In a very significant move, the Madhya Pradesh high court has refused relief to a transporter which has been slapped with a penalty of Rs 1.32 crore by the commercial tax department of the state for not filing the details of the truck in the e-way bill.
Experts say this is a significant decision and could prove to be a test case for e-way bill, a mechanism under the Goods and Services tax (GST) to track movement of goods and trucks within the state or across the country. However, the verdict raises an important question -- should failure to fill truck's details in the e-way bill invite such a harsh punishment?
In this case, Gati Kintetsu Express Pvt Ltd, a transporting and supply chain management company, had filled the part A of the e-way bill, but failed to fill the part B citing technical glitches. The department of commercial tax in MP contented that if there were any technical glitches, the transporter should have raised the grievance with the GST portal. The high court seconded the view of the commercial tax department of the state and refused to give any relief to transporter asking it to pay a penalty of Rs 1.32 crore.
For starters, an e-way bill has two parts -- Part one has details of the consignment, its value, invoice number, HSN Code, etc, while part B has details of the transporter.
MS Mani, partner, Deloitte India, says if seen in isolation, non-filing of part B of the e-way bill should not lead to such a harsh penalty. However, he says that quite often in tax cases a lot of the details are not fully known and hence it is difficult to say if the decision is harsh.
He says quite possibly the company in question has a record of tax evasion in the past and hence the tax department and the high court may have taken such a tough stand.
"It is quite likely that the court may have been convinced beyond doubt that it was not an error but a deliberate act of omission by the company," says MS Mani.
The high court has said in its order that explanation submitted by the petitioner for not updating the details in Part-B due to technical error has no merit. It says that no such grievance has been raised by the petitioner on GST portal, which is considered as a mandatory act in these kinds of circumstances.
Naveen Kumar Gupta, secretary general, All India Motor Transport Congress, however, says that such a harsh penalty for error is completely unjustifiable. "This is not tax evasion because the details of the consignment had already been filled in the part A of the e-way bill. If for some reason, they could not fill the truck's detail you cannot impose such heavy fine," says Gupta.
He says this is a major flaw in the law and that his association has already made representation against this.
Pratik Jain, Partner and Leader Indirect Tax, PwC, says that this is a significant development and would empower the authorities across states to be more vigilant to scrutinise the consignments.
"It becomes extremely important for the businesses to put in place a strong process for E-waybill compliance...because treating the E way bills as merely a 'procedural' requirement would be fraught with risk," he says.
He, however, maintains that there is confusion among companies whether these compliances should be undertaken by the supply chain team or the finance/tax teams and in the process, chances of error is high.