The Ernakulam Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) on 30 October held that the penalty under Section 129 of the Central Goods and Services Tax (CGST) Act, 2017, cannot be imposed unless the show cause notice specifies the provisions of law allegedly violated.
A Bench of Vice President Subramanya Rayaprol and Technical Member Ramamoorthi Sriram allowed an appeal filed by Oxino PEB Pvt. Ltd. against a penalty imposed after its goods were found being unloaded at premises different from the destination mentioned in the e-way bill. It observed:
“No Penalty under section 129(1) of CGST Act can be proposed without specifying the provisions of the Act or Rules that have been contravened.”
The tax authorities had detained the goods on the ground that the driver could not produce the required documents for unloading them at the premises of another company. Oxino explained that the goods had been sent for job work and that the necessary e-way bill was generated after the vehicle was intercepted.
Nevertheless, the authorities imposed tax and penalty, and the first appellate authority upheld the order.
Before the Tribunal, Oxino argued that the transaction was genuine and that it had produced documents supporting the movement of goods for job work before the penalty order was passed. It also submitted that there was no evidence of any intention to evade tax.
The Tribunal found that the show cause notice did not specify the particular provisions of the Act or Rules allegedly contravened. It held that the department could not subsequently rely on statutory provisions that had not been mentioned in the notice.
It noted that the tax authorities had accepted that the goods were being sent for job work. Merely because the e-way bill was generated after the vehicle was intercepted, the nature of the transaction could not be changed.
Further, the Bench observed that Section 143(1) of the CGST Act permits goods to be sent for job work without payment of tax. Since no tax was payable on the goods in the present case, the penalty under Section 129(1), which is linked to the tax payable, could not be sustained.
It also found that the authorities had failed to properly consider Oxino's explanation and supporting documents, thereby violating the principles of natural justice.
Accordingly, the GSTAT set aside the penalty order and allowed the appeal with consequential relief.
For Appellants: Advocate P.S. Soman Pulladan.
For Revenue: Anil Gopinath, Authorised Representative.