Amal Envirotech Pvt. Ltd Vs Commissioner of GST And Anr (Delhi High Court)
Conclusion: Section 129 could not, merely by virtue of its non-obstante clause, be construed to have an overriding effect on Section 126 which interdicts tax officers from imposing any penalty for minor breaches of tax regulations or procedural requirements. Moreover, section 129 pertained to detention, seizure and release of goods while in transit could not be invoked for imposing penalties for minor breaches, like incomplete e-way bill.
Held: Assessee was stated to have imported goods from Italy under Bill of Entry No. 8906095 on which Customs and Integrated Goods and Services Tax had been duly paid. Those goods were being transported to its factory at Neemrana, Rajasthan under Goods and Services Tax Invoice No. KEPL/DEL/021. Undisputedly, while Part A of the EWB had been duly filled out, the transporter appeared to have failed to generate and complete Part B thereof. In the course of transit, the conveyance was intercepted. The GST Officer was stated to have noticed the discrepancy in the EWB and thus detained the goods for physical verification and inspection. It was the case of the writ petitioner that the discrepancy in the EWB upon being discovered was immediately rectified and a corrected Part B generated that day itself. Post-verification of goods, the GST Officer proceeded to pass an order of detention and to raise a demand of Central GST and State GST amounting to INR 19,80,000/- together with penalty of an equivalent amount. Assessee was compelled to get the goods released by submitting a bond under protest whereafter the goods came to be handed over on the next day. Aggrieved by the order in terms of which a tax liability stood created, assessee instituted an appeal which came to be dismissed and led to the institution of the present writ petition. Since the solitary ground for a demand of tax rested on an allegation of goods being transported without the cover of requisite documents, the only penalty which could have been imposed upon them would have been INR 10,000/- as contemplated under Section 122(1)(xiv) of the Act. Since the breach would clearly fall in the category of „minor breaches‟ being an infraction of a mere procedural requirement and would consequently be governed by Section 126. According to the writ petitioners, the mistake in documentation was clearly rectifiable and since it was not made with any fraudulent intent, no penalty could have been imposed upon them by virtue of Section 126. Respondents, argued that Section 129 as existing in the statute book was intended to act as a deterrent and thus the demand of tax as raised was clearly justified. On appeal. It was held that the Court turned down the Department’s contention that Section 129 is intended to override Section 126, by virtue of its non-obstante clause. Section 126 , the Court said, removes from the scope of Section 129 mistakes of minor character, failure to comply with procedural requirements or a rectifiable mistake in documentation. Coming to the purpose of the non-obstante clause in Section 129, the Court relied on the decision rendered by a three-Judge Bench of the Supreme Court in Central Bank of India v. State of Kerala (2009) where it was held that when the section containing the non-obstante clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the whole act and stands all alone by itself. The High Court then referred to the expression “contravention of the provisions of this Act” as appearing in Section 129, which the Department contended would encompass minor breaches. However, disagreeing, the High Court said, “The expression “contravention” as appearing in Section 129 would have to be understood bearing in mind the special provisions which are contained in Section 126 and which indubitably carves out an exception with respect to minor breaches as well as mistakes and omissions which could be easily rectified.” It relied on a Circular issued by the Central Board of Indirect Taxes and Customs on 14 September 2018, clarifying that the CGST Act did not contemplate the imposition of an inevitable levy of penalty under Section 129.
