Landmark Cars (P.) Ltd. V/S Union of India {HIGH COURT OF GUJARAT)

Case Study Name: Landmark Cars (P.) Ltd. V/S Union of India {HIGH COURT OF GUJARAT) :

DATE OF ORDER – 14/06/2024

Case Overview: Landmark Cars (P.) Ltd., an authorized distributor of Mercedes Benz cars, faced a penalty under Section 129 of the GST Act due to a mismatch in the vehicle number on an e-way bill. The discrepancy arose when a replacement truck was used after the original truck carrying the cars suffered a breakdown.

Key Points of the Judgment:

1. Background: Landmark Cars (P.) Ltd. had generated an e-way bill based on a stock transfer invoice and lorry receipt to transport cars from Gujarat to Maharashtra. Due to a breakdown, the transporter used a replacement truck which led to a mismatch in the vehicle number mentioned on the e-way bill.
2. Penalty Imposed: The tax authorities issued a detention order under Section 129, demanding tax and penalty on the grounds of the vehicle number mismatch. The penalty was imposed under the assumption that there was an intention to transport goods without proper documentation, which is the primary concern addressed by Section 129.
3. Court’s Decision: The Gujarat High Court, comprising Justices Bhargav D. Karia and Niral R. Mehta, analyzed the situation and referred to Circular No. 64/38/18 dated 14-9-2018. This circular stipulates that minor errors, such as those related to vehicle numbers due to emergencies like breakdowns, should be dealt with by imposing a nominal penalty of Rs. 500 under the GST Act and Rs. 1,000 under the IGST Act.
4. Reasoning: The High Court found that despite the vehicle number mismatch, the essential details such as the chassis number of the cars and other relevant documents were correct and consistent. The intention to transport goods unlawfully was not proven. Therefore, the imposition of tax and penalty under Section 129 was deemed unjustified and without proper jurisdiction.
5. Order: Consequently, the High Court set aside the order demanding tax and penalty in Form GST MOV-09. This decision was based on the principle that minor errors due to emergencies should not result in severe penalties, especially when there is no intent to evade tax or transport goods unlawfully.

Explanation: Landmark Cars (P.) Ltd. faced a penalty under GST law when a replacement truck used due to a breakdown caused a mismatch in the vehicle number mentioned on the e-way bill. The tax authorities imposed tax and penalty under Section 129, alleging that there was an intention to transport goods unlawfully.

However, the Gujarat High Court intervened and referred to Circular No. 64/38/18, which addresses minor errors in transportation due to emergencies like breakdowns. The Court noted that such errors should be addressed by imposing nominal penalties rather than severe tax demands. Importantly, the Court found that despite the vehicle number mismatch, all essential details regarding the goods were correctly documented, including the chassis numbers matching those on the invoice and e-way bill.

Therefore, the High Court concluded that the tax and penalty imposed under Section 129 were unjustified and lacked jurisdiction. The order demanding tax and penalty in Form GST MOV-09 was set aside, ensuring that minor errors in transport logistics do not lead to disproportionate financial penalties, particularly when there is no evidence of intent to evade taxes or unlawfully transport goods.

This case underscores the importance of considering the circumstances leading to discrepancies in transportation logistics and applying penalties judiciously in accordance with applicable circulars and legal provisions.

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Relevant Section : 125 & 129 of CGST Act.