Case Law Details
Aa Plastics Pvt. Ltd. Vs Additional Commissioner Grade 2 And 2 Others (Allahabad High Court)
The Allahabad High Court has ruled in favor of Aa Plastics Pvt. Ltd., quashing a GST penalty imposed due to the expiration of an E-way bill during the transportation of goods. The petitioner challenged the orders issued by the Additional Commissioner, Commercial Tax/State Tax, Agra, and sought relief from the penalty levied for the expired E-way bill.
Case Background
Aa Plastics Pvt. Ltd., a company holding a GSTIN, is engaged in the manufacture and supply of LD Polythene sheets and bags. On August 5, 2021, the petitioner dispatched goods to M/s Benara Udyog Limited, Agra, accompanied by valid invoices and transported through M/s New Mallik Transport Commission Agency. However, on August 9, 2021, the goods were detained as the E-way bill had expired during transit.
The petitioner explained that the driver had taken an unplanned detour due to a personal emergency, causing the delay. Despite this explanation and the generation of an amended E-way bill on August 8-9, the goods were seized, and a penalty was imposed by the tax authorities on August 17, 2021. The petitioner’s appeal to the Additional Commissioner was subsequently rejected without considering the amended E-way bill and the circumstances presented.
Arguments by the Petitioner
The petitioner argued that there was no discrepancy in the quantity of goods or documentation and that an amended E-way bill was submitted before the order of seizure was passed. Furthermore, they contended that there was no intent to evade tax, which is a necessary criterion for invoking penalty provisions under Section 129 of the CGST Act.
Citing the judgment in Shyam Sel and Power Ltd. Vs. State of U.P. (2023), the petitioner asserted that for proceedings under Section 129(3) of the CGST Act to be valid, there must be an intention to evade tax. In this case, the authorities did not find any such intention, making the penalty invalid.
Respondent’s Stand
The State’s counsel supported the impugned order and defended the actions of the tax authorities.
Court’s Analysis and Ruling
After considering the submissions, the court found that the amended E-way bill had been presented before the seizure order was passed. Additionally, the authorities failed to prove any intent by the petitioner to evade tax.
The court referred to the Shyam Sel and Power Ltd. judgment, which clarified that intent to evade tax is a mandatory requirement under Sections 129 and 130 of the CGST Act. The ruling emphasized that in cases where no such intent is established, the authorities should proceed under Section 122 of the CGST Act, which deals with minor violations, rather than invoking the harsher provisions of Section 129.
The court noted that in this case, the tax authorities overlooked these essential considerations and had not demonstrated any mens rea (intention to evade tax) on the part of the petitioner. Therefore, the seizure and penalty were deemed unwarranted.
Conclusion
The Allahabad High Court quashed the impugned orders and ruled in favor of Aa Plastics Pvt. Ltd. The court emphasized that without evidence of intent to evade tax, the penalty provisions of Section 129 should not be applied. The writ petition was allowed, and the court directed the authorities to refund any amount deposited by the petitioner during the pendency of the case within one month of presenting a certified copy of the order.
This judgment reaffirms the principle that intent to evade tax is a critical factor in determining the applicability of penalties under the CGST Act.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Suyash Agarwal, learned counsel for the petitioner and Sri Rishi Kumar, learned Additional Chief Standing Counsel for the State respondents.
2. By means of instant writ petition, the petitioner has assailed the order dated 16.03.2022 passed by the Additional Commissioner Grade-2 (Appeal) 2, Commercial Tax/State Tax, Agra.
3. Learned counsel for the petitioner submits that the petitioner. having GSTIN, is engaged in the business of manufacturing and supply of LD Polythene Sheets and LD Polythene bags. On 05.08.2021, the petitioner dispatched the LD Polythene sheets and LD Polythene bags from their unit to M/s Benara Udyog Limited, Agra through Tax Invoice No. AAPL/21-22/0622 and AAPL/21-22/0623 respectively, which was transported through M/s New Mallik Transport Commission Agency, Ghaziabad thorough Transport GR No. 110090 dated 05.08.2021. The goods in question was in transit, the same was detained on 09.08.2021 on the ground that the time mentioned in E-way bill has expired, to which the reason given by the petitioner was that truck driver received a call from his native place, which falls on the route, he went there without informing the consignor & consignee about the same. To the notice, the petitioner submitted his reply stating therein that an amended E-way bill dated 08.08.2021, generated on 08.08.2021 night and 09.08.2021 morning, which was presented on the very next day. Not being satisfied from the reply of the petitioner, the impugned order was passed on 17.08.2021 seizing the goods and levied the penalty against which the petitioner filed appeal, which has also been rejected without considering the material available on record. Hence the present writ petition.
4. He further submits that there was no variation in the quantity of goods as mentioned in the accompanied documents, yet the goods in question were detained. He next submits that before passing of the seizure order, an amended E-way bill was produced. He further submits that there is no intention to avoid the payment of tax, which is mandatory for seizing/detaining of goods.
5. In support of his submission, he has placed reliance upon the judgment of this Court passed in the case of Shyam Sel and Power Ltd. Vs. State of U.P., (2023) 11 Centax 99 (All.).
6. Per contra, learned Additional Chief Standing Counsel supports the impugned order.
7. In the case in hand, the goods were detained and the order dated 17.08.2021 was passed on the ground that E-way bill had expired. It is not the case of the revenue that before passing of the seizure order, an amended E-way bill was not produced. It is also not the case of the revenue that any finding of mens rea with regard to intention to evade payment of tax, was recorded as even the revenue authority before this Court fails to show the same.
8. This Court in the case of Shyam Sel (supra) in para nos. 10, 11 & 13 has held as under:-
“10. For invoking the proceeding under section 129(3) of the CGST Act, section 130 of the CGST Act was required to be read together, where the intent to evade payment of tax is mandatory, but while issuing notice or while passing the order of detention, seizure or demand of penalty, tax, no such intent of the petitioner was observed. Once the dealer has intimated the attending and mediating circumstances under which e-way bill of the purchasing dealer was cancelled, it was a minor breach. The authority could have initiated proceedings under section 122 of the CGST Act instead of proceedings under section 129 of the CGST Act. Section 129 of the CGST Act must be read with section 130 of the said Act, which mandate the intention to evade payment of tax. Once the authorities have not observed that there was intent to evade payment of tax, proceedings under section 129 of the CGST Act ought not to have been initiated, but it could be done under section 122 of the CGST Act in the facts & circumstances of the present case. It is also not in dispute that after release of the goods, the same were sold to P.L. Trading Company.
11. Section 129 of the CGST Act deals with detention, seizure and release of goods in case violation of the provisions of the CGST Act is found. Section 130 deals with confiscation of goods or conveyance and levy of penalty. Both the sections revolve around a similar issue and provide for the proceedings available at the hands of the proper Officer upon him having found the goods in violation of the provisions of the Act, Rule 138 of the Rules framed under the CGST Act being one of them. Upon a purposive reading of the sections, it would suffice to state that the legislation makes intent to evade tax a sine qua non for initiation of the proceedings under sections 129 and 130 of the CGST Act.
13. Recently, the Division Bench of this Court in Writ Tax No. 600 of 2022 (M/s Gobind Tobacco Manufacturing Company & Another Vs. State of U.P. & Others) quashed the levy of penalty under section 129 of the GST Act with heavy costs upon the Revenue for abuse of their powers.”
9. In view of the above facts as stated as well as law laid down in the aforesaid judgment, the impugned order cannot be sustained in the eyes of law and the same is hereby quashed.
10. Accordingly, the writ petition is allowed.
11. Any amount deposited by the petitioner during the pendency of the instant writ petition, shall be refunded to him within a month from the date of production of certified copy of this order.
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