Technical Error in E-Way Bill Cannot Justify Penalty: High Court
Quashes GST Orders in Kitchen Equipment Case
Introduction
Under the Goods and
Services Tax (GST) regime, the movement of goods must be accompanied by valid
documents, notably an e-way bill. However, the question arises—what
happens when there's a minor or clerical mistake in such documents? Can
it attract full-scale penal action under Section 129 of the UPGST Act?
The High Court of
Judicature at Allahabad recently addressed this nuanced issue in the case of Kitchen
Equipments Manufacturing Co. vs Additional Commissioner Grade 2 (Appeal) and
Another. The Court took a balanced approach, ruling that mere technical
errors in the e-way bill, in absence of intent to evade tax, cannot justify
detention and penalty under GST law.
Case
Overview
- Case Title:
Kitchen Equipments Manufacturing Co. vs Additional Commissioner Grade 2
(Appeal) and Another
- Case Number:
Writ Tax No. 1388 of 2023
- Neutral Citation No.:
2025:AHC:26934
- Court:
Court No. 2, High Court of Judicature at Allahabad
- Reserved On:
18 February 2025
- Delivered On:
27 February 2025
Facts of
the Case
The petitioner, Kitchen
Equipments Manufacturing Co., is a registered firm under the UPGST Act,
2017, engaged in manufacturing and supplying kitchen equipment. The controversy
emerged during the transport of goods intended for an exhibition.
- On 10 March 2023, the
petitioner dispatched goods from Ghaziabad to Pragati Maidan,
New Delhi for display at the Aahar Exhibition 2023, using Delivery
Challan No. REF/KEMCO/002.
- On 18 March 2023, after the
exhibition concluded, the goods were sent back from New Delhi to
Ghaziabad, accompanied by:
- A material exit slip issued
by Indian Trade Promotion Organisation (ITPO),
- A new delivery challan, and
- An e-way bill.
Detention and Penalty
- The goods were being transported in Vehicle
No. DL1AF 2278, which was intercepted at Mohan Nagar, Ghaziabad.
- The authorities found a discrepancy:
the place of loading was mentioned as Ghaziabad instead of New
Delhi in the return leg e-way bill.
- On this ground, a detention order
was passed, and the goods were released only upon payment of tax
and penalty under protest.
- The petitioner challenged the initial
penalty order dated 19 March 2023 (Form GST MOV-09) and the appellate
order dated 14 August 2023, both passed under Section 129(3) of
the UPGST Act.
Petitioner’s
Submissions
The counsel for the
petitioner made several important arguments:
1. Clerical
Error, Not Malicious Intent:
o The
incorrect mention of the dispatch place in the e-way bill (Ghaziabad instead of
New Delhi) was a human error.
o There
was no intention to evade tax, especially since the goods were returning
after a legitimate exhibition.
2. Goods
Not for Sale:
o The
goods were meant only for display purposes, not for commercial sale.
o As
such, the transaction did not attract GST liability under Section 7 of
the UPGST Act.
3. Precedents
in Favor:
o Cited
Vacmet India Ltd. vs Additional Commissioner Grade-2 (Appeal).
o Also
relied on Shyam Sel and Power Ltd. vs State of U.P., (2023) 11 Centax 99
(All.), where the Court ruled that penalty is unjustified in absence of mens
rea (intent to evade tax).
Respondent’s
Submissions
The State, through
Additional Chief Standing Counsel, contended:
1. Attempt
to Evade Tax:
o The
incorrect place of dispatch could have allowed the dealer to evade tax if
the vehicle was not intercepted.
o It
was argued that this misrepresentation could not be brushed aside as a mere
clerical error.
2. Support
for Impugned Orders:
o The
impugned penalty orders were passed lawfully and needed no interference.
Legal
Issues for Determination
The Hon’ble Court
considered the following key legal issues:
1. Does
a clerical error in the e-way bill attract penalty under Section 129(3)?
2. Is
intention (mens rea) essential for invoking penalty provisions under GST?
3. Were
the authorities justified in holding the petitioner liable for penalty despite
genuine documentation?
Findings
and Observations of the Court
1. Movement for
Exhibition Was Genuine
- The Court noted that the goods were
clearly being moved for display at an exhibition, and the return
movement was post-event.
- All required documents were in place,
including delivery challans and exit slips from ITPO,
validating the claim.
2. Technical Error in
E-Way Bill
- The only discrepancy was the dispatch
location—mentioned as Ghaziabad instead of New Delhi.
- The Court held this to be a minor
clerical error and not indicative of tax evasion.
3. Importance of Mens Rea
(Intent)
The Court referred to
past judgments, notably:
- Saurabh Traders vs Commissioner
of Commercial Tax, U.P.
Here, the Court emphasized that intention to evade tax is a must
for levying penalty.
- I.C.I. India Ltd. vs
Commissioner of Sales Tax, 134 STC 286 (All)
It was held that mere procedural defects (such as not filling out a
column) do not attract penalty unless there's a finding of evasion
intent.
“Satisfaction has to be
recorded... that there was an intention to evade payment of tax. The guilty
mind is necessary.” — the Court observed.
4. Absence of Intention
Clearly Evident
- The authorities did not record any
finding that the petitioner intended to evade tax.
- The goods were covered by proper
documents, and the tax implications did not arise due to the nature of
movement.
Judgment
and Relief Granted
In light of the findings:
- The Court found the proceedings
under Section 129(3) unjustified.
- Both the initial penalty order
(dated 19.03.2023) and appellate order (dated 14.08.2023) were quashed.
Refund Ordered
- The Court directed that any amount
deposited by the petitioner under protest be refunded within two
months, upon submission of a certified copy of the order.
Conclusion:
Technical Lapses Must Be Judged Through the Lens of Intent
This case sets a
precedent that clerical or technical errors, such as incorrect dispatch
details in an e-way bill, cannot form the sole basis for imposing
penalties under GST. The absence of fraudulent intention or tax
evasion motive is critical.
The decision reinforces
judicial restraint in penalizing genuine taxpayers for inadvertent
compliance issues, especially in bona fide transactions like exhibitions.
It highlights the need
for GST enforcement authorities to assess the substance of the transaction,
not just formalistic compliance. As GST continues to mature, such judgments
strike the right balance between strict compliance and fair administration.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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