Krishna Engineering Works vs State of Karnataka

In this petition, the petitioner seeks the quashing of the impugned show cause notice at Annexure-J dated 06.02.2024 and the impugned assessment order at Annexure-P dated 16.02.2024, along with other reliefs. Heard learned counsel for the petitioner and learned AGA for the respondents and perused the material on record. The material on record indicates that the subject vehicle bearing registration No. AP-07-TC-1755 of the petitioner, carrying the subject goods and traveling from Vijayawada to Guntur, was assigned an e-way bill generated on 31.01.2024 at 8:03 p.m., which was valid up to 11:59 p.m. on 05.02.2024. During transit, there was a breakdown of the subject vehicle, as a result of which the petitioner shifted the goods to another vehicle bearing No. KA-51-1AC-5539. Since there was a delay in this regard, the vehicle, which was supposed to reach the destination on 05.02.2024, was not able to do so and was intercepted at Kollegala on 06.02.2024 at 09:51 a.m.

It is the contention of the petitioner that due to bona fide reasons, unavoidable circumstances, and sufficient cause, and on account of oversight, inadvertence, and reasons beyond its control, the petitioner could not update the e-way bill by showing the number of the new vehicle bearing No. KA-51-1AC-5539. As a result, the respondents issued the impugned show cause notice and passed the impugned assessment order levying a penalty upon the petitioner under Section 129 of the CGST Act on the ground that at the time of interception on 06.02.2024 at 09:51 a.m., the subject vehicle did not possess a valid e-way bill, which had expired on 05.02.2024 itself at 11:59 p.m.

It is contended that since the non-updation of the e-way bill was not intentional or deliberate on the part of the petitioner, who had no intent to evade or avoid payment of tax nor contravene any of the provisions of the CGST Act, especially when the breakdown of the subject vehicle leading to the interception of the new vehicle was not within the control of the petitioner nor attributable to it. As such, it was a fit case to levy a maximum general penalty of Rs. 25,000/- on the petitioner by invoking Section 125 of the CGST Act. Consequently, the impugned order and show cause notice deserve to be quashed.

It is also submitted that pursuant to the impugned order, the petitioner has paid the entire penalty demanded by the respondents, and the same may be directed to be refunded back to the petitioner by deducting Rs.25,000/- towards the general penalty payable by the petitioner. In support of its contention, reliance is placed on the judgment of the Apex Court in the case of Assistant Commissioner vs. Satyam Shivam Papers Pvt. Ltd. – (2022) 14 SCC 157. Per contra, learned AGA for the respondents – revenue would oppose the petition and submit that the same is liable to be dismissed. A perusal of the material on record indicates that the petitioner possessed a valid e-way bill in relation to the subject vehicle bearing No.AP-07–TC-1755, which was valid up to 11:59 p.m. on 05.02.2024. However, due to the breakdown of the subject vehicle, the goods had to be shifted to another vehicle bearing No.KA-51-1AC-5539, and due to the delay in this process, the said vehicle could not reach the destination within the time stipulated in the e-way bill and was intercepted on 06.02.2024 at 09:51 a.m. It is the specific assertion of the petitioner that it could not update the e-way bill earlier due to bona fide reasons, unavoidable circumstances, and sufficient cause. These facts and circumstances are sufficient to come to the conclusion that the inability and omission on the part of the petitioner to update the e-way bill, as well as the breakdown, were not intentional or attributable to the petitioner, nor can any negligence be attributed to the petitioner in this regard. At any rate, the material on record does not disclose that there was any intention on the part of the petitioner to either contravene the provisions of the CGST Act or avoid/evade payment of tax, and on account of non-extension of the validity of the e-way bill by the petitioner due to the breakdown of the vehicle, no presumption or inference can be drawn against the petitioner regarding its intent to avoid/evade payment of tax. Consequently, the facts of the instant case make it just and proper to impose a general penalty of Rs.25,000/- on the petitioner by invoking Section 125 of the CGST Act, setting aside the impugned order and notice, and directing the respondents to refund the tax paid by the petitioner by deducting Rs.25,000/- from the said amount.

In identical circumstances, in Satyam’s case supra, the Apex Court confirmed the judgment of the Telengana High Court and held as under: Having heard the learned counsel for the petitioners and having perused the material placed on record, we find no reason to consider interference in the well-considered and well-reasoned order dated 2-6-2021, as passed by the High Court for the State of Telangana at Hyderabad in Satyam Shivam Papers (P) Ltd. v. CST [Satyam Shivam Papers (P) Ltd. v. CST, 2021 SCC OnLine TS 698]. Rather, we are clearly of the view that the error, if any, on the part of the High Court, had been of imposing only nominal costs of Rs 10,000 (Rupees ten thousand) on Respondent 2 of the writ petition, who is Petitioner 2 before us. The consideration of the High Court in the order [Satyam Shivam Papers (P) Ltd. v. CST, 2021 SCC OnLine TS 698] impugned and the material placed on record leaves nothing to doubt that the attempted inference on the part of Petitioner 2, that the writ petitioner was evading tax because the e-way bill had expired a day earlier, had not only been baseless but even the intent behind the proceedings against the writ petitioner was also questionable, particularly when it was found that the goods in question, after being detained, were, strangely, kept in the house of a relative of Petitioner 2 for 16 days and not at any other designated place for their safe custody. The High Court has, inter alia, found that: (Satyam Shivam Papers case [Satyam Shivam Papers (P) Ltd. v. CST, 2021 SCC OnLine TS 698], SCC OnLine TS paras 44-46) “44. It was the duty of second respondent to consider the explanation offered by petitioner as to why the goods could not have been delivered during the validity of the e-way bill, and instead he is harping on the fact that the e-way bill is not extended even four (04) hours before the expiry or four (04) hours after the expiry, which is untenable. 45. The second respondent merely states in the counter-affidavit that there is clear evasion of tax and so he did not consider the said explanations. 46. This is plainly arbitrary and illegal and violates Article 14 of the Constitution of India, because there is no denial by the second respondent of the traffic blockage at Basher Bagh due to the anti-CAA and NRC agitation on 4-1-2020 up to 8.30 p.m. preventing the movement of auto trolley for otherwise the goods would have been delivered on that day itself. He also does not dispute that 4-1-2020 was a Saturday, 5-1-2020 was a Sunday, and the next working day was only 6-1-2020.”

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