Not generating e-Tax Invoice before movement of goods was human error – High Court

Not generating e-Tax Invoice before movement of goods was human error in absence of finding of mens rea – High Court

In a recent judgment, the Hon’ble Allahabad High Court has held that the error committed by the assessee for  not generating E Tax Invoice before movement of goods is a human error. In absence of specific finding of mens rea for evasion of tax, the proceeding u/s 129 (3) of the Act should not have been initiated.

ABCAUS Case Law Citation:
ABCAUS 4148 (2024) (07) HC

In the instant case, the assessee had challenged the order passed by UPGST Authorities u/s 129(3) of UPGST Act 2017 (the Act) imposing penalty and the appellate order confirming the penalty imposed.

The goods transported by Petitioner was detained on the ground that E Tax Invoice was not generated as per Rule 48 of the Goods and Services Tax Rules, 2017 (the Rules). Subsequently, penalty was imposed u/s 129(3) of the Act.

The petitioner submitted that the goods in question were in transit along with tax invoice, GR’s, E waybills. That as per Rule 138A of the Rules there is no provision for carrying E Tax Invoice, hence it was not correct on the part of the authorities to seize the goods and pass the impugned orders against the petitioner.

It was further submitted that once the E Waybill was generated, it was within the knowledge of the authorities about the movement of the goods, hence there was no intention to avoid payment of tax. Further, the authorities had not recorded any finding with regard to any intention to avoid tax.

It was also submitted that the annual turnover of the petitioner was much less than the prescribed limit for generating the E Tax Invoice. The dealers who were having annual turnover above Rs. 20 crores was required to issue E Tax Invoice. This limit was subsequently reduced to annual turnover of Rs. 10 crores by notification dated 1st August, 2022.

It was submitted that there was a bona fide mistake as the petitioner was not aware that the said limit has been reduced from Rs. 20 crores to Rs. 10 crores.

On the other hand, the Department contended that Section 129(3) of the UPGST and CGST Act 2017 empowers the authorities to initiate proceedings and the petitioner is duty bound to issue tax invoice as per Rule 48 (4) of the Rules which has not been done in the present case, therefore the action taken by the authorities was justified.

The Hon’ble High Court observed that admittedly while transiting the goods in question all documents as required under Rule 138A were accompanying with the goods. Only a technical error has been committed by the petitioner for not generating E Tax Invoice before movement of goods in question.

It was also noted that it was not in dispute that Waybill was generated. It was not the case of the Revenue that there was any discrepancy with regard to quality and quantity of the goods as mentioned in Tax Invoice, E Waybill as well as G.Rs accompanying the goods.

The Hon’ble High Court opined that the error committed by the petitioner for not generating E Tax Invoice before movement of goods was a human error. It was also not in dispute that prior to 1st August, 2022 the dealers who were having annual turnover of more than Rs. 20 crores was required to issue E Waybill. The said limit has now been reduced with effect from 1st August, 2022 to Rs. 10 crores, hence there was bona fide mistake on the part of the petitioner for not generating E Tax Invoice but in absence of any specific finding with regard to mens rea for evasion of tax, the proceeding under section 129 (3) of the Act should not have been initiated.

The Hon’ble High Court held that in absence of any finding with regard to mens rea the proceeding under section 129(3) of the Act cannot be initiated. The impugned order were accordingly quashed.

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