2024 (5) TMI 605 - HC - GST

Levy of penalty - Violation of principles of natural justice - no opportunity of hearing was given to the petitioner to submit his reply - Interpretation of statutory provisions regarding E-Way bill - Compliance of E-Way bill as required under the provisions of the CGST/UPGST Act and related rule or not - presumption of tax evasion in its absence - procedural fairness in penalty imposition. HELD THAT - Upon a perusal of the E-Way Bill downloaded by the petitioner, it is clear that even though the driver could not produce the hard copy of the EWay Bill before the respondent No. 2, yet it was downloaded prior to the interception of the vehicle. This Court had dealt with a similar issue in case of M/S. Hindustan Herbal Cosmetics V. State Of U.P. And 2 Others 2024 (1) TMI 282 - ALLAHABAD HIGH COURT wherein it has been held that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. The Court further emphasized that a minor error in the documentation can not be a valid ground for passing of the penalty orders by the authorities. This Court in case of Falguni Steels v. State of U.P. 2024 (1) TMI 1150 - ALLAHABAD HIGH COURT has held that in a case where the E-Way Bill is downloaded and produced before passing of the penalty order by the authorities and no mens rea can be inferred from the act of the petitioner, there is no justification in passing of the penalty order by the authorities. In the facts and circumstances, it is clear that only violation is a technical one wherein E-Way Bill was not present in the vehicle. However, it is clear that the E-Way Bill had been downloaded prior to the interception of the vehicle. Furthermore, invoice and the E-Way Bill matched with the goods in the vehicle, and accordingly, one can infer that there was no mens rea for the evasion of tax. There was no intention to evade tax on the part of the petitioner. Further, respondent authorities failed to check the genuinness of the E-Way Bill number as informed by the driver from the GST portal and did not provide an opportunity of hearing to the petitioner which was against the principles of natural justice which strengthens the view that the authorities did not act in accordance with the law. The impugned orders dated January 4, 2020 and May 21, 2019 are hereby quashed and set aside - petition allowed.

Summary

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.