2024 (2) TMI 363 - HC - GST

Detention and penalty under Section 129(3) unwarranted for technical E-Way Bill lapse absent intent to evade tax

HC allowed the petition, holding that detention of goods and imposition of penalty under Section 129(3) was unwarranted where only a technical lapse ... Mens rea to evade tax - penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - expired E Way Bill as a technical violation - requirement of E Way Bill - consideration of documentary evidence including e Invoices, E Way Bills, mechanic's letter and FASTagMens rea to evade tax - penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - expired E Way Bill as a technical violation - requirement of E Way Bill - Whether imposition of penalty under Section 129(3) was justified where one of two E Way Bills had expired but there was no evidence of intention to evade tax and the goods were otherwise accompanied by matching e Invoices and documents - HELD THAT: - The Court held that mens rea to evade tax is an essential element for imposing penalty under Section 129(3). The authorities had recorded only the expiry of one E Way Bill (ten days prior to detention) but failed to demonstrate any intention on the part of the petitioner to evade tax. The vehicle carried two e Invoices and two E Way Bills, the consignor/consignee and description of goods were not in dispute, and there was evidence (mechanic's letter and FASTag movement chart) indicating the vehicle had broken down and the movement of goods. The authorities did not consider these documents nor show repeated misuse of the E Way Bill. In these circumstances the Court found the violation to be technical and insufficient, without requisite mens rea, to sustain the penalty; reliance was placed on the Court's earlier decisions recognizing that mere absence or expiry of documentation, without intent to evade tax, does not attract penalty. [Paras 4, 5]Penalty under Section 129(3) quashed insofar as it was imposed for the technical violation of an expired E Way Bill in the absence of any intention to evade tax.Consideration of documentary evidence including e Invoices, E Way Bills, mechanic's letter and FASTag - refund of tax and penalty deposited - Relief to be granted consequent to quashing of the penalty and related order - HELD THAT: - Having set aside the impugned penalty and appellate orders, the Court directed restoration of the petitioner by ordering refund of the amount of tax and penalty deposited. The Court required the respondents to effect the refund within a specified short period, giving substantive relief to the petitioner after concluding that the penalty could not be sustained. [Paras 5, 6]Respondents directed to refund the tax and penalty deposited by the petitioner within four weeks; writ petition allowed.Final Conclusion: The High Court quashed the penalty order dated January 16, 2023 and the appellate order dated January 30, 2023, holding that a technical expiry of one E Way Bill, without evidence of mens rea to evade tax and in the presence of supporting documentary evidence, did not justify imposition of penalty; the respondents were directed to refund the tax and penalty deposited within four weeks. Issues involved: The issues involved in this case are the imposition of penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 based on the expiry of an E-Way Bill during the transportation of goods, and the contention of the petitioner regarding the lack of intention to evade tax.Imposition of Penalty based on E-Way Bill Expiry:The petitioner challenged the penalty order dated January 16, 2023, and the appellate order dated January 30, 2023, which were passed due to the expiry of one of the E-Way Bills accompanying the goods being transported. The petitioner argued that apart from this discrepancy, there was no evidence of an intention to evade tax. The petitioner relied on documents including e-Invoices, E-Way Bills, and a mechanic's letter to support the claim that the vehicle had broken down, as evidenced by the 'fast tag' chart. Citing precedents, the petitioner contended that penalties cannot be imposed solely due to missing documents, as seen in judgments like M/s Pepsico India Holdings Limited Lucknow v. Commissioner of Trade Tax and Jain Shudh Vanaspati Limited Ghaziabad and Others v. State of U.P.Contention of the Petitioner:The petitioner's counsel argued that the expired E-Way Bill was the only issue, and the authorities did not consider the explanations and supporting documents provided. It was emphasized that there was no intention to evade tax, and the expired E-Way Bill was due to the breakdown of the vehicle. The petitioner highlighted that the factual aspect did not show any intention to evade tax, as mens rea is essential for imposing penalties, as established in previous cases like M/s Hindustan Herbal Cosmetics v. State of U.P. and M/s Falguni Steels v. State of U.P.Authorities' Response and Ruling:The Additional Chief Standing Counsel argued that the expired E-Way Bill did not meet the requirements, and the authorities considered the petitioner's arguments. It was noted that the petitioner failed to provide a reason for not issuing a fresh E-Way Bill despite being aware of the expiry. However, the court observed that there was no intention to evade tax, and technical violations without such intent cannot warrant penalties under Section 129(3) of the Act. The court found that although there was a technical violation, the authorities failed to prove any repeated use of the expired E-Way Bill or an intention to evade tax by the petitioner.Judgment and Relief:The Court disagreed with the authorities' findings and quashed the orders dated January 16, 2023, and January 30, 2023. It directed the respondents to refund the tax and penalty amount deposited by the petitioner within four weeks. The writ petition was allowed with no costs imposed on either party.