2024 (3) TMI 335 - HC - GST

Penalty under Section 129 quashed for typographical error in e-way bill invoice number without tax evasion intent

The Allahabad HC allowed a petition challenging penalty imposition under Section 129 for incorrect document/invoice number in e-way bill. The petitioner ... Penalty under Section 129 - typographical error in e-way bill - mens rea for evasion of tax - equitable application of law - stock transfer precedentPenalty under Section 129 - typographical error in e-way bill - mens rea for evasion of tax - Imposition of penalty under Section 129 for an incorrectly entered document/invoice number in the e-way bill absent any material showing intent to evade tax - HELD THAT: - The Court found that the consignor was a registered dealer, the consignment was accompanied by matching tax invoice, bilty and e-way bill, and the consignee was a registered dealer. Although the e-way bill contained an incorrect document/invoice number (0401 entered as 2224) resulting in a four-digit discrepancy (exceeding the two-digit mistake tolerance noted in the departmental circular), the error was a typographical one. Relying on the coordinate High Court decision concerning stock transfer and the Supreme Court's analysis of mens rea under Section 129, the Court held that imposition of penalty requires evidence of intention to evade tax. A mere typographical error in the e-way bill, without other material establishing evasion or dishonest intent, does not attract penalty under Section 129. The Court emphasised that law must be applied equitably and that minor lapses of the kind found in this case are insufficient to sustain penalty proceedings. [Paras 6, 8, 9]Impugned orders imposing penalty and upholding seizure quashed and set aside for lack of jurisdiction and absence of mens rea.Final Conclusion: Writ petition allowed; impugned orders dated 17.6.2022 and 1.2.2021 quashed and set aside, with consequential relief to be provided to the petitioner within four weeks. Issues:The issues involved in the judgment are the imposition of penalty for a typographical error in the e-way bill and the applicability of mens rea for evasion of tax under Section 129 of the Goods and Service Tax Act, 2017.Imposition of Penalty for Typographical Error in E-way Bill:The petitioner, a registered dealer under the Act, supplied plywood to another dealer with all necessary documents. However, a typographical error in the e-way bill led to the seizure of the goods by tax authorities. The authorities imposed a penalty solely based on the incorrect document/invoice number in the e-way bill, despite no other infractions or attempts to evade tax by the petitioner. The petitioner argued that the error was a typographical mistake, citing relevant case law to support their position. The Additional Chief Standing Counsel contended that penalties are not imposed for minor errors beyond two digits, as per a government circular, and attempted to distinguish previous judgments cited by the petitioner. Applicability of Mens Rea for Evasion of Tax:The court analyzed the case in light of previous judgments, including one involving a similar typographical error in an e-way bill. The court emphasized that the presence of mens rea, or intention to evade tax, is essential for the imposition of penalties under Section 129 of the Act. It was concluded that a typographical error without evidence of intent to evade tax should not result in penalty imposition. Drawing parallels with previous cases, the court found that in instances of minor errors like the one in this case, penalties under Section 129 are unjustified and illegal. Consequently, the court quashed the impugned orders and granted relief to the petitioner within a stipulated timeframe, allowing the writ petition.This summary provides a detailed breakdown of the judgment, addressing each issue involved and highlighting the key arguments and conclusions made by the court.