Supreme Court on GST E-Way Bill Expiry: Tax Upheld, Penalty Halved for Owner Moving Its Own Machine Between States – Order Not a Precedent [2023 INSC 1087]

The Supreme Court upheld the GST demand of Rs. 54 lakh on a contractor whose own drilling machine was intercepted while being moved from Uttar Pradesh to West Bengal after the e-way bill had expired, but reduced the penalty by half to Rs. 27 lakh, noting that the appellant owned the machine, was moving it for its own works contract and no evidence showed it was meant for sale. The order was passed under Article 142 and the Court expressly said it shall not be treated as a precedent (paras 17–20).

Headnote

Goods and Services Tax — Movement of goods — Expired e-way bill — Detention and penalty — Quantum of penalty — CGST Act, 2017 and WBGST Act, 2017, S. 129 read with S. 20 of the IGST Act, 2017; Constitution of India, Art. 142.

Capital goods (an HDD machine) owned by a works contractor were intercepted on 17.06.2019 while moving inter-State on an e-way bill valid only till 09.06.2019; tax of Rs. 54 lakh and equal penalty were confirmed — Notice in the SLP was confined to the quantum of penalty — Held, stricto sensu the appellant could not escape the requirement of generating a fresh e-way bill; but as it was the owner of the machine, was using it for its own contracts in Uttar Pradesh and West Bengal, an e-way bill had in fact been generated, and there was no evidence that the goods were to be sold or used for any other party, penalty reduced to 50% (Rs. 27 lakh); tax of Rs. 54 lakh upheld. Order passed under Art. 142 and not to be treated as a precedent.

(Paras 12, 17–20)

Note: The Supreme Court has expressly stated that this order has been passed under Article 142 of the Constitution and shall not be treated as a precedent (para 20).

Judgment Intelligence

Key Holdings

• An owner moving goods after expiry of the e-way bill cannot avoid the legal requirement of generating a fresh e-way bill (para 17).
• Where the owner was moving its own capital goods for its own works contract, an e-way bill had been generated, and nothing showed the goods were to be sold or used for another party, the Court found ground to interfere on the quantum of penalty (paras 17–18).
• Tax of Rs. 54 lakh upheld; penalty reduced from Rs. 54 lakh to Rs. 27 lakh (para 19).
• The order was made under Article 142 and is not to be treated as a precedent (para 20).

Brief Facts

The appellant, a horizontal directional drilling contractor registered under the CGST and WBGST Acts, executed works contracts for GAIL. On 30.05.2019 it engaged M/s Hariom Freight Carriers to move its own XCMG HDD machine (about 68 tonnes) – capital goods under Section 2(19) of the CGST Act – from Auraiya, Uttar Pradesh to Durgapur, West Bengal, and generated an e-way bill valid till 09.06.2019 (paras 4–6). The consignment was intercepted on 17.06.2019 while entering West Bengal and detained under Section 129(1) (MOV-06 dated 18.06.2019). A notice under Section 129(3) (MOV-07 dated 19.06.2019) proposed tax of Rs. 54 lakh and penalty of Rs. 54 lakh, which was confirmed by order in MOV-09 dated 27.06.2019 (paras 6–7). The appellant appealed after depositing 10% of the tax; the Calcutta High Court on 18.09.2019 permitted release on payment of the entire tax and 50% of the penalty in cash with a bank guarantee for the rest, and later dismissed the writ petition on 02.08.2022 (paras 8–9, 3).

Issue

1. Notice in the Supreme Court having been issued only on the quantum of penalty – whether the penalty of Rs. 54 lakh called for interference on the facts (paras 12, 17)?

Court's Findings

Legal requirement: The Court confined itself to the quantum of penalty and observed that, stricto sensu, the appellant could not shirk its responsibility to generate a fresh e-way bill if the consignment had not been transported in time (para 17).

Undisputed facts favouring the appellant: The appellant was the owner of the consignment, used it for its contractual obligations in Uttar Pradesh and then a similar contract in West Bengal, and no evidence showed that the consignment was to be sold or used for any other party (para 17).

Relief on penalty: Ordinarily the Court may have refrained from interfering, but since an e-way bill had been generated, it varied the High Court's orders and reduced the penalty to 50% (paras 18–19).

Final Outcome / Directions (paras 19–20)

• Tax of Rs. 54,00,000 upheld; penalty reduced to Rs. 27,00,000; total Rs. 81,00,000 payable.
• Amount, subject to payments already made, to be deposited on or before 29.02.2024; vehicle and consignment then to be released expeditiously.
• Appellant cautioned to be vigilant in future.
• Appeal disposed of; order passed under Article 142 and not to be treated as a precedent.

Legal Principle

Movement of goods on an expired e-way bill remains a breach even where the owner moves its own capital goods. On the particular undisputed facts, the Supreme Court used its Article 142 power to reduce the penalty – a case-specific relief that is expressly not a precedent.

Precedents Relied Upon

None. The order does not cite or rely on any precedent; it was decided on the undisputed facts and under Article 142 of the Constitution (paras 17–20).

Important Paragraphs of the Judgment

Para 17: "Having considered the matter, the Court wishes to confine its consideration only to the quantum of penalty, as was made clear vide order dated 8th December, 2022. It is not in doubt that stricto sensu, the appellant cannot shirk from its responsibility of complying with the requirement in law to generate a fresh E-way bill, if for any reason the consignment had not been transported. However, viewing the factual scenario, which is not disputed, i.e., the appellant is the owner of the consignment and was using it in connection with its contractual obligations in Uttar Pradesh and then having a similar contract in West Bengal and no evidence has been placed on record that shows that the consignment was to be sold/used for any other purpose in respect of any other party, this Court is persuaded to interference."

Para 19: "In our opinion, ends of justice would be served if the penalty amount is reduced to 50% of the penalty imposed, i.e., ₹27,00,000/- (Rupees Twenty seven lakhs). Therefore, ₹54,00,000/-(Rupees Fifty four lakhs) being the tax imposed, is upheld and penalty would now be ₹27,00,000/- (Rupees Twenty seven lakhs), totalling to ₹81,00,000/- (Rupees Eighty one lakhs), which shall be paid by the appellant…"

Para 20: "The appeal stands disposed of in the afore-elucidated terms. It is made clear that this order has been passed under Article 142 of the Constitution of India and shall not be treated as a precedent…"

What the Ruling Means: Practical Impact

• Generate a fresh e-way bill if transport is delayed: The Court made clear that owners cannot shift responsibility to the transporter; a lapsed e-way bill is a breach even for own goods.
• Not a precedent: The penalty reduction rests on Article 142 and the specific facts. Taxpayers cannot cite it as binding authority for automatic penalty relief, though the factors noted by the Court (ownership, own use, no sale, e-way bill generated) may be urged on facts.
• Keep records of ownership and use: Proof that goods are the taxpayer's own capital goods moving for its own contract was central to the relief.

Frequently Asked Questions

Did the Supreme Court waive GST in Vardan Associates?

No. The tax of Rs. 54 lakh was upheld. Only the penalty was reduced from Rs. 54 lakh to Rs. 27 lakh (para 19).

Can Vardan Associates be cited as a precedent for reducing e-way bill penalty?

The Court expressly said the order was passed under Article 142 and shall not be treated as a precedent (para 20).

Why did the Court reduce the penalty?

Because the appellant owned the machine, was moving it for its own works contract, an e-way bill had been generated, and there was no evidence that the goods were to be sold or used for another party (paras 17–18).

Is an e-way bill required for moving own capital goods between States?

The Court held that the appellant could not escape the legal requirement of generating a fresh e-way bill when the earlier one had expired (para 17).

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Download Judgment: 2023 INSC 1087 – Vardan Associates Pvt. Ltd. v. Assistant Commissioner of State Tax (PDF, sci.gov.in)

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