E-Way Bill: HC Sets Aside GST Penalty on Medical Consignment; Orders Release Against Bank Guarantee
E-Way Bill: HC Sets Aside GST Penalty on Medical Consignment; Orders Release Against Bank Guarantee
The current writ petition is being filed by a company named M/s. Modcon Health Care Pvt Ltd (petitioner) against the Secretary, Joint Commissioner, and Deputy State Tax Officer (respondent) in the Madras High Court under Article 226 of the Constitution of India. The company here is requesting the high court to review the case deeply and quash the order dated 21.07.2025, passed by the Joint Commissioner, Commercial Taxes (Enforcement).
The company is M/s. Modcon Health Care Pvt. Ltd., located in Chennai, they are registered under GST laws. Originally, they used to transport medical goods from Kerala to Chennai, and later they expanded operations to send goods to Vellore. On 18.07.2025, the company generated an E-Way Bill (No. 501847369456) for transporting certain medical goods from M/s. SMARD, Kerala, to Christian Medical College (CMC), Vellore. The vehicle carrying these goods was KL 52 U 4621.
On 21.07.2025, while the goods were about to be delivered at CMC Hospital, the Deputy State Tax Officer (Roving Squad-V), Vellore, the tax department stopped and detained the vehicle along with the goods and gave the reason for detention that CMC Vellore was not listed as a registered place of business in the GST portal for the petitioner. The officer issued a show-cause notice (SCN) imposing a penalty of Rs. 1,064,116 for this violation, under the GST Act.
The company argued that they are registered dealers under GST, and this was a genuine delivery to a hospital (CMC, Vellore), a customer. They claimed there was no intention to evade tax and that the detention and penalty were harsh and illegal, especially since the goods were meant for medical treatment. They also informed the court that after they filed the writ petition, the tax officer went ahead and issued a final penalty order (ex parte) on 30.07.2025 without giving them a proper chance to reply.
The tax department said that they are willing to set aside the penalty order dated 30.07.2025, but only on the condition that the company agrees to furnish a bank guarantee of Rs. 10,00,000. After this, they can reply to the original show cause notice, and then the department will pass a fresh order.
When the court observed both sides, it ruled in favour of the company, quashed the penalty order dated 30.07.2025, on the condition that the company furnish a bank guarantee of Rs. 10 lakhs to the tax department within 7 days from the date of receipt of a copy of this order. On the furnishing of such Bank Guarantee, the tax department is directed to immediately release the detained goods. Thereafter, the company must submit a proper reply to the original show cause notice dated 21.07.2025 within 7 days after giving the guarantee. Once the reply is received, the tax department is directed to consider it fairly and pass a fresh final order based on merits and the law, without any bias or delay.