The Allahabad High Court ruled that a minor typographical error in the e-way bill without any other material establishing an intention to evade tax shall not draw a penalty under Section 129 of the Goods and Service Tax Act, 2017.
Placing reliance on the decision of Allahabad High Court in M/s. Varun Beverages Limited v. State of U.P. and 2 others, the judgment of Supreme Court in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another, Justice Shekhar B. Saraf stated that
Upon perusal of the judgments, the principle that emerges is that the presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to the imposition of penalty.
A Brief History of Factual Background
The petitioner, a licensed cosmetics dealer, was delivering products to another registered dealer in Jharkhand when their goods were halted. They argued that the transaction was properly documented with a tax invoice, bilty, and e-way bill.
However, a seizure order was issued due to a discrepancy in the vehicle number on the e-way bill; it displayed DL1 AA 3552 instead of the accurate DL1 AA 5332. Additionally, a penalty was imposed solely because of this incorrect vehicle number.
The petitioner’s counsel argued that there was no accusation of intent to evade taxes on the part of the petitioner, as the GST e-Way bill, bilty, and tax invoice all aligned, and the consignee was also a registered dealer. They emphasized a typographical error in the e-way bill regarding the vehicle number, which was acknowledged in the contested order.
To bolster their stance, the petitioner’s counsel referenced the Allahabad High Court’s decision in M/s. Varun Beverages Limited v. State of U.P. and 2 others, as well as the Supreme Court’s judgment in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another.
However, the respondent’s counsel cited a circular to argue that the Department refrains from imposing penalties only in instances where there is a mistake of two digits in the vehicle number, and not beyond that limit.
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They distinguished the Allahabad High Court’s ruling in M/s. Varun Beverages Limited, asserting that it involved a stock transfer without any tax liability at issue.
A Verdict By the High Court
The Court noted that despite the error involving three digits rather than the specified two in the circular, it stressed the importance of applying the law fairly and reasonably in relevant circumstances, rather than allowing it to exist in isolation.
It emphasized that the intent to evade taxes is an essential condition for imposing a penalty. Therefore, the Court concluded that penalizing solely due to a typographical error in the e-way bill, without any additional evidence indicating an intention to evade taxes, was unjustifiable.
Considering the discrepancy between ‘3552’ and ‘5332’ as a clear, minor typographical mistake, the Court ruled that it did not warrant a penalty under Section 129 of the Act.
In certain cases where lapses by the dealers are major, it may be deemed that there is an intention to evade tax but not so in every case. Typically when the error is a minor error of the nature found in this particular case, I am of the view that imposition of penalty under Section 129 of the Act is without jurisdiction and illegal in law.
It was Therefore Permitted to File a Writ Petition.
| Case Title | M/S. Hindustan Herbal Cosmetics |
| Case Citation | 2024 LiveLaw (AB) 9 |
| Date | 02.01.2024 |
| Counsel for Petitioner: | Shubham Agrawal |
| Counsel For Respondent | Ravi Shanker Pandey |
| Allahabad High Court | Read Order |