Penalty cannot be imposed on the Assessee for not generating E-Tax Invoice

[CA Bimal Jain]

The Hon’ble Allahabad High Court in case of Nancy Trading Company v. State of UP [2024 (7) TMI 1303 - ALLAHABAD HIGH COURT], quashed the detention and penalty order under Section 129 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) on the ground that missing of e-tax invoice was considered as bonafide human error and there was no intent to evade tax, and all other required documents were in order.

Facts:

M/s. Nancy Trading Company (“the Petitioner”), challenged the detention of their goods and the imposition of penalties in an order dated December 26, 2022 (“Impugned Order-1”), which was later upheld by an appellate order dated May 26, 2023 (“Impugned Order-2”). The detention occurred because an e-tax invoice, required under Rule 48 of the Central Goods and Services Tax Act Rules (“the CGST Rules”), was not generated. The goods, however, were accompanied by a tax invoice, Goods Receipt (GR) notes, and an e-way bill.

The Petitioner contented that as per Rule 138A of the CGST Rules there is no provision for carrying E-Tax Invoice, hence it was not correct on the part of the authorities to seize the goods and pass the Impugned Orders.

He further contended that the annual turnover of the Petitioner was much less than the prescribed limit for generating the E-Tax Invoice. The dealers who were having annual turnover above Rs. 20 crores was required to issue E-Tax Invoice and the said limit has been reduced to annual turnover of Rs. 10 crores by notification dated August 01, 2022.

Hence, aggrieved by the Impugned Orders, the Petitioner filed the present writ petition prayed for issuing a direction for quashing the orders.

Issue:

Whether the penalty for not generating an e-tax invoice, despite all other required documents being in order justified?

Held:

The Hon’ble Allahabad High Court in 2024 (7) TMI 1303 - ALLAHABAD HIGH COURT held as under:

• Observed that, while transiting goods all documents as required under Rule 138A of the CGST Rules were accompanying goods. Only a technical error had been committed by the Petitioner for not generating E-tax invoice before movement of goods. There was no discrepancy with regard to quality and quantity of goods as mentioned in tax invoice, e-way bill as well as GRs accompanying goods. The error committed by for not generating e-tax invoice before movement of goods was a human error.
• Noted that, prior to August 1, 2022, dealer who was having annual turnover of more than Rs. 20 crores were required to issue e-way bill and said limit had been reduced with effect from August 1, 2022 to Rs. 10 crores.
• Held that, there was bona fide mistake on part of the Petitioner for not generating e-tax invoice. However, in absence of any specific finding with regard to mens rea for evasion of tax, proceeding under section 129(3) of the CGST Act could not be initiated. Accordingly, the Impugned Orders imposing penalty were to be set aside

Our Comments:

In regard to the above, reliance is placed on Circular No. 64/38/2018 dated September 14, 2018, which provides that in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under Section 129 of the CGST Act may not be initiated in case of minor mistakes like error in one or two digits/characters of the vehicle number.  Similarly, the incorrect distance mentioned in the E-way bill due to a typographic error resulting in the expiry of the validity period should be treated as a minor mistake duly covered by the said benevolent circular, and no penalty/tax should be imposed. There are also cases where the number of the Invoice is wrongly mentioned inadvertently. No penalty/ Tax ought to be imposed unless there is evidence that the same has been done deliberately with a view to evade payment of Tax.

In this regard, reliance is placed on pari materia judgment of the Hon’ble Supreme Court in the case of Assistant Commissioner (ST) v. Satyam Shivam Papers (P.) Limited [2022 (1) TMI 954 - SC ORDER], wherein the Court held that when the facts demonstrate a lack of intent to evade tax and external factors beyond the control of the taxpayer (such as traffic blockages due to agitation) prevented compliance, proceedings under Section 129 of the relevant GST Act are not justified.

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