2024 (1) TMI 1150 - HC - GST

Goods transport without timely e-way bill, but invoices showed full details and GST paid; detention and s.129 penalty quashed.

Detention and penalty under s.129 UPGST/CGST for failure to timely generate an e-way bill was held unsustainable where contemporaneous tax invoices ... Intention to evade tax as prerequisite for imposition of penalty - e-Way Bill compliance and technical glitches - detention, seizure and penalty under Section 129(3) - mens rea requirement for penal tax proceedings - writ of certiorari to correct error of jurisdictionE-Way Bill compliance and technical glitches - detention, seizure and penalty under Section 129(3) - intention to evade tax as prerequisite for imposition of penalty - Validity of the detention, seizure and penalty imposed under Section 129(3) in the facts of the case - HELD THAT: - The Court held that although the petitioner failed to generate an e-Way Bill in time due to technical difficulties and local transport barriers, the tax invoices accompanying the goods contained all relevant details including the vehicle number and CGST/SGST had been charged. Applying precedent, the Court found no evidence of an intention to evade tax - a necessary element for sustaining proceedings under Section 129(3). The authorities below did not indicate any mens rea or any discrepancy in supporting documents and also rejected post-detention e-Way Bills without adequate reasoning. In these circumstances, the imposition of penalty was unsustainable: mere technical errors in e-Way Bill generation, absent intent to evade tax and where supporting documents were in order, do not justify detention, seizure or penalty. [Paras 6, 8, 15, 16, 17]The penalty and seizure order under Section 129(3) was quashed as there was no intent to evade tax and the documents accompanying the goods were in order.Writ of certiorari to correct error of jurisdiction - mens rea requirement for penal tax proceedings - Whether the appellate authority erred and whether interference by way of writ of certiorari was justified - HELD THAT: - The Court concluded that the Appellate Authority failed to cure the jurisdictional error of the lower authority by upholding the penalty without addressing the absence of any intention to evade tax and by giving an erroneous rationale. Given that the impugned orders involved excess of jurisdiction and a failure to proceed in accordance with essential legal requirements, the High Court exercised its supervisory jurisdiction and issued certiorari to quash both the original and appellate orders. The Court further directed refund of the tax and penalty deposited by the petitioner within a specified period. [Paras 18, 23, 25, 26, 27]Writ of certiorari issued; both the order dated February 21, 2019 and the appellate order dated October 20, 2019 quashed, and refund of deposited tax and penalty directed.Final Conclusion: The writ petition succeeds: the detention, seizure and penalty orders were quashed for want of any intention to evade tax and for jurisdictional error; the appellate confirmation was set aside and the amount deposited by the petitioner is to be refunded. Issues Involved:1. Validity of the penalty order under Section 129(3) of the UPGST Act, 2017.2. Examination of the intention to evade tax.3. Adherence to principles of natural justice.4. Jurisdictional errors by the authorities.Summary:Validity of the Penalty Order:The petitioner, M/s Falguni Steels, challenged the orders dated February 21, 2019, and October 20, 2019, passed by the Assistant Commissioner, Commercial Tax, and the Additional Commissioner, Grade - 2, respectively. The petitioner contended that the e-Way Bills were generated before the issuance of the Show Cause Notice and the passing of the order under Section 129(3) of the UPGST Act, 2017. However, these e-Way Bills were not considered by the authorities, leading to the imposition of tax and penalty.Intention to Evade Tax:The petitioner argued that there was no intention to evade tax as the goods were accompanied by valid tax invoices, and the CGST and SGST were already charged by SAIL. The court referred to several precedents, including *VSL Alloys (India) Pvt. Ltd. v. State of U.P.*, *M/s. Shyam Sel and Power Ltd. v. State of U.P.*, and *Modern Traders v. State of U.P.*, emphasizing that the intention to evade tax is a mandatory criterion for invoking Section 129(3) of the CGST Act, 2017. The court concluded that there was no intention to evade tax in this case as the goods were accompanied by all relevant documents, including tax invoices and e-Way Bills.Principles of Natural Justice:The petitioner claimed that the ex-parte order passed by the Respondent No. 3 violated the principles of natural justice as it was passed in haste and without considering the petitioner's arguments. The court noted that the authorities failed to provide a reasoned order and did not consider the petitioner's explanation regarding the delay in generating the e-Way Bill due to local administrative barriers. The court emphasized that penalties should not be imposed for mere technical errors without any intention to evade tax.Jurisdictional Errors:The court found that the authorities exceeded their jurisdiction by imposing tax and penalty without any cogent reason indicating an intention to evade tax. The court highlighted that the essence of any penal imposition is linked to the presence of mens rea, which was absent in this case. The court referred to the principles governing the issuance of a writ of certiorari, noting that it is issued to correct errors of jurisdiction and procedural irregularities that impact the fairness and legality of the proceedings.Conclusion:The court quashed the impugned orders dated February 21, 2019, and October 20, 2019, and directed the Respondent No. 2 to refund the amount of tax and penalty deposited by the petitioner within four weeks. The writ petition was allowed, and the court emphasized that penalties should be proportionate to the gravity of the offense and should not be imposed for technical errors without any intention to evade tax.