VARDAN ASSOCIATES PVT. LTD. vs. ASSISTANT COMMISSIONER OF STATE TAX CENTRAL SECTION

C.A. No.-008302-008302 - 2023Supreme Court2023 INSC 108731 October 2023Bench: HON'BLE MS. JUSTICE HIMA KOHLI HON'BLE MR. JUSTICE AHSANUDDIN AMANULLAHAuthor: HON'BLE MS. JUSTICE HIMA KOHLI10 pages
For Petitioner: KARUNAKAR MAHALIK
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What were the facts?

The appellant, Vardan Associates Pvt. Ltd., a contractor involved in horizontal directional drilling, was transporting a capital goods machine (weighing 68 tons) from Uttar Pradesh to West Bengal. An E-way bill was generated on May 30, 2019, valid until June 9, 2019. The consignment was intercepted on June 17, 2019, after the E-way bill's validity expired. The authorities detained the vehicle and goods, issuing a notice for tax and penalty of ₹54,00,000 each. An order confirming this demand was passed. The appellant filed an appeal after depositing 10% of the tax demand and arranged for a bank guarantee for the balance. Aggrieved by the delay in appeal decision and the demand order, the appellant filed writ petitions. The High Court dismissed the writ petition, leading to the present appeal before the Supreme Court.

What did the Supreme Court hold?

The Supreme Court, while acknowledging that the appellant could not escape responsibility for not generating a fresh E-way bill, decided to interfere based on the factual scenario. The Court noted that the appellant was the owner of the consignment and was using it for its contractual obligations, with no evidence of sale or use for any other party. The Court upheld the tax amount of ₹54,00,000. However, it reduced the penalty amount to 50% of the imposed penalty, i.e., ₹27,00,000. The total amount payable by the appellant was thus fixed at ₹81,00,000 (₹54,00,000 tax + ₹27,00,000 penalty). The Court directed that upon payment of the remaining amount (subject to prior payments), the vehicle and consignment would be released. This order was passed under Article 142 of the Constitution and is not to be treated as a precedent. The issue of whether GST should be imposed at all was not expressly left undecided but was implicitly accepted by upholding the tax amount.

What were the issues?

1. Whether the imposition of GST and penalty under Section 129 of the CGST Act, WBGST Act, and IGST Act is justified when the E-way bill's validity expired before the consignment crossed the state border? Assessee's arguments: The appellant contended that while there was a fault with the E-way bill, it was due to circumstances beyond their control, specifically the unavailability of a vehicle for transportation. They argued that the denial of consignment release despite depositing 10% tax and offering a bank guarantee for the penalty was arbitrary. They also submitted that the consignment might have been damaged due to prolonged detention and that no GST should be imposed as it was an inter-unit transfer of capital goods for their own business use. Revenue's arguments: The respondents argued that the appellant had not made out a case for interference as there was no valid E-way bill at the time of interception, justifying the imposition of GST and penalty. They contended that the appellant could not plead ignorance of the E-way bill's expiry and should have been vigilant. They also argued that the conduct of both the appellant and the transporter did not indicate a bonafide difficulty, and ignorance of law cannot be pleaded, especially in tax matters where timelines are strict. They further argued that the appellant's conduct did not entitle them to leniency regarding the penalty.

Which sections of the Income-tax Act were involved?

Section 129,Section 107(6),Section 2(19),Section 20

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
2023 INSC 1087 1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2023 ( @ SPECIAL LEAVE PETITION (C) NO.21079 OF 2022 ) VARDAN ASSOCIATES PVT. LTD. … APPELLANT VERSUS ASSISTANT COMMISSIONER OF STATE TAX CENTRAL SECTION & ORS. … RESPONDENTS

O R D E R

Leave granted.

2.

We have heard learned counsel for the parties.

3.

The present appeal emanates from the final judgment and order passed by the learned Single Judge of the High Court at Calcutta (hereinafter referred to as the “High Court”) in Writ Petition bearing W.P.A. No.17452 of 2019 dated 2nd August, 2022 (herein- after referred to as the “Impugned Judgment”), by which the said petition was dismissed. 2

BRIEF FACTS:

4.

The appellant, being a company, carries on the business of horizontal directional drilling using trenchless methodology for underground utilities - oil/gas, telecom and power. The appellant functions as a contractor and is duly registered under the Central Goods and Services Act, 2017 (hereinafter referred to as the “CGST Act”) and the West

The order continues below.

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