GST Vidhi | GST Case Law

Expired E-Way Bill Without Intent to Evade Tax Not Punishable: Saahaj Milk Gets Relief from Allahabad High Court

Introduction

The purpose of the e-way bill under the Goods and Services Tax (GST) regime is to ensure legitimate movement of goods and deter tax evasion. However, the law does not intend to penalize unintentional and explainable lapses—especially when there is no intent to evade tax.

The Allahabad High Court, in its recent ruling in M/s Saahaj Milk Producer Company Ltd. vs State of U.P. and Others, reaffirmed this principle by quashing penalty and seizure orders issued merely due to the expiry of an e-way bill—without any findings of malafide intention or discrepancy in documentation.

Case Overview

• Case Title: M/s Saahaj Milk Producer Company Ltd. vs State of U.P. and Others
• Case No.: Writ Tax No. 251 of 2023
• Neutral Citation No.: 2025:AHC:26939
• Court: Court No. 2, High Court of Judicature at Allahabad
• Reserved On: 20 February 2025
• Delivered On: 27 February 2025

 

Factual Background

The petitioner, M/s Saahaj Milk Producer Company Ltd., is a registered private limited company under GST, engaged in the manufacturing and retail business of milk and related products. The sequence of events that triggered litigation is as follows:

1.    On 12 March 2021, the petitioner transferred stock from its Aligarh unit to its own units in Firozabad and Agra (intra-state movement).

2.    The company issued two stock transfer challans (HQ0330 and HQ0331) and generated e-way bills (Nos. 471168443572 and 441168443573).

3.    The goods were transported via Vehicle No. UP81AB9203, supported by a consignment note.

4.    However, the vehicle’s driver deviated from the route due to a family emergency and stayed at his village for three days.

5.    During this delay, the validity of the e-way bill expired, and the vehicle was subsequently intercepted on 15 March 2021.

6.    Authorities passed a seizure and penalty order on 16 March 2021, later upheld by the appellate authority on 2 July 2022.

 

Petitioner’s Submissions

The petitioner made the following key arguments:

1. Intra-State Stock Transfer

• The movement of goods was not a sale, but a stock transfer between company’s own units within the same state (U.P.).
• No GST liability was attracted on such transfer.

2. Delay Due to Driver's Personal Emergency

• The driver diverted the vehicle due to his child's illness, causing unintentional expiry of the e-way bill.
• The petitioner had no control over the driver’s personal decisions and no malafide intention can be attributed.

3. No Discrepancy Found in Documents or Goods

• All documents (challan, bilty, consignment note) were genuine and intact.
• No mismatch in quality, quantity, or description of goods was ever reported.

4. No Finding of Intent to Evade Tax

• Authorities never recorded any finding to suggest that the petitioner intended to evade tax.

5. Precedents Cited

• Relied on:
• Shyam Sel and Power Ltd. vs State of U.P. – [2023:AHC:191074]
• Vacmet India Ltd. vs Additional Commissioner (Grade 2) – [2023:AHC:200160]
• Same Deutz Fahr India Pvt. Ltd. vs State of Telangana – [Telangana HC, W.P. 13392/2020]

 

Respondent’s Submissions

The State argued that:

• The e-way bill had expired, and it was the petitioner’s responsibility to ensure its validity.
• There was a procedural lapse, and penalty is justified under Section 129 of the UPGST Act.

 

Legal Issues for Consideration

The Court framed and examined the following key questions:

1.    Can penalty under Section 129 of the Act be imposed for mere expiry of e-way bill during genuine intra-state stock transfers?

2.    Is mens rea (intention to evade tax) essential for invoking penal provisions?

3.    Did the authorities err in failing to consider mitigating circumstances?

 

Court’s Analysis and Findings

Justice Piyush Agrawal delivered a well-reasoned verdict based on the following observations:

1. Expiry Due to Genuine Human Circumstance

• The driver’s personal emergency led to a delay in transit.
• The Court noted that this was beyond the petitioner’s control, as supported by the letter dated 16.03.2021, promptly submitted to authorities.

2. No Malafide Intention

• At no stage did the authorities record any finding of intent to evade tax.
• Since the movement was intra-state between branches, the question of tax evasion was untenable.

“Once there was no intention to evade payment of tax, the entire proceedings initiated against the petitioner are vitiated.” — Hon'ble Court

3. Precedents Support the Petitioner

The Court relied heavily on established case law:

• Shyam Sel and Power Ltd. (AHC):
• Sections 129 and 130 must be read together.
• Intent to evade is essential for Section 129 proceedings.
• For minor breaches, Section 122 (with lesser consequences) is more appropriate.
• Vacmet India Ltd. (AHC):
• Stock transfers within U.P. do not attract tax.
• No penalty is justified without discrepancy in goods or intention to evade.
• Satyam Shivam Papers (SC):
• Supreme Court held that where goods couldn’t reach destination due to reasons beyond control, penalty was unjustified.

 

Final Verdict

In view of the facts and settled law:

• The Court quashed both the impugned orders:
• Order dated 16.03.2021 (seizure and penalty),
• Order dated 02.07.2022 (appellate order).
• The writ petition was allowed.
• Refund of any amount deposited was ordered to be made in accordance with the law.

 

Conclusion: E-Way Bill Expiry Alone Doesn’t Prove Tax Evasion

This case sets an important precedent—technical lapses like expired e-way bills should not automatically attract penal action under Section 129 unless accompanied by evidence of intent to evade tax.

The ruling protects genuine businesses engaged in intra-state stock transfers, particularly in scenarios involving unforeseen human factors.

The High Court's emphasis on mens rea and contextual interpretation of GST compliance reflects a maturing legal understanding of the GST framework.

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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