SC Lowers Tax Penalty to 50% for Transportation of Goods After Expiry of GST E-Way Bill

In the case of Vardan Associates Pvt. Ltd. vs. Assistant Commissioner of State Tax Central Section & Ors, the Supreme Court of India provided a judgment. The case concerns the transportation of goods and the levying of penalties after the expiry of the E-way bill validity.

The Court declined the penalty levied on the appellant to 50% of the initial amount. This blog revolved around a comprehensive analysis of the case, emphasizing the pivotal legal arguments and the implications of the decision of the Supreme Court.

Context and Background Information

The petitioner, Vardan Associates Pvt. Ltd., is committed to horizontal directional drilling for underground utilities. The case derives from the transportation of a capital goods consignment from Auraiya, Uttar Pradesh, to Durgapur, West Bengal. The petitioner generated an E-way bill for the transportation, but because of unforeseen events, the consignment was intercepted post-expiry of the E-way bill validity. The authorities charged a significant tax and penalty, directing to the petitioner file a plea.

Legal Points and Arguments

• The delay in transportation was because of the unavailability of a vehicle from the transporter, M/s. Hariom Freight Carriers (HFC), in Auraiya, Uttar Pradesh, the petitioner contended.
• Even after depositing a 10% tax amount and being ready to file the left tax and furnish a bank guarantee for the penalty, the council has refused the release of the consignment which the appellant considered arbitrary.
• The appellant argued that the consignment, being its property, must not be subject to GST, as it was an “inter-unit transfer” of capital goods instead of a sale/purchase transaction.

Read Also: Most Important Key Amendments Made in the e-Way Bill System

Counter Arguments Presented by the Respondents

• The appellant, being in the business of such transactions, cannot claim ignorance of the law, the respondent stressed.
• Stressing that the e-way bill gets lapsed before the consignment crosses the state borders and the petitioner must be aware to confirm the timely transportation.
• It contended that the penalty was proven because of the seriousness of tax matters in which the engagement of the government revenue is there and secures a direct impact on the operation of the government.

Decision of the Supreme Court

The Supreme Court wishes to confine its acknowledgement to the quantum of a penalty and consider the appellant’s obligation to follow the law to generate a new E-way bill.

Penalty Reduction

At the time of upholding the tax amount, the Court lessened the penalty to 50% of the initial amount, i.e., ₹27,00,000/-. The total amount that is to be paid by the petitioner was fixed at ₹81,00,000.

The Rationale for the Decision

Through acknowledging the factual case the court has justified the reduction, along with the ownership of the appellant of the consignment and its utilization for the contractual liability. The court stressed the requirement for leniency under such situations.

Important Considerations for Cautioning the Appellant

The court warned the appellant to be alert in the subsequent time, considering the unique possibilities of the case.

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Closure: The decision of the Supreme Court in the Vardan Associates case furnishes crucial information into the complexities of goods transportation along with the e-way bill application. The penalty amount reduction shows a balance between levying the financial results and acknowledging the unique situation of the case. The same decision can set a precedent for identical cases in the forthcoming time underlining the importance of due diligence in following the tax regulations, also identifying genuine challenges that the businesses suffered from.