Seizure of goods for want of e-way bill when due to break down, goods loaded on another vehicle. Burden of proof falls squarely on tax authorities to demonstrate genuine intent to evade tax before penalizing- High Court quashes penalty imposed
ABCAUS Case Law Citation:
ABCAUS 3849 (2024) (01) HC
Important Case Laws relied upon by parties:
Modern Traders v. State of U.P. and others
M/s Galaxy Enterprises v. State of U.P. and others
Hindustan Herbal Cosmetics v. State of U.P. and others
In the instant case a writ petition under Article 226 of the Constitution of India was filed wherein the petitioner was aggrieved by the penalty order passed by the Assistant Commissioner, State Goods and Services Tax and the order passed in appeal by the Additional Commissioner, State Goods and Services Tax.
The case of the petitioner was that the goods had been loaded on a particular vehicle/truck, which broke down and upon such breaking down, the goods were loaded and shifted on another vehicle. At that point of time, the goods were seized.
The petitioner explained to the authorities that the date on which the breakdown had taken place, there was Bharat Band and due to the same, the driver of the vehicle could not update the e-way bill. The goods were accompanied by invoice and e-way bill reflecting earlier vehicle number. Furthermore, the revised e-way bill was produced before the authorities prior to the passing of the seizure order.
The Hon’ble High Court observed that the appellate authority, while passing the order in appeal made categorical finding that even if the documents are accompanied with the goods but there is a technical error, the same would amount to violation of provisions of Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 read with Rule 138 of the Uttar Pradesh Goods and Service Tax Rules, 2017, even though there is no intention to evade tax.
This was despite the catena of judgments of the Hon’ble High Court wherein it has been held that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty and mere technical error would not lead to imposition of penalty.
The Hon’ble High Court observed that the imposition of penalties within the realm of tax laws should not be based solely on insignificant technical errors devoid of any financial consequences. The foundational principle guiding this approach is the commitment to maintain a tax system that is characterized by fairness and justice, where the severity of penalties corresponds to the gravity of the offense committed. While penalties serve a pivotal role in ensuring compliance with tax laws, legal frameworks stress the importance of establishing the actual intent to evade taxes as a prerequisite for their just imposition. This emphasis underscores the critical need to differentiate between inadvertent technical errors and purposeful attempts to circumvent tax obligations. Penalties, according to this principle, should be reserved exclusively for cases where concrete evidence points to a deliberate and fraudulent act against the tax system, rather than being applied to situations involving unintentional mistakes. The legal rationale supporting this principle recognizes that the primary purpose of taxation statutes is not to penalize inadvertent errors but rather to address intentional acts of non-compliance. Consequently, the burden of proof falls squarely on tax authorities to demonstrate the genuine intent to evade tax before penalizing taxpayers. This safeguard is indispensable to shield individuals and entities from punitive measures arising from honest mistakes, administrative errors, or technical discrepancies that lack any malicious intent. The fundamental principle requiring an intent to evade tax for the imposition of penalties is crucial for preserving the fairness and integrity of taxation systems. In order to uphold a balanced and equitable approach to tax enforcement, it is imperative to recognize and acknowledge the distinction between technical errors and intentional evasion.
The Hon’ble High Court opined that the orders impugned in the writ petition were not sustainable in law wherein the authorities exceeded their jurisdiction and have not acted in accordance with the provisions of the statutes.
Accordingly, the orders were quashed and set-aside. It was directed that the amount deposited by the petitioner be refunded within a period of four weeks.
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