Penalty for Missing E-way Bill Falls Under Milder Clause if Owner is Registered.

Penalty for Missing E-way Bill Falls Under Milder Clause if Owner is Registered.

Issue

When goods in transit are accompanied by a valid tax invoice and the owner of the goods is a registered taxpayer, should the penalty for the sole infraction of not carrying an e-way bill be levied under the harsher clause (1)(b) or the more lenient clause (1)(a) of Section 129 of the CGST Act?

Facts

• A consignment of goods, owned by a GST-registered person, was intercepted during intra-state movement.
• The goods were accompanied by a valid tax invoice containing all necessary particulars.
• The only violation alleged by the tax authorities was the non-accompaniment of a valid e-way bill.
• The Assistant Commissioner initiated proceedings and levied a penalty under Section 129(1)(b), which applies to cases where the owner of the goods does not come forward to pay the tax and penalty.
• The petitioner challenged this, arguing that the penalty should have been computed under Section 129(1)(a).

Decision

• The High Court ruled in favour of the assessee.
• It held that the adjudicating authority had erred in applying the harsher penalty under clause (1)(b).
• The court, relying on the precedent set in Halder Enterprises v. State of U.P., clarified that for a procedural infraction like a missing e-way bill, where the owner of the goods is registered and has provided a valid tax invoice, the penalty must be computed under Section 129(1)(a).
• The impugned penalty order was set aside, and the matter was remanded to the authority with a direction to re-determine the penalty quantum strictly in accordance with clause (1)(a).
• The goods were ordered to be released upon the deposit of the recomputed penalty.

Key Takeaways

• Distinction Between Penalty Clauses is Crucial: Section 129 provides for two different penalty mechanisms. Clause (1)(a) applies when the owner of the goods comes forward, resulting in a penalty equal to 200% of the tax payable. Clause (1)(b) applies in other cases, leading to a much higher penalty equal to 50% of the value of the goods.
• Minor Infraction vs. Evasion: The ruling distinguishes between a procedural lapse (missing e-way bill with a valid invoice) and a situation suggesting potential tax evasion (no invoice or an unregistered owner). The former attracts the milder penalty.
• Registered Owner is Key: When the owner of the goods is a registered person and has issued a proper tax invoice, it is presumed that they have “come forward,” making clause (1)(a) the applicable provision.
• Precedent Provides Clarity: The reliance on established case law provides a clear guideline for both taxpayers and tax authorities on how to handle such common transit-related violations, preventing the arbitrary application of harsher penalties.