In a recent ruling, the Calcutta High Court addressed the issue of penalties imposed under the GST framework, specifically under Section 129 of the CGST/WBGST Act. The case involved appellants Sandip Kumar Pandey and another, who were penalized despite carrying valid documentation for their goods transport. The appellants had purchased garments from M/s. Ghosh Enterprises, supported by a valid tax invoice and e-way bill, which were presented during an interception en route from West Bengal to New Delhi.
The Department imposed a penalty after the proprietor of M/s. Ghosh Enterprises allegedly stated that the business was not operational and his identity was misused. This led to the Department treating the invoice and e-way bill as invalid. However, the appellants challenged the penalty, arguing that they complied with all statutory requirements under Section 68 and Rule 138A.
The High Court found that the Department erred by accepting the supplier's unverified statement as fact without allowing the appellants to respond. The Court emphasized that carrying a valid invoice and e-way bill constituted sufficient compliance, and thus, Section 129 was not applicable. The penalty was deemed a violation of natural justice principles, leading the Court to quash the penalty and order a refund within eight weeks. This decision underscores the importance of due process and proper verification before imposing penalties in GST matters.
Order date: 07th August 2025
Petitioner: Sandip Kumar Pandey & Anr.
Facts
- The Appellants purchased readymade garments from M/s. Ghosh Enterprises under a valid tax invoice dated 30.07.2024, with applicable IGST.
- Goods were transported from West Bengal to New Delhi and intercepted on 21.07.2024.
- All supporting documents – invoice, e-way bill, and consignment note – were available and produced.
- Later, a statement was allegedly made by the proprietor of M/s. Ghosh Enterprises that he had not carried on business or obtained GST registration, and that his identity was misused.
- Based on this, the Department treated the invoice and e-way bill as invalid and imposed penalty under Section 129(1)(b) of the CGST/WBGST Act.
- The writ petition challenging the penalty was dismissed by a Single Bench on grounds of availability of appellate remedy.
Issue
- Whether penalty under Section 129 could be sustained when the appellants had carried all documents prescribed under Section 68 read with Rule 138A at the time of interception.
Order
- The Court held that the Department erred in accepting the supplier’s statement as “gospel truth” without verification or affording the appellants a chance to respond.
- Since valid invoice and e-way bill were present, there was no contravention of Section 68/Rule 138A, hence Section 129 was not attracted.
- Action of the Department violated principles of natural justice and thus Penalty under Section 129(1)(b) was quashed.
- Department directed to refund the penalty within 8 weeks.
