Gujarat High Court Grants Major Relief to Exporters: Reduces 200% GST Penalty on Expired E-Way Bills

Introduction

In a recent landmark judgment, the Gujarat High Court has significantly reduced a 200% GST penalty imposed on an exporter for transporting goods with an expired e-way bill. This ruling offers a valuable precedent for businesses engaged in zero-rated export supplies, where tax is not payable.

Case Background

The petitioner was exporting goods, which under GST law are treated as zero-rated supplies (no tax is payable).

However, during transit, the e-way bill expired, leading to detention of goods and vehicle by GST officers.

A penalty of 200% of the tax amount was imposed under Section 129(1)(a) of the CGST Act, 2017.

The exporter challenged the penalty in the Gujarat High Court, arguing that:

Since the transaction involved export, no actual GST was payable.

Hence, the 200% penalty was excessive and unjustified.

Gujarat High Court’s Judgment

According to the judgment dated May 2024, the Gujarat High Court held:

1.200% Penalty Not Justified in Zero-Rated Export Cases

The court acknowledged that no GST was due in this case. Hence, levying a penalty based on tax that wasn't payable is excessive and not legally sustainable.

2.Penalty Reduced to ₹25,000 Only

The court modified the penalty order and reduced it to a token amount of ₹25,000, considering the technical lapse (expired e-way bill).

3.Release of Bank Guarantee Ordered

The exporter had submitted a bank guarantee to get their goods released earlier. The court directed authorities to release this bank guarantee immediately.

4.Exporter Penalized for Hiding Key Facts

The court found that the exporter had suppressed certain facts, such as routing the order through sister concerns and later trying to amend the documentation. Due to this non-disclosure, the court imposed an additional cost of ₹10,000 per petition.

Legal Provisions Referenced

Section 129(1)(a), CGST Act, 2017 – Provides for penalty if goods are transported without proper documents (e.g., valid e-way bill).

Zero-Rated Supply (Section 16, IGST Act) – Exports are considered zero-rated, meaning no GST is payable on such outward supplies.