No penalty can be imposed for an expired e-way bill if the delay in transit was caused by a genuine, documented vehicle breakdown and there is no evidence of tax evasion.

No penalty can be imposed for an expired e-way bill if the delay in transit was caused by a genuine, documented vehicle breakdown and there is no evidence of tax evasion.

Issue

Can a penalty be levied under Section 129 of the CGST Act, 2017, for an expired e-way bill when the taxpayer provides a valid and documented reason, such as a vehicle breakdown, for the delay, and there are no other discrepancies suggesting an intent to evade tax?

Facts

• A vehicle transporting goods from Kanpur to Punjab was intercepted by GST authorities.
• The sole reason for the interception and initiation of proceedings under Section 129 was that the e-way bill accompanying the goods had expired.
• The assessee provided a clear explanation for the delay, stating that the truck had suffered a breakdown. This explanation was supported by documentary evidence submitted to the authorities.
• It was an undisputed fact that all other necessary documents were present with the goods, and there was no discrepancy in the description, quantity, or quality of the goods being transported.
• Despite this, the authorities passed an order confirming the penalty, without giving any specific or cogent reason for disbelieving the evidence of the breakdown.

Decision

The High Court ruled in favour of the assessee.

• It held that the tax authorities had passed the order without properly considering or even attempting to rebut the evidence of the truck breakdown submitted by the assessee.
• The court found that since the reason for the delay was plausibly explained and there were absolutely no other discrepancies found in the documents or the goods, the intent to evade tax, which is a necessary ingredient for invoking the harsh provisions of Section 129, was not present.
• Therefore, the impugned orders were not sustainable in the eyes of the law and were quashed.

Key Takeways

• An Expired E-way Bill is Not an Automatic Offense: The expiry of an e-way bill is a procedural lapse, but it does not automatically lead to a penalty. The authorities are required to examine the reasons for the delay.
• Intent to Evade Tax is the Key Factor: The primary objective of Section 129 is to catch and penalize tax evasion. If there is a genuine, non-fraudulent reason for a procedural error and no other evidence points to an attempt to evade tax, a penalty is not justified.
• Authorities Must Pass Reasoned Orders: Adjudicating authorities cannot simply ignore the evidence and explanations provided by a taxpayer. They have a legal duty to apply their minds to the facts and must provide clear and cogent reasons if they choose to reject the taxpayer’s explanation.
• The Full Picture Matters: The absence of any other discrepancies (in the invoice, quantity of goods, etc.) is strong corroborative evidence that the expiry of the e-way bill was a bona fide issue and not a cover for illicit activity.