The Gujarat High Court recently ruled that a heavy penalty under Section 129 of the GST Act cannot be imposed merely due to the expiry of an E-way bill when the goods in question are meant for export. This is because exports are considered zero-rated supplies, meaning there is no tax liability on such transactions. The case involved Balkrishna Industries Limited, which was transporting goods intended for export when the GST authorities detained the goods due to an expired E-way bill, resulting in a penalty demand of ₹18,00,140.
Balkrishna Industries challenged the penalty, arguing that since exports are zero-rated under the IGST Act, no tax is payable on them. The company sought to have the penalty quashed and the amount refunded, relying on a previous Gujarat High Court ruling in a similar case involving Marcowagon Retail Pvt. Ltd.
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The Court noted that the violation was procedural, related only to the requirement of an E-way bill under Rule 138, and did not indicate any tax evasion. It emphasized that when no tax is payable on the goods, imposing a significant penalty under Section 129 is not justified. Given the precedent set in the Marcowagon Retail case, the Court granted relief to Balkrishna Industries, holding that the penalty could not be sustained.
Order Date -
Parties : BALKRISHNA INDUSTRIES LIMITED Vs UNION OF INDIA & ORS.
Facts -
- Balkrishna Industries Limited, an exporter of goods, transported goods meant for export outside India, treating the supply as zero-rated under the IGST Act.
- During transit, the GST authorities found that the E-way bill had expired, and the goods were detained, leading to a penalty demand of ₹18,00,140 under Section 129(1)(a).
- The petitioner challenged the penalty and the appellate order passed in Form GST APL-04, arguing that exports are zero-rated supplies where no tax is payable.
- Relying on the earlier Gujarat High Court ruling in Marcowagon Retail Pvt. Ltd., the petitioner approached the High Court seeking quashing of the penalty and refund of the amount.
Issue -
- Whether penalty under Section 129 can be imposed for expiry of an E-way bill during transportation of goods meant for export ?
Order -
- The Court observed that exports are treated as zero-rated supplies under Section 16 of the IGST Act, meaning no tax is ultimately payable on such transactions.
- The alleged violation related only to Rule 138 (E-way bill requirement), which is procedural in nature and not indicative of tax evasion.
- When no tax is payable on the goods, imposing a large penalty under Section 129 becomes unsustainable.
- Since the issue was already settled in Marcowagon Retail Pvt. Ltd., the Court granted relief and held that such penalty cannot be sustained.
