Clarifying Penalty under Section 129(3) of the U.P. GST Act: Allahabad High Court’s Ruling on Non-Filling of Part-B of E-way Bill

In the recent ruling by the Allahabad High Court in the case of M/S TATA HITACHI CONSTRUTION MACHINERY COMPANY PRIVATE LIMITED VERSUS STATE OF UTTAR PRADESH AND 2 OTHERS - 2025 (5) TMI 770 - ALLAHABAD HIGH COURT, the Court addressed the imposition of penalty under Section 129(3) of the U.P. GST Act, 2017 for the non-filling of Part-B of the e-way bill. The petitioner in this case was penalized for violating Rule 138 of the GST Rules, 2017, due to the absence of details in Part-B of the e-way bill. However, the Court found that the authority had not made any finding regarding an attempt to evade tax. The Court emphasized that merely a technical violation of the e-way bill provisions, without evidence of tax evasion, should not lead to a penalty under Section 129.

Key Points of the Judgment:

1. Violation of Rule 138: The petitioner was carrying goods with an e-way bill but failed to fill out Part-B of the e-way bill. This non-compliance with the requirements of Rule 138 led to a penalty being imposed by the Assistant Commissioner of the Mobile Squad, Gautam Buddha Nagar.
2. Argument of Technical Breach: The petitioner argued that the non-filling of Part-B was a technical breach and not an intentional violation. There was no evidence or finding of any attempt to evade tax. This aligns with previous judgments of the Allahabad High Court that emphasize intent to evade tax as a key factor for imposing penalties under Section 129.
3. Reliance on Precedents: The petitioner relied on the earlier ruling in Precision Tools India v. State of U.P., where the Court had held that a mere technical violation, without any intention to evade tax, does not warrant the imposition of a penalty under Section 129.
4. Lack of Tax Evasion Findings: The Court scrutinized the order passed by the Assistant Commissioner and found that it only mentioned the non-filling of Part-B but did not indicate any findings or facts related to an attempt to evade tax.
5. Court’s Conclusion: The Court held that without a finding of tax evasion, the imposition of a penalty for a technical violation like the non-filling of Part-B of the e-way bill is unsustainable. The judgment effectively set aside the penalty and directed that the bank guarantee furnished by the petitioner under protest for the penalty amount should be returned.

Implications of the Judgment:

This ruling reaffirms the principle of proportionality and intent-based penalties under the U.P. GST Act, 2017. The Court has made it clear that in cases of technical non-compliance, such as failure to fill Part-B of an e-way bill, penalties should not be levied unless there is clear evidence of an attempt to evade tax. The decision underscores the need for authorities to demonstrate an intent to evade tax before imposing penalties for minor procedural lapses.

Conclusion:

The Allahabad High Court’s decision serves as a significant reminder that under the U.P. GST Act, penalties for non-compliance should be applied judiciously, especially when the breach is technical and there is no attempt to evade tax. This ruling protects businesses from disproportionate penalties for minor procedural issues, thereby promoting a more fair and balanced application of tax laws.

The Court's ruling also provides an important guideline for tax authorities to ensure that penalties are imposed in cases where tax evasion is explicitly evident, and not merely based on minor errors in compliance.