Top Stories Delhi HC: Section 129 of GST Act cannot Override Procedural Safeguards for Minor Breaches [Read Order] The Delhi High Court has ruled that Section 129 of the CGST Act cannot be used to impose penalties for minor e-way bill errors. By Nandan GK – On January 20, 2025 5:30 pm – 3 mins read The Delhi High Court has ruled that Section 129 of the CGST Act cannot be used to impose penalties for minor e-way bill errors. The court held that such errors constitute minor procedural breaches, and penalties should not be imposed without considering the principles of moderation and proportionality outlined in Section 126.

The petitioner imported goods from Italy and paid the necessary taxes. They were transporting the goods to their factory in Rajasthan. However, the transporter failed to complete Part B of the e-way bill (EWB) while Part A of the EWB had been duly filled out, The GST officer intercepted the conveyance and detained the goods due to the e-way bill error. The officer then raised a demand of Central GST7 and State GST8 amounting to INR 19,80,000/- together with penalty of an equivalent amount. Become a PF & ESIC expert with our comprehensive course – Enroll Now

Despite the company promptly correcting the e-way bill error the next day, the officer still demanded the penalty and continued to detain the goods. The petitioner had to submit a bond to get their goods released. They appealed against the officer’s decision, but the appeal was dismissed. They then filed a writ petition in court to challenge the penalty. The main issue in this case is, whether Section 129 can be used to impose penalties for minor e-way bill errors without considering the principles of moderation and proportionality outlined in Section 126 of the Act. The petitioners argued that the incomplete e-way bill constituted a minor procedural error, not a serious offense. They claimed that since the mistake was easily rectified and made without fraudulent intent, no penalty should be imposed according to Section 126 of the CGST Act.

The respondents on contra argued that Section 129 of the CGST Act is a provision for a statutory penalty, meaning it applies regardless of intent to evade tax or fraud. They claimed that Section 129 aims to deter such violations and justifies the tax demand. Become a PF & ESIC expert with our comprehensive course – Enroll Now While deciding the case, the two-judge bench of Justice Vashwant Varma and Justice Harish Vaidyanathan Shankar observed that: Imposing a penalty for failing to fulfill a statutory obligation requires careful consideration. It should not be automatic, but rather based on whether the party acted deliberately, dishonestly, or with conscious disregard. Even with a prescribed minimum penalty, authorities can refrain from imposing it for minor breaches or those arising from genuine misunderstandings. The Court has ruled that Section 129 of the Central Goods and Services Tax Act, 2017, which governs the detention and seizure of goods in transit, cannot be invoked to impose penalties for minor breaches, such as incomplete e-way bills.

The Court emphasized that Section 126 of the CGST Act, which mandates moderation in imposing penalties, prohibits the imposition of penalties for minor breaches of tax regulations or procedural requirements. This demonstrates the legislature’s intent to exercise restraint when imposing penalties. Furthermore, the Court held that the non-obstante clause in Section 129 does not have the authority to override all other provisions of the Act, including the principles of moderation enshrined in Section 126. The court emphasizes that non-obstante clauses should be interpreted within the context of the entire statute. They should not be applied broadly to override other relevant provisions. The court highlights the importance of considering the entire statute and its overall purpose when interpreting specific clauses