Penalty should not be imposed when one of the E-way bill expired: Allahabad HC

Global Panel Industries India Pvt. Ltd. Vs State of U.P. and Others (Allahabad High Court)

Introduction: In a significant judgment, the Allahabad High Court, in the case of Global Panel Industries Pvt. Ltd. vs. State of U.P., addressed the imposition of penalties under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act). The court ruled that penalties should not be imposed when an E-way bill expires, considering the absence of any intention to evade tax. This decision, dated February 5, 2024, offers insights into the legal interpretation of technical violations and intent in tax matters.

Allahabad High Court allowed the writ petition and held that penalty should not be imposed under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (“the UPGST Act”) on account of technical violation i.e. one of the e-way bill expired, when there is no intention to evade payment of tax.

Facts:

Global Panel Industries (P.) Ltd. (“the Petitioner”) has filed a writ petition against Penalty Order dated January 16, 2023 and Appellate Order dated January 30, 2023 (“the Impugned Orders”) passed by the Revenue Department (“the Respondent”) wherein penalty has been imposed under Section 129(3) of the UPGST Act on the ground that one of the e-way bill has expired.

Issue:

Whether Penalty should be imposed when one of the E-way bill expired?

Held:

The Hon’ble Allahabad High Court in Writ Tax No. 141 of 2023 held as under:

• Relying upon the judgment in the case of M/s Hindustan Herbal Cosmetics v. State of U.P. and Others [Writ Tax No. 1400 of 2019 dated January 2, 2024] and M/s Falguni Steels v. State of U.P. and Others [Writ Tax No. 146 of 2023 dated January 25, 2024] observed that, Mens Rea is essential for imposition of penalty.
• Noted that, as per the facts of the case, there is no indication of any intention to evade payment of taxes. Also, the documents that have been relied upon by the Petitioner have not been considered by the Respondent.
• Further Noted that, though there is a technical violation when one of the e-way bill expired, however the Respondent was unable to prove that E-way bill has been used repeatedly and there is any intention to evade payment of tax.
• Opined that, mere technical violation without any intention to evade payment of tax cannot lead to imposition of penalty under Section 129(3) of the UPGST Act.
• Held that, the Impugned Orders are quashed. Hence, writ petition is allowed.

Relevant Provision:

Section 129 of the UPGST Act:

129. Detention, seizure and release of goods and conveyances in transit

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,––

(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

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(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. This is a writ petition under Article 226 of the Constitution of India wherein the petitioner is aggrieved by the penalty order dated January 16, 2023 passed by the respondent No.3/Assistant Commissioner, State Tax Department, Sector 1, Mobile Squad, Deoria under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinfater referred to as “the Act”) and the appellate order dated January 30, 2023 passed by the respondent No.2/Additional Commissioner, Grade-2 (Appeal)-I, State Tax, Judicial Division, Gorakhpur.

2. Learned counsel appearing on behalf of the petitioner submitted that the particular vehicle was accompanied by two e-Invoices and two E-Way Bills. He further submitted that the goods matched the description in the e­-Invoices and the E-Way Bills. The only descrpency that was found at the time of detention was that one of the E-Way Bills had expired. Apart from this discrepancy, there is no other finding with regard to intention of the petitioner to evade tax. He relied upon the documents to indicate that the vehicle had broken down. The same is evidenced by the letter of the mechanic, who had repaired the particular vehicle. Furthermore, the movement of the goods have been traced by way of the ‘fast tag’ chart. He further submits that none of these documents were considered by the authorities. He further relies upon the judgments in M/s Pepsico India Holdings Limited Lucknow v. Commissioner of Trade Tax reported in 2003 U.P.T.C. 856 and Jain Shudh Vanaspati Limited Ghaziabad and Others v. State of U.P. and Others reported in 1983 U.P.T.C. 198 to buttress his arguments that the penalty cannot be imposed merely for the reason that the said goods were not accompanied by requisite documents.

3. Learned Additional Chief Standing Counsel submitted that the E-Way Bill is the necessary part of the documents and the expired E-Way Bill does not fulfill the requirements of the Rules. He further submitted that the authorities have considered the arguments raised by the petitioner and the orders indicate that the E-Way Bill has expired ten days before the date of He further submitted that the petitioner could not explain the reason for not issuing a fresh E-Way Bill even though it was obvious that the petitioner was aware of the said expiry. He thus submitted that the penalty was in order.

4. This Court in M/s Hindustan Herbal Cosmetics v. State of U.P. and Others (Writ Tax No.1400 of 2019 decided on January 2, 2024) and M/s Falguni Steels v. State of U.P. and Others (Writ Tax No.146 of 2023 decided on January 25, 2024) held that mens rea to evade tax is essential for imposition of penalty. The factual aspect in the present case did not indicate any intention whosoever to evade tax. Furthermore, the documents that have been relied upon by the petitioner have not been considered by the authorities. The authorities have dealt with the issue with regard to the expiry of the E-Way Bill and held that no explanation was offered by the petitioner with regard to the fresh generation of the E-Way Bill, as the same had expired ten days before the detention. However, it is to be noted that the goods in the vehicle were for two e-Invoices and two E-Way Bills and only one E-Way Bill had expired. There is no dispute with regard to the consignor and consignee nor any dispute with regard to the description of the goods in the vehicle. In relation to the e-Invoices and the E-Way Bills, the authorities have not been able indicate any intention whatsoever on behalf of the petitioner to evade tax. Indubitably, there is a technical violation that has been committed by the petitioner. However, the authorities have not been able to indicate in any manner that the E-Way Bill had been used repeatedly nor have they made out any case with regard to an intention to evade tax by the petitioner. Accordingly, this Court is of the view that such a technical violation by itself without any intention to evade tax cannot lead to imposition of penalty under Section 129(3) of the Act. This view is fortified by a catena of judgments as indicated above.

5. In light of the same, this Court is unable to agree with the findings of the authorities, and accordingly, the impugned orders dated January 16, 2023 and January 30, 2023 are quashed and set aside.

6. This Court directs the respondents to refund the amount of tax and penalty deposited by the petitioner within a period of four weeks from date.

7. The instant writ petition is allowed in aforesaid terms. There shall be no order as to the costs.

Conclusion: In conclusion, the Allahabad High Court’s ruling in the Global Panel Industries case provides clarity on the imposition of penalties for expired E-way bills. The decision underscores the importance of establishing mens rea and intent to evade tax for penalty imposition. The court’s emphasis on considering the entire factual matrix and the absence of any intention to evade tax aligns with a fair and just interpretation of tax provisions. This judgment is likely to impact how tax authorities handle technical violations, ensuring a balanced approach that considers both legal requirements and the taxpayer’s intent.

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(Author can be reached at info@a2ztaxcorp.com)