Mens rea required under Section 129(3); mere e-way bill lapse is technical breach, penalties and tax quashed

HC held that mens rea to evade tax is essential for imposing penalty under Section 129(3); the factual matrix showed no intention to evade tax. The e-way bill had expired four days before detention, but documents accompanied the goods and GPS evidence and mechanical issues explained slow movement, making the lapse a technical breach only. Orders imposing tax and penalty were quashed and set aside, and respondents were directed to refund the tax and penalty deposited within four weeks.

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Issues:
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 for the expiry of an e-way bill and the consideration of mens rea for tax evasion in penalty imposition.

Imposition of Penalty for E-way Bill Expiry:
The petitioner, aggrieved by the penalty order dated April 6, 2022, argued that despite the expired e-way bill, the vehicle had valid documents and a reasonable explanation for the delay due to mechanical issues. The petitioner cited a similar case judgment to support their argument. The respondents contended that the petitioner did not seek an extension for the e-way bill as allowed by the portal, leading to a technical breach justifying the penalty under Section 129(3) of the Act.

Consideration of Mens Rea for Tax Evasion:
The court referred to previous judgments emphasizing the necessity of mens rea for tax evasion penalties. It noted that in this case, there was no intent to evade tax as the goods were accompanied by proper documents, and the slow movement was due to a mechanical fault supported by GPS tracking. The court held that the technical breach of not extending the e-way bill duration cannot solely justify the penalty under Section 129(3) of the Act.

Judgment:
The court quashed and set aside the orders imposing penalty dated April 6, 2022, and June 22, 2022, as the factual matrix did not support the finding of intention to evade tax. The court 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.

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