to evade tax) is a sine qua non.
- Mere procedural lapses or technical errors, such as non-generation of an e-way bill, do not justify penalty without demonstrated intent to evade tax.
- The Court relied on the Supreme Court’s decision in CST v. Satyam Shivam Papers Pvt. Ltd. [(2022) 14 SCC 157], emphasizing that procedural lapses alone cannot attract penal provisions.
- Various High Court decisions were cited (including Patanjali Ayurved Ltd., Hindustan Herbal Cosmetics, Modern Traders, and Falguni Steels) reinforcing that penalties must be proportionate and grounded in evidence of evasion.
Upon above observations, the Court found no justification for penalty as the tax was already paid and no intent to evade was evident. The penalty was held arbitrary and disproportionate. Accordingly, the impugned orders were quashed, and the bank guarantee was directed to be released with applicable interest within four weeks.
