Facing a Penalty for Tax Evasion? Judicial Relief for Minor E-Way Bill Discrepancies

The imposition of penalties under the Goods and Services Tax (GST) regime for discrepancies in e-way bills has been a contentious issue, particularly when such errors are inadvertent and lack any intent to evade tax. Recent judgments by the Allahabad High Court have reinforced the principle that penalties under Section 129(3) of the CGST Act cannot be imposed mechanically—there must be evidence of a deliberate attempt to evade tax.

This article examines key rulings where the courts have quashed penalty orders due to minor, unintentional errors in e-way bills, providing much-needed relief to taxpayers.

1. Typographical Errors Do Not Attract Penalty – RIMJHIM ISPAT LIMITED VERSUS STATE OF UP AND 2 OTHERS - 2024 (9) TMI 1013 - ALLAHABAD HIGH COURT

The Allahabad High Court held that a mere typographical error in an e-way bill, without any intention to evade tax, does not justify the imposition of a penalty under Section 129(3). The court emphasized that mens rea (guilty mind) is a necessary element for penal consequences.

Key Takeaway:

• Minor clerical mistakes should not lead to harsh penalties.
• Authorities must assess whether there was an actual intent to evade tax.

2. E-Way Bill Produced Before Seizure – No Penalty Sustainable – S/S BANARAS INDUSTRIES VERSUS UNION OF INDIA AND 4 OTHERS - 2024 (11) TMI 379 - ALLAHABAD HIGH COURT

In this case, goods were detained because the e-way bill was not produced during detention. However, the taxpayer submitted the e-way bill before the seizure order was passed. The court ruled that since there was no finding of tax evasion intent, the penalty was unsustainable.

Key Takeaway:

• If an e-way bill is provided before formal seizure, detention and penalty orders may be quashed.
• The absence of evasion intent is critical in such cases.

3. Delay Due to Driver’s Personal Reasons – No Intent to Evade – M/S AA PLASTICS PVT LTD VERSUS ADDITIONAL COMMISSIONER GRADE 2 AND 2 OTHERS - 2024 (8) TMI 452 - ALLAHABAD HIGH COURT

Here, the e-way bill had expired because the driver diverted the vehicle for personal reasons without informing the taxpayer. The court quashed the penalty, holding that Section 129 (detention) and Section 130 (confiscation) require proof of intent to evade tax, which was missing.

Key Takeaway:

• Unforeseen delays (like driver misconduct) without taxpayer’s knowledge do not justify penalties.
• The burden of proving tax evasion intent lies with the revenue department.

4. Wrong Vehicle Number in E-Way Bill – Unintentional Mistake – M/S BMR ENTERPRISES VERSUS STATE OF UP AND 3 OTHERS - 2024 (5) TMI 1036 - ALLAHABAD HIGH COURT

The e-way bill contained a wrong vehicle number (UP 80 CT 7024 instead of UP 83 CT 2724). The High Court set aside the penalty, holding it was an unintentional error that did not warrant penal action.

Key Takeaway:

• Minor discrepancies in vehicle details, if bona fide, should not attract penalties.
• The court distinguishes between genuine errors and deliberate misdeclarations.

5. Invoice Number Discrepancy – No Penalty for Minor Errors – M/S DECO PLYWOOD INDUSTRIES VERSUS STATE OF U.P. AND 2 OTHERS - 2024 (3) TMI 335 - ALLAHABAD HIGH COURT

The e-way bill showed an incorrect invoice number (2224 instead of 0401). The court quashed the penalty, ruling that Section 129 penalties cannot apply to trivial errors without tax evasion intent.

Key Takeaway:

• Small discrepancies in invoice numbers, if not material to tax liability, should not lead to penalties.
• The substance of the transaction matters more than technical errors.

Conclusion: Judicial Safeguard Against Mechanical Penalties

The Allahabad High Court’s rulings establish a crucial precedent:

• Penalties under Section 129(3) require proof of intent to evade tax.
• Minor, unintentional errors in e-way bills should not attract harsh penalties.
• Courts will intervene where revenue authorities act mechanically without assessing mens rea.

Taxpayers facing penalties for bona fide e-way bill discrepancies should explore legal remedies, as judicial trends favor a fair and intent-based approach to GST enforcement.

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Abhishek Raja Ram