2022 (11) TMI 1185 - HC - GST

Levy of penalty - mens rea in evasion of tax - alleged ground of contravention of Section 129(1)(a) of the Central Goods and Services Tax Act, 2017 read with West Bengal Goods and Services Tax Act, 2017 - HELD THAT - The goods which were to be supplied to the said Public Sector Undertaking was of very huge in size and, therefore, the appellants had raised multiple e-weigh bills and loaded the goods into three trucks. One of the three trucks had already reached the consignee which was not disputed by the Revenue. The other two trucks could not reach the destination within the validity of the e-weigh bills i.e. 23.08.2021. The vehicle along with the goods were intercepted by the authorities on 25.08.2021. The appellants had explained that there is absolutely no mens rea on their part and there was no intention to evade payment of tax. Nevertheless, the Adjudicating Authority had imposed full tax and penalty upon the appellants and aggrieved by such order, the appellant had filed the appeal before the First Appellate Authority. It is well settled that by merely using the expression mens rea , it would not amount to concluding that there was a willful attempt on the part of the dealer to evade the payment of tax. The concerned authority or the First Appellate Authority, is required to record the reasons in writing as to how and in what manner mens rea was established. Since this is lacking in the order passed by the Appellate Authority dated 6.4.2022, the matter should be remanded back to the Appellate Authority for fresh consideration to decide this short issue as to whether there is any mens rea on the part of the appellants to evade payment of duty. Appeal allowed by way of remand.

Summary

Issues:
1. Condonation of delay in filing an appeal.
2. Interpretation of tax laws regarding the imposition of full tax and penalty.
3. Consideration of mens rea in tax evasion cases.
4. Remand of the matter to the Appellate Authority for fresh consideration.

Condonation of Delay:
The Court perused an affidavit for condonation of delay and found sufficient cause for the delay, thereby allowing the application and condoning the delay.

Interpretation of Tax Laws - Full Tax and Penalty:
The appeal was against an order imposing full tax and penalty under the Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017. The appellants contended that they had raised a single invoice for a public sector undertaking in West Bengal, loading goods into three trucks. While one truck reached the destination, the other two were intercepted after the validity of the e-weigh bills had expired. The Adjudicating Authority imposed full tax and penalty, alleging contravention of the tax laws. The Court noted that the Appellate Authority's order did not adequately discuss the establishment of mens rea, crucial in tax evasion cases. Consequently, the matter was remanded back to the Appellate Authority for fresh consideration to determine the presence of mens rea.

Consideration of Mens Rea in Tax Evasion Cases:
The Court emphasized that the mere mention of "mens rea" is insufficient to establish willful tax evasion. The Appellate Authority's failure to provide a detailed reasoning on the presence of mens rea led to the decision to remand the matter for a fresh assessment. The Court directed the Appellate Authority to afford the appellants a personal hearing and pass a new order considering the aspect of mens rea.

Remand of the Matter:
The appeal and connected application were allowed. The writ petition was granted, setting aside previous orders and remanding the matter to the Appellate Authority for a fresh decision. The Appellate Authority was instructed to consider the presence of mens rea, provide a personal hearing, and issue a new order in compliance with the law. The appellants were relieved from the bank guarantee requirement and instead directed to furnish a bond for the tax and penalty amount. No costs were awarded in this matter.