E-Way bill penalty orders quashed for violating natural justice principles and lacking mens rea proof

The Allahabad HC quashed penalty orders imposed for E-Way bill violations, ruling that authorities failed to provide hearing opportunity, violating natural justice principles. The court found no mens rea for tax evasion since the E-Way bill was downloaded before vehicle interception and matched the goods/invoice. The court emphasized that technical violations without intent to evade tax and minor documentation errors cannot justify penalty imposition. Authorities failed to verify the E-Way bill's genuineness from GST portal and denied proper hearing, acting contrary to law. The petition was allowed and impugned orders set aside.

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Issues:
The issues involved in the judgment are compliance with E-Way bill requirements, presumption of tax evasion, procedural fairness in penalty imposition, and principles of natural justice.

Compliance with E-Way Bill:
The petitioner, a registered dealer, was transporting goods without an E-Way bill, leading to interception and detention by the authorities. The petitioner argued that the E-Way bill was downloaded prior to interception, and the driver informed the authorities about the E-Way bill number. The court emphasized the importance of E-Way bills during transportation and highlighted that a technical violation without intent to evade tax cannot justify penalty imposition.

Presumption of Tax Evasion:
The authorities imposed penalties under the UPGST Act for the absence of an E-Way bill during transit, alleging a violation of tax laws. However, the court held that the mere technical violation of E-Way bill presence did not indicate any intention to evade tax, especially when the E-Way bill had been downloaded before interception.

Procedural Fairness in Penalty Imposition:
The court noted that the show cause notice and penalty order were issued on the same day without providing the petitioner an opportunity to be heard, violating principles of natural justice. The court referred to previous judgments emphasizing the necessity of mens rea for tax evasion and the illegality of penalty imposition for minor errors in documentation.

Conclusion:
The court found that there was no intention to evade tax on the part of the petitioner and that the authorities failed to verify the E-Way bill information provided by the driver. As a result, the court allowed the writ petition, quashed the impugned orders, and directed the authorities to refund the tax and penalty amount deposited by the petitioner within four weeks from the date of the judgment.

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