Penalty Equivalent to Tax Can’t Be Levied u/s 129 if Machinery Was Transported from Port to Factory After Customs Clearance

Case Details: Fabricship (P.) Ltd. v. Union of India - [2024] 164 taxmann.com 80 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram & Jitendra Jain, JJ.
  • Ishaan Patkar & Alaksha for the Petitioner. 
  • Anjani Kumar Singh, D.P. Singh, Ms S.D. Vyas, Addl. G.P., M.M. Pable AGP for the Respondent.

Facts of the Case

The petitioner imported machinery from China under EPCG scheme and arranged transport to its own factory. The vehicle in which machinery was being transported was intercepted in Maharashtra and it was found that e-way bill did not accompany vehicle. The department levied penalty under Section 129(1) of CGST Act, 2017 equivalent to tax applicable on value of machinery. The petitioner filed writ petition against the levy of penalty and contended that there would be no GST liability when goods are transported by an importer to his own factory.

High Court Held

The Honorable High Court noted that the activity of transport of machinery from port to petitioner’s own factory would not fall within Section 7 which deals with scope of supply. In the instant case, when the machinery was being transported to petitioner’s own factory after Customs clearance, there would be no tax payable under the GST Act. Therefore, the first limb of Section 129(1)(a) which provides for penalty equal to one hundred per cent of tax payable could not be invoked in instant case.

Moreover, the second limb of Section 129(1)(a) would be applicable which provides penalty equal to two per cent of value of goods or 25,000 whichever is less in case of exempted goods. In the instant case, two per cent of value of goods is more than Rs.25,000 and therefore, as per Section 129(1)(a) penalty which could be levied would be Rs.25,000 because it is lesser of two amounts. Thus, it was held that the penalty of Rs.25,000 would be levied and writ petition was disposed of.