The Hon'ble Allahabad High Court in Uttam Electric Store v. State of U.P. [Writ Tax No. 153 of 2021 [26-07-2024] held that where an assessee supplied goods to a purchaser in Chandpur (UP), consigned to "Udit Engineers, Aligarh," but mentioned the place of delivery as "Chandpur (UP)" in the e-way bill due to human error, and no finding of mens rea for tax evasion was recorded by any authority, the impugned orders levying penalty under section 129(3) of the CGST Act were to be set aside.
Facts of the Case:
The Petitioner, Uttam Electric Store, is engaged in the business of supplying electrical goods. On August 19, 2019, the Petitioner supplied electrical goods to M/s Chandpur Enterprises Limited, Chandpur, Bijnaur, which were consigned to M/s Udit Engineers, Aligarh. An e-way bill was generated for this transaction. However, in the e-way bill, the place of delivery was erroneously mentioned as "Chandpur (UP)" instead of Aligarh.
On August 21, 2019, during the goods' onward journey, they were detained on the grounds that they were being dispatched to a place different from that mentioned in the accompanying documents. Subsequently, proceedings under section 129 of the UPGST Act were initiated, and a show cause notice was issued to the Petitioner.
On the same day, August 21, 2019, the respondent no. 2 passed an impugned penalty order. The Petitioner appealed against this order, but the appeal was dismissed by respondent no. 3 vide an impugned order dated September 30, 2020.
The Petitioner contended that the error in the e-way bill was a human error that could be ignored. They also emphasized that there were no discrepancies regarding the quality, quantity, or any other details mentioned in the accompanying documents such as tax invoice and e-way bill.
Aggrieved by the orders of the lower authorities, the Petitioner filed this writ petition challenging both the penalty order dated August 21, 2019, and the order dismissing their appeal dated September 30, 2020.
Issue:
Whether the penalty imposed under section 129(3) of the CGST Act is sustainable in the absence of a finding of mens rea for tax evasion, when the discrepancy in the e-way bill was due to human error?
Held:
The Hon'ble Allahabad High Court in Writ Tax No. 153 of 2021 held that:
Court observed that it was not in dispute that the purchaser was from Chandpur, but the goods were to be consigned to M/s Udit Engineers, Aligarh. The goods were intercepted during their onward journey because the e-way bill mentioned the place of delivery as Chandpur (UP) instead of Aligarh. The Court opined that such an error could occur due to human error while filling up the form/e-way bill.
Importantly, the Court noted that there was no finding recorded by any of the authorities below that there was mens rea for evading payment of tax. The Court emphasized that even before it, there was no pleading on behalf of the State that there was any intention to evade tax.
Court relied on its recent judgment in Nancy Trading Company v. State of U.P. & 3 Others [Writ Tax No. 892 of 2023, decided on 15.07.2024]. In that case, the Court had held that in the absence of any finding regarding mens rea for tax evasion, proceedings under section 129(3) of the Act cannot be initiated.
Applying the principles laid down in Nancy Trading Company, the Court concluded that the impugned orders dated September 30, 2020, passed by respondent no. 3, and August 21, 2019, passed by respondent no. 2, could not be sustained in the eyes of law. Consequently, the Court quashed both impugned orders.
The Court allowed the writ petition and directed that any amount deposited in the said proceedings shall be returned to the petitioner within one month from the date of production of a certified copy of the order.
Relevant Sections:
Section 129 of Central Goods and Services Tax Act, 2017/Uttar Pradesh Goods and Services Tax Act, 2017: "Detention, seizure and release of goods and conveyances in transit"
Pari Materia:
Nancy Trading Company v. State of U.P. & 3 Others [Writ Tax No. 892 of 2023, decided on 15.07.2024]
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