GST Vidhi | GST Case Law

Mere Technical Breach in E-Way Bill Cannot Justify Detention Under Section 129: High Court’s Firm Ruling

 

Summary of the Case

In a strong reaffirmation of taxpayer rights under GST law, the Allahabad High Court in its judgment dated 11 November 2024 quashed penalty proceedings initiated solely due to minor technical lapses in the e-way bill. In M/s Monotech Systems Limited vs. State of U.P. and Others, the Court ruled that when there is no discrepancy between goods physically inspected and details declared in the e-way bill, and no intent to evade tax is established, proceedings under Section 129 of the CGST Act become vitiated. The ruling heavily relied on earlier precedent from VSL Alloys (India) Pvt. Ltd. vs. State of U.P., emphasizing that substantial compliance protects the taxpayer against penal consequences arising from minor technical errors.

1. Case Overview

• Case Name: M/s Monotech Systems Limited vs. State of U.P. and Others
• Case Number: Writ Tax No. 1689 of 2024
• Neutral Citation: 2024:AHC:176192
• Date of Judgment: 11 November 2024
• Court: High Court of Judicature at Allahabad (Lucknow Bench)

 

2. Background and Facts

M/s Monotech Systems Limited, a GST-registered business entity, was engaged in the movement of goods across states.

Events Leading to Dispute:

• A vehicle carrying goods belonging to the petitioner was intercepted by State GST officials.
• During verification, it was observed that certain parts of the e-way bill were not completely filled.
• However, upon physical inspection, the goods perfectly matched the details declared in the e-way bill.
• Authorities issued a show cause notice under Section 129 of the GST Act.
• The petitioner promptly filed a reply, asserting that:
• The lapse was purely technical.
• All documents were in place.
• There was no attempt to evade tax.

Despite this:

• The adjudicating authority as well as the appellate authority rejected the petitioner’s defense.
• A penalty order was passed against the petitioner.

Aggrieved, the petitioner moved the High Court.

3. Legal Issues Raised

The High Court was called upon to decide:

1.    Whether a minor technical error in filling the e-way bill, without tax evasion intent, can attract penalty under Section 129?

2.    Whether substantial compliance—correct goods accompanied by correct documentation—is sufficient to avoid detention and penalty?

3.    Whether the authorities acted mechanically without recording any finding on mens rea (intent to evade tax)?

4. Submissions by the Petitioner

Learned counsel for the petitioner, Mr. Abhinav Mehrotra, advanced the following submissions:

• Goods matched exactly with the e-way bill and invoice descriptions.
• No discrepancy or undervaluation was found during physical inspection.
• Minor non-filling of certain parts of the e-way bill was purely procedural, without any mala fide intent.
• Cited the judgment in VSL Alloys (India) Pvt. Ltd. vs. State of U.P., where the Court ruled that:

“Mere non-filling of vehicle number or Part-B in the e-way bill cannot be the sole ground for seizure or penalty when substantial compliance is established.”

• Argued that mens rea is essential before imposing any penalty under GST laws.
• Emphasized that Section 129 proceedings are punitive in nature, and therefore must be based on intention, not mere technicalities.

5. Submissions by the Respondent

The State Counsel, Mr. Ravi Shankar Pandey, opposed the petition, arguing:

• The e-way bill was improperly filled, triggering violation under GST laws.
• Authorities were within their right to proceed under Section 129.
• Detention and penalty were thus justified.

However:

• No material was presented to prove that there was any tax evasion or fraudulent intention by the petitioner.

6. Relevant Legal Framework

Section 129 of the CGST Act, 2017

• Governs detention, seizure, and release of goods and conveyances in transit.
• Requires that either:
• Goods are transported without valid documents, or
• There is an intention to evade tax.

Precedent: VSL Alloys (India) Pvt. Ltd. vs. State of U.P.

• Held that:
• Minor procedural lapses in the e-way bill cannot alone justify seizure.
• Substantial compliance (presence of invoice and reconciled goods) protects the taxpayer.
• Mens rea is critical before imposing any penalty under Section 129.

7. Court’s Analysis and Findings

Justice Ajay Bhanot carefully reviewed the facts and law and observed:

Key Findings:

• The goods physically matched the description in the e-way bill and invoice.
• There was no allegation of undervaluation or mis-declaration.
• Authorities had not recorded any finding regarding intent to evade tax.
• Merely non-filling certain parts of the e-way bill is a technical breach, not a substantive violation.
• Section 129 proceedings are vitiated when initiated merely on technical defaults without substantive evidence.

The Court referred to its earlier ruling in VSL Alloys and held:

“When substantial compliance is disclosed and when the physical inspection of goods tallies with the goods declared in the E-Way Bill and no intent of tax evasion is made out, proceedings under Section 129 of GST Act become vitiated.”

Thus, the penalty and seizure orders could not survive judicial scrutiny.

8. Judgment and Final Order

The Court delivered the following clear order:

• The impugned order dated 22.12.2023 passed by the Additional Commissioner, Commercial Tax, Noida, is quashed.
• The writ petition is allowed.
• Full relief is granted to M/s Monotech Systems Limited.

9. Conclusion

This case underscores several key legal principles:

• Technical errors alone (such as minor e-way bill filling mistakes) cannot trigger harsh penalties under Section 129.
• Substantial compliance — meaning goods are correctly declared, taxed, and accompanied by valid documents — shields the taxpayer.
• Mens rea (intention to evade tax) is a mandatory condition before imposing penalties.
• GST enforcement must not become a tool of oppression for honest businesses based on procedural rigidity.

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.

Find the Attachment (Press on Click Here )

Click here