The Allahabad High Court in the case of M/S INDEUTSCH INDUSTRIES PRIVATE LIMITED VERSUS STATE OF U.P. AND 2 OTHERS vide Writ Tax No. – 1314 of 2019 dated 19.02.2024, has held that  in case of no discrepancies or clerical errors in the documentation, the initial burden to prove that there is intention to evade tax lies on the department. Penalties should be imposed only in cases of intentional tax evasion, not on inadvertent errors.

In this case, The petitioner is having its manufacturing unit in SEZ. The Petitioner sold some goods in Domestic Tariff Area, and generated an e-way bill for their transportation. Due to a problem with the initial truck assigned for transportation, the goods were loaded onto a different vehicle. However, the e-way bill still contained the incorrect truck number. When the vehicle was stopped for verification by the authorities, they detained the goods, citing the discrepancy in the GST e-way bill.

The Petitioner contended that the goods were accompanied by the tax invoice, packing list, bill of entry for home consumption and the e-way bill. The only mistake in all these documents was that the truck number written in the e-way bill was incorrect. It was submitted that this mistake had occurred because of a problem in the initial truck that was supposed to carry the goods. The petitioner’s counsel referred to a letter from the transporter explaining the reason for the change in the truck and contended that the penalty was unjustified.

The Revenue department contended that  in the present case the mistake by the petitioner cannot be seen as a clerical error as the truck number itself is different. He further submitted that since the distance between NOIDA to Madoli, Delhi is only 100 kilometers, there is always chance of the e-way bill being used on several occasions resulting in evasion of tax. 

The Court held that since goods were intercepted shortly after leaving SEZ unit, and customs duty and IGST had been duly paid, indicating no intention to evade tax. The said goods were intercepted only two-three hours after the goods have left the SEZ Unit, and therefore, it cannot be said that this e-way bill was wrongly being used.  It is a fact that the burden of proof lies on the petitioner in certain cases to show that there was no evasion of tax. However, when the the error in the documents is only that of a clerical or typographical error, the initial burden of proof lies on the department to show there was intention to evade tax. 

In the present case, while acknowledging burden of proof on assessee to show no tax evasion, the Revenue department failed to establish any such intention, particularly considering discrepancy in e-way bill was merely a typographical error. Apart  from this one error in the e-way bill, nothing has been shown by the department to justify the imposition of penalty under Section 129(3) of the Act. The impugned order also failed to take into account the document produced by the petitioner of the transporter wherein the explanation was given with regard to the reason for the mistake of the vehicle number in the e-way bill.

Reliance placed upon the judgment of Falguni Steels reported in Writ Tax No. – 146 of 2023 dated 25.01.2024, wherein it was held that ‘The intention to evade tax is desideratum for the imposition of penalty. Mere technical errors, without having any potential financial implications, should not be the grounds for imposition of penalties.’

The Complete judgment can be accessed at 2024 Taxo.online 336