Mens rea for GST penalty: technical e-way bill error after vehicle breakdown could not sustain seizure and penalty orders.

Penalty and seizure orders under the Uttar Pradesh GST law were found unsustainable where goods were covered by invoice and e-way bill, the vehicle had broken down, and a revised e-way bill was produced before the seizure order. The court treated the discrepancy in vehicle details as a technical lapse and held that, absent fraudulent or deliberate intent to evade tax, mens rea is required for penal action under Section 129 read with Rule 138. The impugned orders were quashed and the deposited amount was directed to be refunded.

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Issues: Whether penalty and seizure-related orders under the Uttar Pradesh Goods and Services Tax law were sustainable where the goods were accompanied by invoice and e-way bill, the vehicle had broken down, a revised e-way bill was produced before the seizure order, and the alleged lapse was a technical error without intent to evade tax.

Analysis: The petitioner's case was that the goods were initially transported in one vehicle, which broke down, and the goods were shifted to another vehicle while the e-way bill still reflected the earlier vehicle number. The record also showed that the revised e-way bill had been produced before the authorities prior to the seizure order. The order under challenge proceeded on the basis that even a technical error would amount to a violation of Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 read with Rule 138 of the Uttar Pradesh Goods and Services Tax Rules, 2017, notwithstanding the absence of any intention to evade tax. The governing principle applied was that mens rea to evade tax is necessary for imposition of penalty and that a mere technical lapse, without any fraudulent or deliberate intent, does not justify penal action.

Conclusion: The impugned orders were held unsustainable in law and were quashed, with a direction to refund the deposited amount.

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