Levying penalties should not be based solely on technical errors without any intent to evade taxes.

The Hon’ble Allahabad High Court, in the matter of Rawal Wasia Yarn Dying (P.) Ltd. v. Commissioner Commercial Tax [Writ Tax No. 352 of 2023 dated January 16, 2024], ruled that as the invoice contains truck details, the error is purely technical and lacks any intention to evade tax. Consequently, there is no necessity to impose a penalty under Section 129(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Facts:

The Petitioner, Rawal Wasia Yarn Dying, failed to submit Part ‘B’ of the E-way Bill. Although the invoice contained all the details of the transporting truck, the goods did not match the information on the invoice. Subsequently, the Petitioner received an Order dated May 24, 2022 (“the Impugned Order”) imposing a penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 (“the UPGST Act”). The appeal filed by the Petitioner was dismissed by the appellate authority in an Order dated October 15, 2022 (“the Impugned Order”).

Therefore, dissatisfied with the Impugned Order, the Petitioners filed the current writ petition.

Issue:

Can a penalty be imposed when it is established that there is no intent to evade tax and the issue is merely a technical error?

Held:

In Writ Tax No. 352 of 2023, the Hon’ble Allahabad High Court ruled as follows:

1. Noted that the invoice provided by the Petitioner contained the necessary details of the truck, and the error committed was purely technical, lacking any intention to evade tax. Consequently, the imposition of a penalty under Section 129(3) of the CGST Act is deemed unnecessary once the absence of intent to evade tax has been established.

2. Drew reference to the precedent set in the case of M/s Citykart Retail Private Limited through Authorized Representative vs. Commissioner Commercial Tax and Another [2023 U.P.T.C. [Vol.113]-173], highlighting that the failure to complete Part ‘B’ of the e-Way Bill, without an accompanying intent to evade tax, does not warrant the imposition of a penalty under Section 129(3) of the CGST Act.

3. Ordered the Respondents to return the security to the Petitioner within six weeks from the date of the order, thereby quashing and setting aside the Impugned Orders.

Our Remark:

In a similar legal context, the Supreme Court, in the case of Assistant Commissioner ST & Ors. v. Satyam Shivam Papers Pvt. Ltd. [SLP (C) No. 21132/2021], emphasized that the existence of mens rea, or a guilty mind, is a fundamental criterion for establishing tax evasion and, consequently, justifying the imposition of a penalty.