Penalty Under Section 129 Not Sustainable When E-way Bill Could Not Be Updated On Change Of Vehicle Due To An Inadvertent Error
The Petitioner filed the Writ Petition before the Hon’ble High Court challenging the penalty order dated 13th September 2018 passed by the Assistant Commissioner, State Goods and Service Tax, Agra as well as the order dated 3rd October 2019 passed by Additional Commissioner Grade – 2 (Appeal) – III, State Goods and Service Tax, Agra.
The case of the petitioner is that the goods have been loaded on a particular vehicle, which broke down and upon such breaking down, the goods were loaded on another vehicle. At that point of time, the goods were seized. It was explained by the Petitioner that the date on which the breakdown had taken place, there was Bharat Band and due to the same, the driver of the vehicle could not update the e-way bill. The factual position is that the goods were accompanied by invoice and e-way bill reflecting earlier vehicle number. Moreover, the revised e-way bill was produced before the authorities prior to the passing of the seizure order.
Held: –
- The Hon’ble Court on perusal of the facts and circumstances of the case, found that the appellate authority, while passing the order in appeal, has made categorical finding that even if the documents are accompanied with the goods but there is a technical error, the same would amount to violation of provisions of Section 129 of the UPGST Act, 2017 read with Rule 138 of the UPGST Rules, 2017, even though there is no intention to evade tax.
- It was noted by the Hon’ble Court that this Court in number of judgments has held that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty and mere technical error would not lead to imposition of penalty. Reference was made to M/s Modern Traders v. State of U.P. and others – Writ Tax No.763 of 2018; M/s Galaxy Enterprises v. State of U.P. and others Writ Tax No.1412 of 2022; Hindustan Herbal Cosmetics v. State of U.P. and others Writ Tax No.1400 of 2019.
- It was found by the Hon’ble Court that the imposition of penalties within the realm of tax laws should not be based solely on insignificant technical errors devoid of any financial consequences. While penalties serve a pivotal role in ensuring compliance with tax laws, legal frameworks stress the importance of establishing the actual intent to evade taxes as a prerequisite for their just imposition. There is a need to differentiate between the inadvertent technical errors and purposeful attempt to avoid tax obligations.
- It was further found by the Hon’ble Court that the legal rationale supporting this principle recognizes that the primary purpose of taxation statutes is not to penalize inadvertent errors but rather to address intentional acts of non-compliance.
- Therefore, the burden of proof falls squarely on tax authorities to show the genuine intent to evade tax before penalizing taxpayers. This safeguard is essential to shield individuals and entities from punitive measures arising from honest mistakes, administrative errors, or technical discrepancies that lack any malicious intent.
- Lastly, it was found by the Hon’ble Court that the fundamental principle requiring an intent to evade tax for the imposition of penalties is crucial for preserving the fairness and integrity of taxation systems. In order to uphold a balanced and equitable approach to tax enforcement, it is imperative to recognize and acknowledge the distinction between technical errors and intentional evasion.
- The Hon’ble Court therefore, held that order impugned in this writ petition are not sustainable in law wherein the authorities have exceeded their jurisdiction and have not acted in accordance with the provisions of the statutes.
With the above findings and observations, the Hon’ble Court quashed the impugned orders dated 13th September 2018 & 3rd October 2019 and directed for the refund of the amount deposited by the petitioner.
To read the complete judgment 2024 Taxo.online 119
