Expiry of E-Way Bill AND Mens Rea: Technical Violation Alone Insufficient for Penalty Imposition

Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2024 (2) TMI 363 - ALLAHABAD HIGH COURT

Introduction

This article provides a detailed analysis of a judgement delivered by the Honorable High Court (HC) in a case concerning the detention of goods along with a vehicle and the levy of penalty u/s 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (the Act). The case revolves around the expiry of an E-Way Bill, which led to the detention of the goods and the imposition of penalty by the tax authorities.

Arguments Presented

Petitioner's Arguments

The learned counsel appearing on behalf of the petitioner made the following submissions:

• The vehicle was accompanied by two e-Invoices and two E-Way Bills, and the goods matched the description in these documents.
• The only discrepancy found at the time of detention was that one of the E-Way Bills had expired.
• Apart from this discrepancy, there was no finding regarding the petitioner's intention to evade tax.
• The petitioner provided documents indicating that the vehicle had broken down, evidenced by a letter from the mechanic who repaired it and a 'fast tag' chart tracing the movement of the goods.
• The authorities did not consider these documents.
• The petitioner relied on judgments from the Allahabad High Court (Pepsico India Holdings Ltd. Versus Commissioner of Trade Tax - 2003 (5) TMI 493 - ALLAHABAD HIGH COURT and Jain Shudh Vanaspati Ltd. Versus State of UP. and Others - 1983 (1) TMI 226 - ALLAHABAD HIGH COURT) to argue that penalty cannot be imposed merely because the goods were not accompanied by the requisite documents.

Respondent's Arguments

The learned Additional Chief Standing Counsel submitted the following arguments:

• The E-Way Bill is a necessary part of the required documents, and an expired E-Way Bill does not fulfill the requirements of the Rules.
• The authorities considered the petitioner's arguments, and the orders indicate that the E-Way Bill had expired ten days before the date of detention.
• The petitioner could not explain the reason for not issuing a fresh E-Way Bill, even though they were aware of the expiry.
• The penalty was imposed in order.

Discussions and Findings of the Court

The Honorable High Court made the following observations and findings:

1. The court referred to its previous judgments in M/s. Hindustan Herbal Cosmetics Versus State of U.P. And 2 Others - 2024 (1) TMI 282 - ALLAHABAD HIGH COURT and M/s Falguni Steels Versus State of U.P. And Others - 2024 (1) TMI 1150 - ALLAHABAD HIGH COURT, where it held that mens rea (intention) to evade tax is essential for the imposition of penalty.
2. The factual aspects of the present case did not indicate any intention whatsoever on the part of the petitioner to evade tax.
3. The documents relied upon by the petitioner were not considered by the authorities.
4. The authorities focused solely on the expiry of the E-Way Bill and the lack of explanation from the petitioner regarding the fresh generation of the E-Way Bill.
5. However, the goods in the vehicle were covered by two e-Invoices and two E-Way Bills, and only one E-Way Bill had expired.
6. There was no dispute regarding the consignor, consignee, or the description of the goods in the vehicle.
7. The authorities could not indicate any intention on the part of the petitioner to evade tax in relation to the e-Invoices and E-Way Bills.
8. While the petitioner committed a technical violation by not generating a fresh E-Way Bill, the authorities could not establish that the E-Way Bill had been used repeatedly or that there was an intention to evade tax.

Analysis and Decision by the Court

Based on the above discussions and findings, the Honorable High Court arrived at the following decision:

1. A technical violation by itself, without any intention to evade tax, cannot lead to the imposition of penalty u/s 129(3) of the Act.
2. The court disagreed with the findings of the authorities and quashed the impugned orders dated January 16, 2023, and January 30, 2023.
3. The court directed the respondents to refund the amount of tax and penalty deposited by the petitioner within four weeks.
4. The writ petition was allowed, with no order as to costs.

Doctrine or Legal Principle Discussed

The judgement discussed and reiterated the legal principle of mens rea (intention or guilty mind) being essential for the imposition of penalty, particularly in cases related to tax evasion. The court emphasized that a mere technical violation, without any intention to evade tax, cannot warrant the imposition of penalty u/s 129(3) of the Act.

Comprehensive Summary of the Judgement

The Honorable High Court, in this judgement, quashed the orders of the tax authorities imposing penalty on the petitioner u/s 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017. The court observed that while the petitioner committed a technical violation by not generating a fresh E-Way Bill after the expiry of the previous one, there was no evidence or indication of any intention on the part of the petitioner to evade tax.

The court noted that the goods in the vehicle were covered by two e-Invoices and two E-Way Bills, and only one E-Way Bill had expired. There was no dispute regarding the consignor, consignee, or the description of the goods. The authorities failed to consider the documents provided by the petitioner, which explained the delay in the movement of the goods due to a vehicle breakdown.

Relying on its previous judgments, the court reiterated the legal principle that mens rea (intention or guilty mind) is essential for the imposition of penalty, particularly in cases related to tax evasion. A mere technical violation, without any intention to evade tax, cannot warrant the imposition of penalty u/s 129(3) of the Act.

Consequently, the court quashed the impugned orders of the tax authorities and directed them to refund the amount of tax and penalty deposited by the petitioner within four weeks.

Full Text:

2024 (2) TMI 363 - ALLAHABAD HIGH COURT