Penalty provision’s on E-Way Bill under GST

The journey of E-way Bill is start in April-2018. E-way bill is three year old now and right from its inception we have seen lot of changes and amendments in E-way bill rules and E-way bill portal. Now, most of the taxpayers are familiar with E-Way bill rules, processes and procedures of generating of e-way bill and are moving smoothly as it becomes older and more streamlined.

E-way bill is an electronically generated document mandatory under Sec No. 68 of CGST Act’17, read with rule 138, 138A, 138B, 138C, 138D,138E to be carried for movement of goods across India. It is necessary for the movement of goods worth more than Rs. 50,000 with some exception. A unique e-way bill number (EBN) would be generated for each such consignment to be transported. The validity of this EBN depends on the distance of transportation of goods. To enforce this rule, authorized officers may be instructed to intercept any vehicle at certain check posts for the verification of necessary documents. Additionally, a physical verification of the vehicle may be carried out on receiving specific inputs regarding tax evasion.

So, in this article, we will discuss all the penalties provisions for non-issuance of E-way Bill or wrong information fill-up in E-way Bill.

Penalty for Non-Generation of E-Way Bill:

If e-way bills, wherever required, are not issued in accordance with the provisions contained in Rule 138, the same will be considered as contravention of rules. As per Section 122(1)(xiv) of CGST Act,2017, a taxable person who transports any taxable goods without the cover of specified documents (e-waybill is one of the specified document) shall be liable to a penalty of ₹ 10,000/- or the amount of tax sought to be evaded (wherever applicable) whichever is greater. Moreover, as per Section 129(1) of CGST Act,2017, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the Rule made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure.

Whether penalty needs to be paid even in case of minor offenses.

CBIC vide Circular No. 64/38/2018-GST dated 14-09-2018 has clarified as follow, The consignment of goods must be accompanied by tax invoice or delivery challan and e-way bill. In case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings u/s 129 of CGST Act’17 may not be initiated in following situations-

(a) Spelling mistake in the name of the consignor or the consignee but GSTIN, wherever applicable, is correct;

(b) Error in the PIN Code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN Code should not have the effect of increasing the validity period of e way bill.

(c) Error in the address of the consignee to the extent that locality and other details of the consignee are correct.

(d) Error in one or two digits of the document numbers mentioned in the e way bill.

(e) Error in the 4 or 6 digit level of HSN where first 2 digits of HSN are correct and the rate of tax mentioned is correct.

(f) Error in the one or two digit / characters of the vehicle number.

In case of the above situations, penalty to the tune of ₹ 500/- each under Section 125 of the CGST Act and the respective State GST Act Should be imposed (₹ 1,000/- under the IGST Act) in FORM GST DRC-07 for every consignment.

Penalty For Transporting Goods Without Documents:

Conveyance carrying goods in contravention of the provisions of this Act and Rules is liable to detention and seizure. After detention / seizure, the goods & conveyance shall be released on payment of amount to be ascertained as per Section 129 of the CGST Act’17 and Notification 39/2021-CT dated 21-12-2021, wherein Central Government appoints 01.01.2022 as the date for various amendments made through Finance Act, 2021 to come into force.

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, ––

(a) on payment of penalty equal to two hundred per cent (200%) of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent (2%) of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

(b) on payment of penalty equal to fifty per cent (50%) of the value of the goods or two hundred percent (200%) of the tax payable on such goods,whichever is higher, and in case of exempted goods, on payment of an amount equal to five percent (5%) of the value of goods  or twenty-five thousand rupees, whichever is less, where the owner of goods does not come forward for payment of such penalty;

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

PROVIDED that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances .[Section 129(2) shall be omitted w.e.f.01.01.2022]

(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).

(4) No penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section(3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3) Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less;

Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officers.

Amendments in Section 129 and 130 of the CGST Act:

Section 129 of the CGST Act, which deals with the detention, seizure and release of goods and conveyances in transit, has been amended in a following manner:

Enhanced penalty (previously penalty and tax) under Section 129(1)(a) & (b):

• Period of issuance of notice and passing of order under Section 129(3) of the CGST Act: The proper officer detaining/seizing the goods, have to issue a notice (MOV-07) within 7 days specifying the penalty payable and pass an order (MOV-09) within next 7 days after service of such notice, whereas earlier there was no such time limit.
• Determination of penalty: In the amendment to Section 129(4) of the CGST Act, no penalty shall be determined without giving opportunity of hearing, where penalty is payable on detention or seizure of goods or conveyance.

It’s to be noted that tax and interest shall not be demanded after the amendment in law for release of goods and conveyance.

• Delinking Section 129 from Section 130: Amendment in Section 129(6) of the CGST Act delinks the proceedings under Section 129 of the CGST Act relating to ‘detention, seizure and release of goods and conveyances in transit’, from the proceedings under Section 130 of the CGST Act relating to ‘confiscation of goods or conveyances and levy of penalty’.

Earlier the provision was if person does not pay tax and penalty within 14 days of seizure, the conveyance and goods detained were liable for confiscation as per Section 130 ibid. But, after this amendment, the goods or conveyance detained or seized shall become liable to be sold or disposed off in the manner prescribed in case the payment of imposed penalty is not made within 15 days from the date of receipt of copy of the order imposing such penalty.

Further, conveyance used for transportation of the goods may be released on payment of penalty or INR 1 Lakh whichever is less.

Corresponding changes for delinking Section 129 and 130 of the CGST Act are also made in Section 130 of the CGST Act.

Under the earlier provisions, there was ambiguity on whether taxes for supply of goods will have to be paid in addition to the taxes paid under section 129, specifically in light of ITC restriction under section 17(5)(i). Moreover, no mechanism was provided to adjust the taxes paid under section 129, in the GSTR 3B. With the amendment of provisions of section 129, by increase the penalty to 200%, the ambiguity is now put to rest.

Summary of the various forms involved in procedure for Inspection, Verification and Detention of Goods in Transit:

To conclude this article, It is important to understand the penalty provisions on E-Way Bill. Once a taxpayer is caught non-complying with the e-way bill provisions, GST authorities keep tracking his/her movement of consignment. Therefore each and every taxpayer should take care before movement of goods, generate correct e-way bill and handover to vehicle along-with invoices and delivery challans  and complete the transaction in proper manner. Taxpayer is  also maintain the proper record and reconciliation of E-way bill with GSTR-1 Return.

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