2024 (2) TMI 1181 - HC - GST

Levy of penalty - e-way bill had expired four days prior to the date of detention - existence of mens rea - HELD THAT - This Court in M/S. HINDUSTAN HERBAL COSMETICS VERSUS STATE OF U.P. AND 2 OTHERS 2024 (1) TMI 282 - ALLAHABAD HIGH COURT held that mens rea to evade tax is essential for imposition of penalty. The factual aspect in the present case clearly does not indicate any mens rea whatsoever for evasion of tax. The goods were accompanied by the relevant documents and the explanation of the petitioner with regard to slow movement of the goods coupled with GPS tracking system clearly indicate that the truck was moving slowly due to mechanical fault in the engine of the vehicle. This factual aspect should be considered by the authorities below. The breach committed by the petitioner with respect to not extending time period of the e-way bill is only a technical breach and it cannot be the sole ground for penalty order being passed under Section 129(3) of Act. The finding of the authorities with regard to intention to evade tax is not supported by the factual matrix of the case, and accordingly, the impugned orders dated April 6, 2022 and June 22, 2022 are quashed and set aside - This Court directs the respondents to refund the amount of tax and penalty deposited by the petitioner within a period of four weeks from date. Petition allowed.

Summary

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.