E-Way Bill not present in vehicle only a technical violation. IGST Penalty order quashed

E-Way Bill not present in vehicle only a technical violation when E-Way Bill was downloaded prior to the interception of vehicle and goods in vehicle matched with invoice & E-Way Bill

In a recent judgment, the Hon’ble Allahabad High Court has quashed the penalty order passed under Section 20 of the IGST Act read with Section 129 (3) of the CGST Act by holding E-Way Bill not present in vehicle only a technical violation and there was no mens rea for the evasion of tax when E-Way Bill was downloaded prior to the interception of vehicle and goods in vehicle matched with invoice & E-Way Bill

ABCAUS Case Law Citation:
ABCAUS 4006 (2024) (05) HC

Important Case Laws relied upon:
M/S. Hindustan Herbal Cosmetics V. State of U.P. And 2 Others
Falguni Steels v. State of U.P. reported in (2024) 124 GSTR 10 
M/s Globe Panel Industries India Private Limited v. State of U.P. And Others 

In the instant case, the Petitioner had filed a writ petition under article 226 of the Constitution of India praying quashing of impugned order passed in appeal by Additional Commissioner GST confirming the penalty order passed under Section 20 of the IGST Act read with Section 129 (3) of the CGST Act by Assistant Commissioner, State Tax, Mobile Squad.

The mobile squad of the sales tax intercepted the truck carrying goods of the assessee and detained the same on the ground that the goods loaded on the truck were being transported without E-Way bill.

Subsequently, a show cause notice was issued and on the same day a penalty order was passed under Section 20 of the IGST Act read with Section 129 (3) of the CGST Act.

Before the Hon’ble High Court, the Petitioner submitted that it had downloaded the E-Way Bill for the goods in question 15 minutes before the interception took place on the same day . That in the show cause notice issued to the petitioner, a time limit of 7 days was mentioned to submit the reply but without waiting for 7 days and without giving an opportunity of hearing to the petitioner, illegaly penalty order was passed. That the minor mistake in documentation was without any fraudulent intent or gross negligence and the same was later on rectified by downloading the E-Way Bill. This minor mistake of the petitioner is protected under Section 126 (1) of the CGST Act.

It was further submitted that as provided under rule 138(A)(b) of the CGST Rules, the person incharge of a conveyance shall carry a copy of the E-Way Bill in physical form or E-Way bill number in electronic form. In the present case, although the driver of the vehicle could not provide a hard copy of the E-Way Bill, yet he informed the authorities about the E-Way bill number.
It was also submitted that since the E-Way Bill was downloaded prior to the interception of the goods and the driver of the vehicle informed the respondent No. 2 about the E-Way Bill number, the authority was not justified in passing the penalty order.

The Hon’ble High Court observed that the crux of the dispute lies in the interpretation of statutory provisions regarding E-Way bill, the presumption of tax evasion in its absence, and the procedural fairness in penalty imposition.

The Hon’ble High Court further observed that the show cause notice and the penalty order both were issued on the same day, which indicated that no opportunity of hearing was given to the petitioner to submit his reply which is a gross violation of the principles of natural justice.
The Hon’ble High Court also observed that from the perusal of the E-Way Bill downloaded by the petitioner, it was clear that even though the driver could not produce the hard copy of the E-Way Bill yet it was downloaded prior to the interception of the vehicle.

The Hon’ble High Court further observed that it had dealt with a similar issue wherein it has been held that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. The Court further emphasized that a minor error in the documentation can not be a valid ground for passing of the penalty orders by the authorities.

It was further noted that in another case, the Bench had held that   in a case where the E-Way Bill is downloaded and produced before passing of the penalty order by the authorities and no mens rea can be inferred from the act of the petitioner, there is no justification in passing of the penalty order by the authorities.

The Hon’ble High Court noted that only violation was a technical one wherein E-Way Bill was not present in the vehicle. However, it was clear that the E-Way Bill had been downloaded prior to the interception of the vehicle. Furthermore, invoice and the E-Way Bill matched with the goods in the vehicle, and accordingly, one can infer that there was no mens rea for the evasion of tax.

The Hon’ble High Court opined that there was no intention to evade tax on the part of the petitioner. Further, authorities failed to check the genuinness of the E-Way Bill number as informed by the driver from the GST portal and did not provide an opportunity of hearing to the petitioner which was against the principles of natural justice which strenghtens the view that the authorties did not act in accordance with the law.

Accordingly, the writ petition wa allowed and the impugned orders were quashed and set aside with direction to GST authorities to refund the amount of tax and penalty deposited by the petitioner within four weeks.

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