02.12.2022: Mere Use of Term ‘Mens Rea’ Would Not Mean That There Was Wilful Attempt To Evade The Payment Of Tax – Non Speaking Order Passed Under Section 129 Set Aside – Calcutta High Court

The Hon’ble High Court of Calcutta vide its order dated 17.11.2022 in the matter of Medha Servo Drives Private Limited & Anr. Vs. The Assistant Commissioner of State Tax, Bureau of Investigation (South Bengal), Durgapur Zone & Ors. in MAT 1751 of 2022 with IA No. CAN 1 of 2022 & IA No. CAN 2 of 2022, set aside the order passed without considering the aspect ‘whether there is any ‘mens rea’ on the part of the appellants to evade payment of tax’ while transporting the goods, for which the tax demand and penalty have been imposed on the appellant for contravention of Section 129(1)(a) of the CGST Act, 2017 read with WBGST Act, 2017.

The intra-Court appeal was preferred by the writ petitioners/appellants before the Hon’ble High Court challenging the orders dated 20th April, 2022 and 22nd June, 2022 passed in WPA No. 6537 of 2022, whereby the learned Single Bench extended the time for filing affidavit-in-opposition by the respondent and simultaneously declined to grant any interim order to the appellant.

Appellants’ Submissions: –

  • It was submitted on the behalf of the appellants that a single invoice was raised by the appellants to M/s. Chittaranjan Locomotive Works, a public sector undertaking, carrying on operation in the State of West Bengal.
  • That the appellants raised multiple e-way bills and loaded the goods in three trucks as the goods supplied to the said Public Sector Undertaking were very huge in size. Further it was informed that one of those trucks had already reached the consignee and the same has not been disputed by the Revenue.  However, the other two trucks could not reach the destination within the validity of the e-way bills i.e., 23.08.2021, which resulted in interception of the vehicles along with goods by the authorities on 25.08.2021.
  • It was contended that there was absolutely no mens rea on their part and there was no intention to evade payment of tax.

Held: –

  • The Hon’ble Court after considering the submissions made, facts of the case and after the perusal of the order passed by the appellate authority, observed that at the first sight, the order gives us an impression that it is a speaking order considering all the issues raised by the appellants/writ petitioners. However, on close reading of the order, shows that out of 23 pages, the discussion is of only one page and the rest of the pages are the submissions made and the decisions relied upon by the appellants and the decisions referred by the authority on its own.
  • From perusal of the facts, it was noted by the Hon’ble Court that the short question which is to be decided in the instant matter is ‘whether full tax and penalty could have been demanded from the appellants on the alleged ground that they contravened Section 129(1)(a) of the Central Goods and Services Tax Act, 2017 read with West Bengal Goods and Services Tax Act, 2017.’
  • Thereafter, it was found that in the appeal preferred by the appellants before the appellate authority, the short issue which was required to be considered as to ‘whether there is any mens rea on the part of the appellants in attempting to evade payment of tax.’ However, unfortunately there was absolutely no discussion in the order with respect to the question as to ‘whether the mens rea was established.
  • It was found by the Hon’ble Court that it is well settled law that merely using the expression ‘mens rea’, would not amount to concluding that there was a willful attempt on the part of the dealer to evade the payment of tax. The concerned authority is required to record the reasons in writing as to how and in what manner mens rea was established.
  • Further since the afore-stated discussion is lacking in the order dated 04.2022 passed by the appellate authority, the Hon’ble Court was of the view that the matter needs to be remanded back for fresh consideration to decide this short issue as to whether there is any mens rea on the part of the appellants to evade payment of duty.

The Hon’ble Court with the above findings, allowed the appeal as well as the Writ petition and the connected application.  The order passed by the learned Single Bench dated 20.04.2022 & 22.06.2022 was set aside and the matter was remanded back to the Appellate Authority for fresh consideration, with the directions to consider the aspect of the mens rea and to pass a fresh order on merits in accordance with law after affording an opportunity of personal hearing to the authorized representative of the appellants.   Without going in to merits of case the appellate authority is directed to take the decision without being influenced in any manner by any observations made in this order.  Further it was suggested that the appellant is not required to keep the bank guarantee alive, which has been already furnished by the appellants, however, the appellants are directed to furnish a bond to the satisfaction of the concerned authority for the entire amount of tax and penalty.

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