GSTAT Quashes Rs 1.77 Lakh Penalty on Saraswati Motors for Missing E-Way Bill:

M/s Saraswati Motors, an authorised dealer of Hero MotoCorp Ltd. which was transporting six motorcycles valued at Rs 4,05,138 to M/s Prakash Motors, Mauaima, Prayagraj, on 23 November 2021. During transit, the vehicle was intercepted by the Assistant Commissioner. The driver produced a valid e-invoice containing the engine and chassis numbers of all six motorcycles, along with the invoice reference number (IRN), acknowledgement details and QR code. However, the driver could not produce the e-way bill required under Rule 138A(1) of the CGST Rules, 2017.

The driver explained that the dealership's computer operator was under home isolation due to COVID-19 and that the preceding day had been a business holiday, resulting in the delay in generating the e-way bill. Although physical verification revealed no discrepancy in the quantity, description or destination of the goods, the authorities issued a detention order in Form GST MOV-06 and a show cause notice in Form GST MOV-07 on 25 November 2021. The Department demanded tax of Rs 88,623.94 and an equal penalty, aggregating to approximately Rs 1,77,248.

Saraswati Motors deposited the amount under protest to secure the release of the motorcycles. The adjudicating authority passed the final order under Section 129(3) in Form GST MOV-09 just 57 minutes after issuing the show cause notice. The First Appellate Authority subsequently dismissed the appeal and upheld the demand. 

The Tribunal observed that the transaction, interception, show cause notice and penalty order all related to November 2021, before the relevant amendment to Section 129(6) of the CGST Act took effect on 1 January 2022. Under the unamended provision, Section 129(6) linked further proceedings to Section 130, which expressly referred to dealings with goods with the intent to evade payment of tax. The Tribunal held that the statutory framework applicable at the relevant time required the provisions to be read together.

Accordingly, intent to evade tax was a necessary condition for imposing a penalty under Section 129 in the present case. The Tribunal rejected the First Appellate Authority's approach of treating the provision as imposing automatic liability for every procedural contravention, irrespective of the circumstances.

The Tribunal found no evidence suggesting that Saraswati Motors had attempted to conceal the goods, their value or their destination. It also noted that neither of the authorities below had recorded a finding that the appellant intended to evade tax. The Tribunal further examined the circumstances in which the penalty order had been passed. Although Section 129(3), as it stood at the relevant time, did not prescribe a specific period for adjudication, Section 75(4) mandated an opportunity of hearing where an adverse decision was contemplated.

In the present case, the final order was passed only 57 minutes after the show cause notice was issued. The Tribunal held that such a short interval did not afford the appellant a reasonable opportunity to respond to the allegations or explain the circumstances surrounding the missing e-way bill. Allowing the appeal, GSTAT set aside the orders dated 25 November 2021 and 16 January 2024. It quashed the demand of Rs 1,77,248 and directed that the amount deposited under protest be refunded to Saraswati Motors along with applicable interest in accordance with law.