Nancy Trading Company Vs State of U.P. And 3 Others (Allahabad High Court)
The recent Allahabad High Court ruling in the case of Nancy Trading Company Vs State of U.P. And 3 Others has significant implications for the interpretation of tax compliance under the GST regime. The court addressed the issue of whether the failure to generate an e-invoice constitutes an attempt to evade tax, especially when an e-way bill has been duly generated.
Background of the Case
Nancy Trading Company filed a writ petition challenging the orders passed by the authorities under Section 129(3) of the CGST Act, 2017, which imposed penalties due to the absence of an e-invoice during the transportation of goods. Despite having all other requisite documents, including the e-way bill, the petitioner was penalized for not generating the e-invoice as per Rule 48 of the GST Rules, 2017.
Arguments Presented
1. Petitioner’s Arguments:
- The petitioner argued that the goods were accompanied by all necessary documents such as the tax invoice, goods receipt (GR), and e-way bill.
- There is no provision under Rule 138A of the GST Rules that mandates carrying an e-invoice during transit.
- The e-way bill generation indicates the authorities were aware of the movement of goods, negating any intent to evade tax.
- The turnover requirement for mandatory e-invoicing was reduced from ₹20 crores to ₹10 crores effective August 1, 2022, which was a recent change that the petitioner was unaware of.
- The absence of mens rea (intent to evade tax) should exempt the petitioner from penalty under Section 129(3).
2. Respondent’s Arguments: The authorities have the power to initiate proceedings under Section 129(3) if the tax invoice is not generated as required. Compliance with Rule 48(4), which mandates e-invoicing for specified turnovers, is essential.
