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25 August 2021

Non Filling of Part-B of E-Way Bill cannot be considered as minor breach of provisions under Section 126 of CGST Act, 2017

Detention of Goods: As per the provisions of Section 129 of the 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 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:

  • on payment of penalty equal to hundred per cent of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent 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 penalty;
  • on payment of penalty equal to fifty per cent of the value of the goods or two hundred per cent of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty
  • upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed.

Confiscation of Goods: Further any confiscation of goods shall be done only after finalization of tax and penalty payable and after giving opportunity of being heard as per the provisions of Section 130.

No penalty for Minor Breaches: Section 126 of the CGST Act, 2017 specifies that “No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.

Explanation—For the purpose of this sub-section—
  • a breach shall be considered a 'minor breach' if the amount of tax involved is less than five thousand rupees;
 
  • an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record

In the light of aforesaid provision, the question arises as whether incomplete documents i.e. non filling of Part B of E-Way Bill during transportation of goods should be considered as minor breach of the provisions under Section 126 of the CGST Act, 2017 or it will attract penalty under Section 129 of the CGST Act, 2017?

A similar issue was observed in the case of “Daily Express vs. Assistant State Tax Officer” [2019] 104 taxmann.com 47 (Kerala) wherein it was held by the by the Honorable Kerala High Court that Section 129 of the CGST Act, 2017 presides other sections and therefore non filling of Part-B of E-Way bill cannot be construed as minor breach under Section 126 of the CGST Act, 2017 and therefore goods are liable for proceeding under Section 129 and Section 130 of the CGST Act, 2017.

Further, the contention of the petitioner (transporter) was overruled that the provisions of Section 129 of the CGST Act, 2017 applies to the owner of the goods whether consignor or consignee and petitioner being transporter of goods cannot be construed as owner of goods. Therefore, provision of section 129 of the CGST Act 2017 should not be invoked in this case. It was held by the Hon’ble Kerala High Court that Section 129(1) makes it adequately clear that any person who is interested in the goods shall be liable under Section 129(1)(b). Particularly, a reading of Section 129(6) would indicate that where a person transporting any goods or the owner of the goods, fails to pay the amount of tax and penalty as provided in sub-Section (1) within 14 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of Section 130. This would undoubtedly indicate action not only against the goods, but also against the transporter.

An excerpt of the cited case law has been reproduced as follows:

Facts of the Case: -
  • Daily Express (Petitioner) is a transporting firm, engaged in plying about 100 Lorries as carriers of goods in India.
  • While petitioner was transporting goods the vehicle was intercepted by the first respondent, Assistant Sales Tax Officer (ASTO).
  • All documents were in order except the Part B of E-way bill which was incomplete due to which vehicle was detained. Reason provided was that documents under Section 138 are not complete.
  • Competent Authority imposed a tax of Rs. 64,128 with 100 per cent penalty totaling to Rs. 1.28 lakhs under section 129(3) upon the petitioner.
Contention by the Petitioner: -  
  • According to Section 126 of the CGST Act, 2017, no penalty is imposable for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent.
  • There was no tax evasion (resulting which no penalty or interest should be demanded) and all the invoices were in place.
  • Maximum penalty that can be imposed should be related to incomplete documents as specified under Sections 122 or 125 of the CGST Act, 2021. Also the penalty which was imposed is atrocious.
  • It was further contended that the transporter are not the owners of such goods being transported and penalty should, if charged, be done on consignor or consignee they being the owners (based upon Section 129).
Respondent’s Stand: -  
  • It was contented that Section 129 specifies any person transporting goods as the owner of the goods and not only the persons who are interested in those goods. This covers the transporter as well.
  • It further states that, a person transporting any goods or the owner of the goods, fails to pay the amount of tax and penalty as provided in sub-Section (1) within 14 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of Section 130. This enables the initiation of proceedings against the transporters.
Held by Kerala High Court: -  
  • Section 129 clearly specifies, where a person transporting any goods or the owner of the goods, fails to pay the amount of tax and penalty as provided in sub-section (1) within 14 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130.
  • Section 129 of the CGST Act, 2017, contains the non obstante clause due to which it presides over Sections 122, 125 and 126.
  • Further minor breach as per Section 126 is, if the tax amount involved is less than INR 5000. Since the amount involved is much more than that this section is not attracted.
  • Case is dismissed by the Kerala High Court in favor of revenue.