VARDAN ASSOCIATES PVT. LTD. versus ASSISTANT COMMISSIONER OF STATE TAX CENTRAL SECTION & ORS
[2023] 16 S.C.R. 1118, Supreme Court of India, 2023
Outcome: Disposed off
Segment: Issues
[2023] 16 S.C.R. 1118 : 2023 INSC 1087
1118
CASE DETAILS
VARDAN ASSOCIATES PVT. LTD.
v.
ASSISTANT COMMISSIONER OF STATE TAX CENTRAL 
SECTION & ORS.
(Civil Appeal No. 8302 of 2023)
OCTOBER 31, 2023
[HIMA KOHLI AND AHSANUDDIN AMANULLAH, JJ.]
HEADNOTES
Issue for consideration: Consignment was intercepted in the course of 
inter-state movement, as there was no valid E-way bill. High Court directed 
that the goods be released subject to payment of the entire amount of the 
Goods and Service Tax in cash and 50% of the penalty imposed also in cash 
while the remaining 50% by way of bank guarantee.
Central Goods and Services Act, 2017 – West Bengal Goods and 
Services Act, 2017 – Integrated Goods and Services Tax Act, 2017 – 
Appellant executed work contracts for GAIL in the State of UP in 
Auraiya district, including work in the State of West Bengal – It availed 
services of one M/s. HFC for mobilising a machine-the consignment 
(capital goods under CGST Act) used for execution of works contracts 
from Auraiya, UP to Durgapur, West Bengal, for which an E-way Bill 
was generated – However, as transportation was not done within the 
validity period of the E-way bill, the consignment was intercepted and 
order of detention was issued, at the time of entering the State of West 
Bengal – Consignment and the vehicle detained – Order of demand of 
tax and penalty passed – Eventually, High Court inter alia, directed that 
the goods be released subject to payment of the entire amount of the
Goods and Service Tax in cash and 50% of the penalty also in cash while 
the remaining 50% by way of bank guarantee – Challenged – Present 
consideration conﬁ ned only to the quantum of penalty:
Held: Appellant was saddled with tax – Law also provides for 
imposition of penalty – Ordinarily, this Court would have refrained from
1119
interfering, but because there was an E-way bill that was generated and 
in view of the factual scenario which is not disputed that 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 had been placed on record showing that 
the consignment was to be sold/used for any other purpose in respect of any 
other party, the orders passed by the High Court varied – ₹ 54,00,000/- being 
the tax imposed is upheld however, penalty is reduced to 50% of the penalty 
imposed and would now be ₹ 27,00,000/- – ₹81,00,000/- be paid by the 
appellant (subject to payment already made) – Upon the same being done, 
the transportation vehicle as also the consignment be released – Present order 
passed u/Article 142 and shall not be a precedent. [Paras 18, 17, 19 and 20]
OTHER CASE DETAILS INCLUDING IMPUGNED 
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION : Special Leave Petition (C) 
No.21079 of 2022.
From the Judgment and Order dated 02.08.2022 of the High Court at 
Calcutta in WPA No.17452 of 2019.
Appearances:
R. Balasubramanian, Sr. Adv., Mehul Sharma, Karunakar Mahalik, 
Yash Tyagi, Manoranjan Mishra, Sarbendra Kumar. Advs. for the Appellant.
Balbir Singh, A.S.G., Rakesh Dwivedi, Sr. Adv., Ms. Madhumita 
Bhattacharjee, Ms. Urmila Kar Purkayasthe, Ms. Srija Choudhury, Mukesh 
Kumar Maroria, Rupender Sinhmar, Shlok Chandra, Shantnu Sharma,
Naman Tandon, Advs. for the Respondents.
JUDGMENT / ORDER OF THE SUPREME COURT
ORDER
Leave granted. 
2. We have heard learned counsel for the parties.
3. The present appeal emanates from the ﬁ nal judgment and order 
passed by the learned Single Judge of the High Court at Calcutta (hereinafter 
VARDAN ASSOCIATES PVT. LTD. v. ASSISTANT 
COMMISSIONER OF STATE TAX CENTRAL SECTION
1120 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
referred to as the “High Court”) in Writ Petition bearing W.P.A. No.17452 
of 2019 dated 2nd August, 2022 (hereinafter referred to as the “Impugned 
Judgment”), by which the said petition was dismissed.
BRIEF FACTS:
4. The appellant, being a company, carries on the business of horizontal 
directional drilling using trenchless methodology for underground utilities 
- oil/gas, telecom and power. The appellant functions as a contractor and is 
duly registered under the Central Goods and Services Act, 2017 (hereinafter 
referred to as the “CGST Act”) and the West Bengal Goods and Services 
Act, 2017 (hereinafter referred to as the “WBGST Act”). For many years, 
the appellant executed work contracts of the Gas Authority of India Limited 
(hereinafter referred to as “GAIL”), including work in the State of West 
Bengal for Dobhi-Durgapur Gas Pipeline Section. Prior to this, the appellant 
had executed work for GAIL in the State of Uttar Pradesh in Auraiya district.
5. Insofar as the execution of the work in Durgapur is concerned, on 
30th May, 2019, the appellant availed of the services of M/s. Hariom Freight 
Carriers (hereinafter referred to as “HFC”) for mobilising one machine being 
XCMG HDD Machine XZ6600(hereinafter referred to as the consignment”)
weighing approximately 68 tons from its previous/old work site at Auraiya, 
Uttar Pradesh to the new site at Durgapur, West Bengal. The said machine 
which is used for execution of
works contracts by the appellant, who is its 
sole owner, is ‘capital goods’ as per Section 2(19)1, CGST Act. The appellant 
complied with the provisions of the CGST Act relating to movement of 
capital goods, before initiating the movement from Auraiya, Uttar Pradesh 
to Durgapur, West Bengal by generating E-way Bill on 30th May, 2019, 
bearing No.791074700465 after paying the requisite tax amount required 
under the Integrated Goods and Services Tax Act, 2017 (hereinafter referred 
to as the “IGST Act”). 
6. The validity of the said E-way bill was till 9th June, 2019. As 
transportation was not done within the validity period of the E-way bill, 
ﬁ nally the consignment was intercepted on 17th June, 2019 and upon 
1 
‘(19) “capital goods” means goods, the value of which is capitalised in the books of 
account of the person claiming the input tax credit and which are used or intended to 
be used in the course or furtherance of business;’
1121
inspection, an order of detention was issued by the respondent No.1, at the 
time of entering the State of West Bengal, under Section 129(1), CGST Act 
and Section 129(1), WBGST Act read with Section 20, IGST Act under 
Form GST MOV-06 No.703 dated 18th June, 2019. Pursuant thereto, the 
consignment as well as the vehicle carrying the same were detained by the 
respondent No.1. 
7. Thereafter, the respondent No.1 issued a notice under Section 
129(3), CGST Act and Section 129(3), WBGST Act read with Section 
20, IGST Act, being Form GST MOV-07 No.712 dated 19th June, 2019, 
asking the appellant to show-cause, within seven days from the date of the 
receipt of the notice, as to why the proposed tax of ₹ 54,00,000/- (Rupees 
Fifty four lakhs) and penalty of ₹ 54,00,000/- (Rupees Fifty four lakhs) 
be not imposed, indicating that failure would lead to initiation of further 
proceedings under the provisions of the CGST, WBGST or IGST Acts. On 
24th June, 2019, the appellant ﬁ led its reply. However, upon consideration 
of the reply ﬁ led by the appellant, on 27th June, 2019, an order of demand 
of tax and penalty under Form GST MOV-09 vide Order No.803 was passed 
by the respondent No.1 and the proposed tax and penalty in terms of the 
notice dated 19th June, 2019, was conﬁ rmed. 
8. The appellant, aggrieved by the said demand order, preferred an 
appeal, against the same on 19th July, 2019 before the Appellate Authority, 
after depositing 10% of the tax demand, i.e.,
₹5,40,000/- (Rupees Five lakh 
forty thousand) in terms of Section 107(6), IGST Act. On 2nd July, 2019, 
Form GST DRC-07 with Reference No.ZA190719000030Y was issued 
raising a demand of tax of ₹54,00,000/- (Rupees Fifty four lakhs) and a 
penalty of ₹54,00,000/- (Rupees Fifty four lakhs) totalling to ₹1,08,00,000/- 
(Rupees One crore and eight lakhs) was imposed. On 31st July, 2019, the 
appellant communicated to the respondent No.1 that it had ﬁ led an appeal 
before the Appellate Authority after having deposited 10% of the tax demand 
and that a bank guarantee had been arranged in favour of the respondent No.1 
being the amount of demand, as per the order dated 27th June, 2019. A copy 
of the said bank guarantee was submitted before the respondent No.1 with a 
request to give formal permission of release of goods on execution of bond 
in Form GST MOV-08 and submission of bank guarantee. It was further 
assured by the appellant to the respondent No.1 that the bond under Form 
VARDAN ASSOCIATES PVT. LTD. v. ASSISTANT 
COMMISSIONER OF STATE TAX CENTRAL SECTION
1122 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
GST MOV-08 as well as bank guarantee would be executed immediately 
after receiving permission from the respondent No.1. However, the appeal 
was not decided and thus, the appellant ﬁ led a writ petition2 before the 
High Court at Calcutta against the order dated 2nd July, 2019. This writ 
petition was disposed of by the High Court by order dated 21st August, 
2019, directing the Senior Joint Commissioner of State Tax, Central Section, 
who was the Appellate Authority, to decide the appeal of the appellant at 
the earliest and preferably by 28th August, 2019. The appellant also ﬁ led 
a writ petition3, inter alia, praying for consideration of the applications 
dated 31st July, 2019 and 2nd August, 2019, for submission of full amount 
through bank guarantee and provisional release of the consignment in terms 
of Section 129(1)(c), WBGST Act and not to give eﬀ ect to the demand order 
dated 27th June, 2019. Further, as an interim measure, it was prayed that the 
respondents be directed not to give eﬀ ect and/or further eﬀ ect to the order 
dated 27th June, 2019. 
9. On 18th September, 2019, the High Court, inter alia, directed that the 
goods may be released subject to payment of the entire amount of the Goods 
and Service Tax (hereinafter referred to as “GST”) of ₹54,00,000/- (Rupees 
Fifty four lakhs) in cash to the Authority, out of which, ₹5,40,000/-(Rupees 
Five lakhs and forty thousand) had already been paid with the further
direction that the appellant shall also pay 50% of the penalty of ₹ 54,00,000/- 
(Rupees Fifty four lakhs), i.e., ₹27,00,000/- (Rupees Twenty seven lakhs) in 
cash and the remaining 50%, i.e., ₹27,00,000/- (Rupees Twenty seven lakhs) 
by way of bank guarantee which should be valid for a year and be renewed 
every year till the disposal of the writ petition. Thereafter, the impugned 
judgment was passed which is under challenge in the present proceeding. 
SUBMISSION BY THE APPELLANT:
10. Learned counsel for the appellant submitted that though there may 
have been some fault on the part of the appellant with regard to the E-way bill 
not being valid on the day when the actual transportation of the consignment 
took place but the same was due to the fact that HFC could not make available 
any vehicle for transportation in Auraiya, Uttar Pradesh which fact was 
2 
Writ Petition No.15959(W) of 2019
3 
Writ PeƟ Ɵ on No.17452(W) of 2019
1123
never intimated/conveyed to the appellant, and this was the reason as to 
why fresh E-way bill for interstate transfer of the said consignment could 
not be generated by the appellant. It was further submitted that even after 
depositing 10% of the tax amount, which was required for ﬁ ling an appeal 
and the appellant being ready to pay the remaining amount of the tax and 
to give a bank guarantee for the penalty, the respondents had denied release 
of the consignment which was arbitrary.
11. It was next submitted that the consignment has remained uncared 
till now and must have been damaged. Ultimately, the consignment was the 
property of the appellant, who was merely transporting the same from Uttar 
Pradesh to West Bengal and thus, there should not be any GST imposed 
and in this regard, actually an E-way bill was generated, but unfortunately, 
validity of such transportation had elapsed due to factors, which the appellant 
was unaware of and were beyond its control. Thus, it was submitted that in 
such a background, the appellant should not be saddled with huge ﬁ nancial 
consequences which would be inequitable, unjustiﬁ ed, arbitrary and dis-
proportionate. The movement of the consignment was in the nature of an 
“inter unit transfer” of capital goods from one place to another and not a 
result of any transaction of sale/purchase of goods between two parties, 
making it liable for taxation under the GST regime.
12. Finally, learned counsel submitted that as notice
had been issued 
on the limited point of quantum of penalty, this Court may consider the 
circumstances under which the entire episode happened and protect the 
appellant as imposition of such heavy amount(s) would lead to serious 
ﬁ nancial hardship and cripple the appellant from carrying out its business.
SUBMISSIONS BY THE RESPONDENTS NO.1, 2, 3 AND 5:
13. Per contra, learned counsel for the respondents submitted that 
appellant has not made out any case for interference since the admitted 
position is that on the day when the consignment was intercepted in the 
course of inter-state movement, there was no live/valid E-way bill which 
exempted payment of the GST and in the absence of the same, imposition of 
GST and the attendant penalty is justiﬁ ed both, in law as well as on facts. It 
was submitted that the Authority which has passed the underlying impugned 
order, exercising the power under the relevant Acts had no option but to 
pass such an order in view of the admitted factual position and as such, no 
VARDAN ASSOCIATES PVT. LTD. v. ASSISTANT 
COMMISSIONER OF STATE TAX CENTRAL SECTION
1124 
SUPREME COURT REPORTS 
[2023] 16 S.C.R.
inﬁ rmity or fault can be attributed to the course adopted by the concerned 
respondents.
14. Learned counsel further submitted that the Court would also 
consider the facts that in such a matter where the Consignment was to be 
shifted from Auraiya, State of Uttar Pradesh to Durgapur, State of West 
Bengal and the validity period of the generated E-way bill was from 
30th May, 2019 till 9th June, 2019, i.e., more than ten days whereas, the 
consignment ultimately crossed the state borders only on 17th June, 2019, 
i.e., after a delay of over one week from the date of expiry of the E-way 
bill. The appellant cannot simply plead ignorance of such factum, as it was 
required to be vigilant of the consignment being transported, if at all it was 
for the purpose of doing work by the appellant itself at a diﬀ erent place and 
by way of “inter unit transfer of capital goods from one place to another”. 
It was contended that even HFC to which, as per the appellant, the work 
of transportation of the consignment was entrusted, was fully aware of the 
period of expiry/validity of the E-way bill. If there was a genuine diﬃ  culty 
of not having an available transportation vehicle at the relevant time, the 
appellant could not/would not have agreed to transport the same within 
the time-period of the E-way bill. But from the conduct of both, HFC and 
the appellant, it does not appear that such a plea was bonaﬁ de or genuine.
15. Learned
counsel summed up, submitting that in any view of 
the matter, the appellant as well as HFC being in the business of such 
transactions, cannot plead ignorance of law. It was advanced that the mere 
fact that an E-way bill had been generated, and was used mistakenly beyond 
the validity period, cannot be accepted, much less in taxation matters where 
the time-period ﬁ xed for certain acts by the person, is required to comply 
with the same is strict, without any discretion either to the person concerned 
or to the authorities to relax the timelines. The only way going forward was 
to generate a fresh E-way bill, which has not been done.
16. On the point of quantum of penalty limited to which notice was 
issued, it was submitted that from the sequence of facts, it is obvious that 
the conduct of the appellant does not entitle it to any leniency, especially 
in tax matters, where the parties have to be very serious as government 
revenue is involved; which in turn has an eﬀ ect on the very functioning of 
the Governments, both at the Central and State levels.
1125
DIRECTIONS:
17. Having considered the matter, the Court wishes to conﬁ ne 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. 
18. The appellant has been saddled with the tax amount of ₹ 54,00,000/- 
(Rupees Fifty four lakhs). The law also provides for imposition of penalty. 
Ordinarily, we may have refrained from interfering, but because there 
was an E-way bill that was generated and in view of the discussions made 
hereinabove, we are inclined to vary the orders passed by the High Court.
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. The said amount, subject to payment(s) 
already made, shall be deposited with the concerned Authority on or before 
29th February, 2024. Upon the same being done, the transportation vehicle as 
also the consignment shall be released to their rightful owners expeditiously. 
At the same time, the appellant is cautioned to be vigilant in future.
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. Pending 
application stands disposed of.
Headnotes prepared by: 
Appeal disposed of.
Divya Pandey
VARDAN ASSOCIATES PVT. LTD. v. ASSISTANT 
COMMISSIONER OF STATE TAX CENTRAL SECTION