M/S.Ajay Agency vs The State Tax Officer – on 30 March, 2023

1. Outcome

The writ petition was dismissed. The Court declined to interfere with the State Tax Officer's order imposing the penalty. The petitioner was granted liberty to pursue the alternative remedy available under the law, which is typically an appeal before the appellate authority.

2. Core Issue

The central issue was whether the imposition of the maximum penalty of 200% under Section 129 of the TNGST Act, 2017, for the transportation of goods with an expired E-Way bill was legally valid and proportionate, particularly when the petitioner claimed the expiry was due to an unintentional delay caused by a vehicle breakdown.

3. Key Facts

• Petitioner: M/s. Ajay Agency, a registered dealer in agricultural implements.
• Transaction: The petitioner purchased a ‘Petrol Power Weeder’ from a supplier in Maharashtra for delivery in Tamil Nadu.
• E-Way Bill: The E-Way bill was valid from 28.02.2023 to 05.03.2023, expiring at midnight.
• Interception: The vehicle carrying the goods was intercepted by the GST Roving Squad on 06.03.2023 at 10:30 a.m., approximately 10.5 hours after the E-Way bill had expired.
• Reason for Delay: The petitioner claimed the vehicle suffered a puncture upon entering Tamil Nadu, and repairs were delayed as the date of expiry (05.03.2023) was a Sunday.
• Non-extension of E-Way Bill: As per Rule 138(10) of the CGST Rules, the E-Way bill could have been extended within 8 hours of its expiry (i.e., by 8:00 a.m. on 06.03.2023), but this was not done.
• Impugned Order: The State Tax Officer detained the goods and vehicle and passed an order imposing a penalty of Rs. 3,68,640/- (200% of the value of goods) under Section 129 of the TNGST Act.
• Factual Discrepancy: A key piece of evidence, a document supporting the vehicle repair, was found to be tampered with. The petitioner's copy showed the date "06.03.2023," while the copy produced by the Department had the date field blank, casting doubt on the genuineness of the petitioner's explanation.

4. Arguments

Petitioner's Arguments (M/s. Ajay Agency):

• The delay was unintentional and caused by a genuine vehicle breakdown.
• The goods in question are agricultural implements, which they claimed are exempt from tax, meaning there was no intent to evade tax and no potential revenue loss to the government.
• Relied on Circular No. 10/2019, which suggests that in cases where the expiry of an E-Way bill does not create a scope for tax evasion, a minor penalty of up to Rs. 5,000 should be levied.
• Cited the High Court's decision in Tvl. Thiruvannamalaiyar Transport to argue that an expired E-Way bill alone is not sufficient grounds for presuming tax evasion.

Respondent's Arguments (State Tax Officer):

• The petitioner failed to comply with the statutory requirement of extending the E-Way bill within the prescribed 8-hour window after its expiry.
• The goods ('Petrol Power Weeder' with HSN code 84321090) are not exempt and are taxable at 12%.
• The detention and penalty were lawfully imposed under Section 129 of the GST Act for a clear violation.
• The genuineness of the vehicle breakdown claim was doubtful due to the discrepancy in the supporting document.
• The precedent cited by the petitioner was not applicable to the facts of this case.

5. Court’s Reasoning

• Disputed Questions of Fact: The Court identified the genuineness of the vehicle breakdown as a disputed question of fact, especially given the discrepancy in the repair document. The Court held that such factual determinations are best left to the appellate authority, not to be decided in a writ petition.
• Statutory Violation is Admitted: It was undisputed that the E-Way bill had expired and the petitioner had failed to extend it within the statutory time limit, constituting a clear violation.
• Discretion of the Officer: The Court noted that the officer has wide discretion under Section 129 to levy penalties. Since the impugned order was passed after considering the facts, the Court was reluctant to interfere with this discretionary power.
• Inapplicability of Circular and Precedent: The Court distinguished the facts of the present case from the example in Circular No. 10/2019, noting this was a single B2B transaction, not one with multiple delivery points, and the taxability of the goods was itself in dispute. The precedent of Tvl. Thiruvannamalaiyar Transport was also held to be factually distinguishable.
• Availability of Alternate Remedy: The Court concluded that since the matter involves factual disputes and the impugned order is an appealable one, the petitioner should exhaust the statutory remedy of appeal rather than invoking the High Court's writ jurisdiction under Article 226.

6. Statutory References

• Constitution of India: Article 226
• Tamil Nadu Goods and Services Tax (TNGST) Act, 2017: Section 68, Section 129, Section 130
• Central Goods and Services Tax (CGST) Rules, 2017: Rule 138, specifically the third proviso to sub-rule (10) regarding the 8-hour extension window.

7. Precedents Cited

• Tvl. Thiruvannamalaiyar Transport vs. The Deputy State Tax Officer [W.P.No.32960 of 2022]: Cited by the petitioner but distinguished by the Court on factual grounds and deemed not applicable.
• Circular No. 10/2019 dated 31.05.2019: Relied upon by the petitioner but found by the court to be inapplicable to the specific facts of this case.
• Circular No. IW1/3365394/2022 dated 24.02.2023: Cited by the respondent, which amends the 2019 circular and clarifies the current departmental stance on penalties for minor discrepancies.