Case Law Details
Meghdoot Enterprises Vs Additional Commissioner (Appeal) (Allahabad High Court)
Allahabad High Court Quashes GST Penalty Because No Intention to Evade Tax Was Found; GST Penalty Set Aside as Goods Were Unloaded at Assessee’s Own Godown, Not to Evade Tax; Penalty Under Section 129 Invalid Because Revenue Failed to Prove Tax Evasion Intent; Allahabad High Court Sets Aside GST Penalty Because Documentary Records Were Undisputed; Mere Change in Unloading Address Not Enough for GST Penalty, Holds Allahabad High Court.
The writ petition was filed under Article 226 of the Constitution challenging the appellate order dated 28 July 2022, which affirmed a penalty imposed under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017.
The petitioner contended that the sole basis for the penalty was that the goods had been unloaded at a location not mentioned in the registration certificate. The petitioner submitted that the godown where the goods were unloaded belonged to it and had been registered as its place of business under the erstwhile Value Added Tax regime. It was further argued that there was no discrepancy in the tax invoices or e-way bill and no mismatch between the goods described in the documents and the goods transported. The petitioner relied on a previous judgment of the Court in M/s Hindustan Herbal Cosmetics v. State of U.P. and Others, contending that penalty under Section 129 could not be imposed in the absence of any intention to evade tax.
The revenue authorities argued that the place where the goods were unloaded was different from the consignee’s address mentioned in the e-way bill. According to the revenue, this discrepancy was a serious defect and shifted the burden onto the assessee to establish that there was no intention to evade tax.
The Court examined its earlier decision in M/s Hindustan Herbal Cosmetics, which held that the existence of mens rea or intention to evade tax is a sine qua non for imposition of penalty. The Court had previously observed that minor errors or lapses, such as typographical mistakes in e-way bills, cannot by themselves justify imposition of penalty unless there is material indicating an intention to evade tax.
Applying the same principle to the present case, the Court noted that the goods had been unloaded at a godown belonging to the petitioner and not at the premises of any third party. It was also undisputed that the godown had been registered as the petitioner’s place of business under the earlier Value Added Tax regime.
In these circumstances, the Court concluded that there was no intention on the part of the petitioner to evade tax. Consequently, the imposition of penalty was not warranted. The Court also referred to a judgment of the Madurai Bench of the Madras High Court in Algae Labs Pvt. Ltd. v. State Tax Officer-I Adjudication, which supported the proposition that unloading goods at a different location, by itself, does not justify the imposition of penalty.
Accordingly, the Court quashed and set aside the appellate order dated 28 July 2022. The writ petition was allowed, and consequential reliefs were directed to follow. The Court further ordered that any amount deposited by the assessee in relation to the demand be refunded within six weeks.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard counsel appearing on behalf of the parties.
2. This is an application under Article 226 of the Constitution of India wherein the writ petitioner is aggrieved by the order passed in appeal dated July 28, 2022 wherein the penalty imposed on the petitioner under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to the as “the Act”) has been affirmed.
3. Mr. Aditya Pandey, learned counsel appearing on behalf of the petitioner has submitted that the only ground for levy of the penalty was that the goods were unloaded at a place that was not registered in the registration certificate. He submitted that the godown where the goods were unloaded were earlier registered in the erstwhile Value Added Tax regime. He further submitted that this godown is also the place of business of the petitioner. He submitted that there was neither any discrepancy with regard to the tax invoices and the e-way bill nor was there any mismatch of the goods as enumerated in the tax invoices and in the e-way bill. He relied on a judgement of this Court in M/s Hindustan Herbal Cosmetics v. State of U.P. and 2 Others (decided on January 2, 2024 Writ Tax No.1400 of 2019 [Neutral Citation No. – 2024:AHC:209]) to buttress his argument that without there being any mens rea for evasion of tax, no penalty can be imposed under Section 129 of the Act. He further submitted that neither the original order nor the order passed in appeal brings out any intention whatsoever for evasion of tax.
4. Per contra, learned counsel appearing on behalf of the revenue authority submits that the place of unloading of the goods was distinct from the address provided in the e-way bill of the consignee. He, accordingly, submits that this is a fatal flaw and burden of proof is shifted on the assessee to show that there was no intention to evade tax.
5. One may look into the relevant paragraph of the judgement of this Court in M/s Hindustan Herbal Cosmetics (Supra) that is delineated below :-
“8. Upon perusal of the judgments, the principle that emerges is that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to imposition of penalty. In the case of M/s. Varun Beverages Limited (supra) there was a typographical error in the e-way bill of 4 letters (HR – 73). In the present case, instead of ‘5332ç ‘3552’ was incorrectly entered into the e-way bill which clearly appears to be a typographical error. In certain cases where lapses by the dealers are major, it may be deemed that there is an intention to evade tax but not so in every case. Typically when the error is a minor error of the nature found in this particular case, I am of the view that imposition of penalty under Section 129 of the Act is without jurisdiction and illegal in law. “
6. As evident from the judgement above, intention to evade tax is sine qua non for imposition of penalty. The facts in the present clearly indicate that the place where the goods were unloaded is the godown belonging to the petitioner and not to any third party. It is not in dispute that this particular godown was registered as place of business of the petitioner in the erstwhile Value Added Tax regime.
7. In light of the above, one may come to the conclusion that there is no intention to evade tax whatsoever. The imposition of penalty in such circumstances is not warranted. The judgement of the Madurai Bench of Madras High Court in Algae Labs Pvt. Ltd., Rep. by its Managing Director, Shri Adhi Visvanathan, 7/116A, Chotta Panikan Theri Villai, South Thamaraikulam & Post Agasteeswaram Taluk, Kanyakumari – 629 701 v. State Tax Officer-I Adjudication, CTO Building Complex AR Lane Road, Palayakottai, Tirunelveli – 627 002 (decided on April 4, 2022, Writ Petition (MD) No.4958 of 2022 and W.M.P. (MD) No.4073 of 2022) also supports the case of the petitioner that unloading of goods at a different place by itself would not lead to imposition of penalty.
8. In light of the same, impugned order dated July 28, 2022 is quashed and set aside. The writ petition is allowed. Consequential reliefs to follow.
9. Any amount that has been deposited by the assessee in relation to the above demand shall be returned to the assessee within a period of six weeks from date.
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