Absence of Tax Evasion: Uttarakhand HC quashes Disproportionate Penalties for lack of Delivery Challan

A Single Bench of the Uttarakhand High Court has quashed the disproportionate penalties imposed for lack of delivery challans, despite compliance with all other actual requirements.

The petitioner is into the business of manufacturing PC wires-Strand ACSR Core Wire and Galvanized steel wire. He purchases the raw material from Steel Authority of India Limited, Kolkata.

The petitioner placed an order with SAIL, the goods were transported from West Bengal to Kanpur through railway in the wagon against invoices and other documents required under the Act. The wagon was unloaded and taken into custody by the petitioner for further transportation of goods to Bazpur. For that purpose two vehicles were deployed.

Accordingly, eway bill was also generated and goods were moved towards its destination on 04.06.2023. When the vehicles were intercepted by the respondent no.3, it was found that the vehicles were not carrying the delivery challans as required under Rule 55 (5) (b) of the Central/State Goods and Services Rules, 2017. After completing the procedure as required under the Act and Rules, by the impugned order, separate penalty has been imposed with regard to each of the vehicles engaged in transportation.

In these petitions, those two orders dated 09.06.2023 have been challenged. The petitioner also seeks refund of the amount which was deposited on 10.06.2023 pursuant to the impugned orders dated 09.06.2023.

It is the case of the petitioner that the imposed penalty is illegal and it has been passed without

appreciating the fact that the petitioner had already ensured all the compliances under the GST Act. He had all the documents with him except the delivery challan.

Counsel appearing for the petitioner submitted that the impugned orders are bad in the eye of law. He referred to the Rules 138A, 55 (3) and 55 (5)(b) of the 2017 Rules and argued that non availability of the delivery challan with the vehicles is a mere procedural impropriety or irregularity; it has no element of evasion of tax, whatsoever.

The counsel further referred to provisions of Section 126 of the Act and argued that in the instant case, the penalty had been much disproportionate; it was an error which was rectifiable. They contended that the lack of delivery challans was a procedural error rather than a deliberate attempt at tax evasion.

The Revenue Authorities contended that the procedural requirements in place could not be condoned as they are necessary to prevent fraud, escape, leakage, and administrative inconveniences.

The court, in agreement with the assessee, held that the penalties were disproportionate.

It was highlighted that there was no evidence of tax evasion, and all necessary documentation, including proper E-way bill generation and tax payments, was readily available to the Revenue Authorities. The court classified the penalties as rectifiable errors.

The Single Bench of Justice Ravindra Maithani, presiding over the case, stated that, “In view thereof, this Court is of the opinion that the impugned orders are not in accordance with the law. Both the orders deserve to be set aside, and writ petitions deserve to be allowed."

In result, the impugned orders dated 09.06.2023 were set aside and The GST authorities were directed to refund the amount deposited by the petitioner on 10.06.2023, pursuant to the impugned orders.

To Read the full text of the Order CLICK HERE

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