2024 (2) TMI 1073 - HC - GST

E way bill vehicle number discrepancy and penalty quashed where no intent to evade tax; refund ordered

Penalty imposed for discrepancies in an e way bill was annulled because the department failed to prove any intention to evade tax; the transporting ... Penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - Requirement of intention to evade tax (mens rea) for imposition of penalty - Burden of proof on tax authority to establish evasion where only clerical/typographical errors exist - Clerical/typographical error versus substantive irregularity in e-way bill - Transport of goods from SEZ to DTA with payment of customs duty and IGSTPenalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - Requirement of intention to evade tax (mens rea) for imposition of penalty - Burden of proof on tax authority to establish evasion where only clerical/typographical errors exist - Clerical/typographical error versus substantive irregularity in e-way bill - Validity of imposition of penalty under Section 129(3) where goods were accompanied by invoices, bill of entry and e-way bill but the vehicle number on the e-way bill was incorrect - HELD THAT: - The Court examined the documents produced at the time of interception and found that the goods were being transported from an SEZ unit to the Domestic Tariff Area after payment of customs duty and IGST, and were intercepted shortly after departure. The error in the e-way bill was limited to an incorrect vehicle number due to a change of truck by the transporter. Applying the principle that penalties require a demonstrated intention to evade tax, the Court held that where the discrepancy is a mere clerical or typographical error, the initial burden lies on the department to show intention to evade tax. The department failed to displace the documentary evidence produced by the petitioner or to demonstrate any mens rea. The Appellate Authority also did not adequately consider the transporter's explanation or other documents tendered to rebut the allegation of evasion. On these findings the imposition of penalty under Section 129(3) could not be sustained and the impugned orders were quashed. The Court further directed refund of any deposited amount. [Paras 6, 7, 8, 9, 10]Imposition of penalty under Section 129(3) set aside as department failed to prove intention to evade tax; impugned orders quashed and deposited amount ordered refunded.Final Conclusion: The writ petition is allowed; the orders dated 22.06.2018 and 22.06.2019 imposing penalty under Section 129(3) are quashed for want of any established intention to evade tax, and any amount deposited is directed to be refunded within four weeks. Issues involved:The issues involved in the judgment are the imposition of penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 based on discrepancies in the e-way bill and documents during the transportation of goods from a SEZ unit to a Domestic Traffic Area (DTA).Facts and Contentions:The petitioner, a company engaged in manufacturing Artist Brush and materials, sold goods to a buyer in Delhi from its SEZ unit in Noida. During transportation, the goods were detained by authorities due to a discrepancy in the vehicle number mentioned on the e-way bill. The petitioner argued that it was a clerical error caused by a change in the transporting vehicle. The respondent contended that such errors could lead to tax evasion.Analysis and Conclusion:Upon reviewing the documents, the court found that the goods were properly checked by customs, and all necessary duties and taxes were paid. The court emphasized that the burden of proof lies on the department to show intention to evade tax in case of clerical errors. As the department failed to prove any intent to evade tax and did not discredit the payment proofs provided by the petitioner, the imposition of penalty was deemed unjustified. Referring to the principles laid down in a previous judgment, the court reiterated that penalties should be reserved for intentional tax evasion, not inadvertent errors.Judgment:The court quashed the orders imposing penalty and allowed the writ petition, directing the refund of any deposited amount by the petitioner within four weeks. The court emphasized the importance of establishing intent to evade tax before imposing penalties, ensuring a fair and just tax system.