Penalty should not be imposed when one of the E-way bill expired

The Hon'ble Allahabad High Court in the case of Global Panel Industries (P.) Ltd. v. State of UP[Writ Tax No. 141 of 2023 dated February 05, 2024] allowed the writ petition and held that penalty should not be imposed under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 ("the UPGST Act") on account of technical violation i.e. one of the e-way bill expired, when there is no intention to evade payment of tax.

Facts

Global Panel Industries (P.) Ltd. ("the Petitioner") has filed a writ petition against Penalty Order dated January 16, 2023 and Appellate Order dated January 30, 2023 ("the Impugned Orders") passed by the Revenue Department ("the Respondent") wherein penalty has been imposed under Section 129(3) of the UPGST Act on the ground that one of the e-way bill has expired.

Issue

Whether Penalty should be imposed when one of the E-way bill expired?

Held

The Hon’ble Allahabad High Court in Writ Tax No. 141 of 2023 held as under:

• Relying upon the judgment in the case of M/s Hindustan Herbal Cosmetics v. State of U.P. and Others [Writ Tax No. 1400 of 2019 dated January 2, 2024] and M/s Falguni Steels v. State of U.P. and Others [Writ Tax No. 146 of 2023 dated January 25, 2024] observed that, Mens Rea is essential for imposition of penalty. 
• Noted that, as per the facts of the case, there is no indication of any intention to evade payment of taxes. Also, the documents that have been relied upon by the Petitioner have not been considered by the Respondent. 
• Further Noted that, though there is a technical violation when one of the e-way bill expired, however the Respondent was unable to prove that E-way bill has been used repeatedly and there is any intention to evade payment of tax. 
• Opined that, mere technical violation without any intention to evade payment of tax cannot lead to imposition of penalty under Section 129(3) of the UPGST Act. 
• Held that, the Impugned Orders are quashed. Hence, writ petition is allowed.  

Relevant Provision

Section 129 of the UPGST Act

129. Detention, seizure and release of goods and conveyances in transit

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,–

(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

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(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).