Driver of vehicle is not a proper person to be serve a notice for imposition of penalty.

Case Title: Bansal Earthmovers (P.) Ltd. v. Assistant Commissioner of State Goods and Service Tax

Court: High Court of Calcutta

Petition No.: WPA No. 82 of 2019

Relevant Sections: Sections 129(1)(a), (b), (3), (4) of the WBGST Act, 2017 and CGST Act, 2017

Category of Dispute: Detention of Goods / Penalty for Absence of E-Way Bill

Date of Judgment: 5 December 2019

Facts of the Case [¶2]

1. The petitioner, a trader in heavy machinery, sold a Soil Compactor to M/s. Akash Enterprise and dispatched the same with all valid sale documents but without an e-way bill, citing GST portal server issues. [¶2(b)]
2. The vehicle was intercepted and detained on 23 March 2019 for non-possession of an e-way bill, which was generated shortly after interception. [¶2(c)]
3. The goods were later released upon furnishing a bank guarantee by court order dated 16 April 2019. A penalty order was passed ex parte without notice to the petitioner. [¶2(d)-(e)]

Question(s) in Consideration [¶3, ¶4]

1. Whether the penalty order under Section 129(3) of the WBGST Act was valid despite service of notice only on the driver and not the owner. [¶3(E)]
2. Whether absence of an e-way bill due to technical/server failure of the GST portal constitutes a valid ground to escape penalty. [¶3(C), ¶6]
3. Whether imposition of penalty without providing an opportunity of hearing violates principles of natural justice. [¶3(E), ¶4]

Observation of Court [¶11–18]

1. Section 129(3) and (4) mandates issuance of notice and opportunity of hearing to the person on whom penalty is to be imposed; mere service on driver is not valid service. [¶12, ¶17]
2. Circulars and GST forms cannot override statutory mandates; hence, MOV-07 served on the driver did not satisfy legal requirement. [¶13–14]
3. Petitioner was within 15 km of the tax authority’s office, yet no attempt was made to serve notice to the company. [¶15]
4. No hearing was granted, amounting to a substantive, not technical, breach of natural justice. [¶17–18]
5. The question of mens rea was left open for reconsideration by the proper officer. [¶20]

Judgment of the Court [¶19–21]

• The High Court quashed the penalty order dated 3 April 2019 due to violation of principles of natural justice.
• The Assistant Commissioner was directed to issue fresh notice, grant a hearing, and pass a reasoned order with at least seven days’ notice.
• The matter was remanded without addressing the issue of mens rea at this stage.

Between Fine Lines

• The penalty imposed solely on the basis of notice served to a driver (and not the owner) was held legally deficient.
• GST officials must ensure service of notice and opportunity of hearing to the actual owner or person liable.
• Circulars or administrative forms cannot substitute or override statutory requirements.
• Detentions due to technical glitches on the GST portal warrant fair inquiry before penal action.
• The Court reaffirmed that natural justice must be a real, not ritualistic, exercise under Section 129.

Summary of Referred Cases