GST Vidhi | GST Case Law

Mere Technical Breach Without Tax Evasion Intent Cannot Justify Seizure under Section 129 of GST Act

Summary of the Case

In a significant judgment dated 12 November 2024, the Allahabad High Court emphatically reiterated that mere technical errors in e-way bill generation, in the absence of any intention to evade tax, cannot justify seizure and penalty under Section 129 of the GST Act. In the case of M/s GSV Products vs. Additional Commissioner Grade-2 and Another, the Court found that while there was a minor defect in the filling of the e-way bill, there was no mismatch between the goods physically inspected and the documents produced. Relying on earlier precedents, including VSL Alloys (India) Pvt. Ltd. vs. State of U.P., the Court quashed the penalty order, reinforcing the critical importance of substantive compliance over mere technical formality in GST law.

1. Case Overview

• Case Name: M/s GSV Products vs. Additional Commissioner Grade-2 and Another
• Case Number: Writ Tax No. 1938 of 2024
• Neutral Citation: 2024:AHC:177052
• Date of Judgment: 12 November 2024
• Court: High Court of Judicature at Allahabad (Lucknow Bench)

2. Background and Facts

M/s GSV Products, a GST-registered entity, was engaged in the interstate transportation of goods.

Events Leading to Dispute:

• During transit, the vehicle carrying the goods was intercepted by State GST authorities.
• On scrutiny, it was found that certain parts of the e-way bill were not properly filled.
• However, physical verification of goods matched exactly with the description provided in the accompanying documents and e-way bill.

Actions by Authorities:

• Authorities issued a show cause notice, and ultimately passed an order imposing penalty and tax, treating the mistake as a violation under Section 129.
• The first appeal filed by the petitioner was dismissed, leading to the present writ petition before the High Court.

Key Points:

• No discrepancy was found between goods in the vehicle and those declared.
• No intent to evade tax was alleged or found by authorities.

3. Legal Issues Raised

The following important issues were raised before the Court:

1.    Whether minor technical errors in e-way bill completion without any tax evasion intention could justify detention and penalty under Section 129?

2.    Whether substantial compliance (i.e., correct goods with valid documents) protects the taxpayer against penalties for procedural lapses?

3.    Whether the authorities acted in violation of the legal principle that mens rea (guilty intent) is essential for imposition of penalty?

4. Submissions by the Petitioner

The petitioner, represented by Shri Aditya Pandey, advanced the following arguments:

• The goods matched exactly with the description in the e-way bill and invoices.
• The technical error in filling part of the e-way bill did not lead to any concealment or tax loss.
• There was no intent to evade tax, which is a mandatory requirement before imposing any penalty under Section 129.
• Substantial compliance with GST documentation requirements was demonstrated.
• Reliance was placed on the decision in VSL Alloys (India) Pvt. Ltd. vs. State of U.P., where the Allahabad High Court had quashed penalties imposed merely for incomplete e-way bills when no evasion intention was established.

5. Submissions by the Respondent

The State authorities, represented by Shri Ravi Shankar Pandey (ACSC), opposed the petition, arguing:

• There was a defect in the e-way bill, which constituted a breach of GST provisions.
• Such breach, even if minor, justified detention and penalty under Section 129.

However, crucially:

• The State did not produce any material to show that the petitioner had any intent to evade tax.

6. Relevant Legal Framework

Section 129 of CGST Act, 2017

• Provides for detention, seizure, and penalty for goods transported without proper documents or with an intention to evade tax.

Legal Principle:

• Mens rea (guilty intent) is a mandatory prerequisite for levying penalty.
• Technical mistakes, when promptly explained or corrected, cannot be the basis for harsh penalties.

7. Court’s Analysis and Findings

Justice Ajay Bhanot conducted a careful review of the facts and applicable legal principles.

Key Observations:

• The Court noted that physical goods exactly matched the goods declared in the e-way bill.
• No difference in description, quantity, or taxability was found.
• Authorities did not record any finding of intent to evade tax.
• Procedural breach, if not coupled with mala fide intention, cannot attract penalty under Section 129.

Quoting the precedent of VSL Alloys (India) Pvt. Ltd. vs. State of U.P., the Court observed:

“Merely non-mentioning of the vehicle number in Part-B cannot be a ground for seizure of goods. Once there is substantial compliance, seizure is totally illegal.”

The Court also noted that similar cases had consistently been decided in favor of taxpayers, reinforcing the principle that substantive justice must prevail over technical errors.

Thus, the Court found that:

• Substantial compliance was achieved.
• Technical error alone does not suffice for penalty.
• The seizure and penalty order was illegal and arbitrary.

8. Judgment and Final Order

The Court ultimately held:

• The impugned penalty order dated 24.06.2024 passed by the Additional Commissioner, Grade-2 (Appeal), State Tax, Judicial Division, Etawah was quashed.
• The writ petition was allowed in favor of M/s GSV Products.

Accordingly, the petitioner was relieved of all penalty obligations, and the authorities were directed to act in accordance with the Court’s decision.

9. Conclusion

The judgment in M/s GSV Products underscores a vital point in GST enforcement:

• Technical breaches, such as incomplete filling of an e-way bill, without evidence of mala fide intent, do not justify punitive action under Section 129.
• Substantial compliance protects a taxpayer, even if minor procedural errors occur.
• The revenue authorities must focus on tax evasion intent, not merely technical perfection.

This case strengthens the concept of fairness and proportionality in GST law enforcement, ensuring that honest businesses are not harassed for trivial mistakes.

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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