Mere Delay in E-Way Bill Generation Without Intention to Evade
Tax Does Not Justify Penalty under GST Law
Summary of
the Case
The Allahabad High Court
(Lucknow Bench) in its decision dated 7th November 2024 reaffirmed that technical
lapses such as the non-generation of an e-way bill at the time of
interception, without any proven intent to evade tax, cannot attract
penalty under Section 129(3) of the GST Act. In the case of S/S
Banaras Industries vs. Union of India & Others, the Court quashed the
penalty orders against the petitioner, who had promptly generated and produced
a valid e-way bill before the seizure order was passed. Highlighting the
fundamental requirement of proving "intention to evade tax" for imposing
penalty, the Court relied on earlier judgments including M/s Falguni Steels
and M/s Bans Steel. The case thus strengthens taxpayers' protection
against arbitrary penal actions based solely on minor procedural mistakes.
1. Case
Overview
- Case Name:
S/S Banaras Industries vs. Union of India and 4 Others
- Case Number:
Writ Tax No. 897 of 2022
- Neutral Citation:
2024:AHC:174522
- Date of Judgment:
7 November 2024
- Court:
High Court of Judicature at Allahabad (Lucknow Bench)
2.
Background and Facts
S/S Banaras Industries,
a registered partnership firm (GSTIN No. 09AARFB1585E1Z8), is engaged in the
manufacture and sale of MS squares, MTMS flats, and similar goods.
Transaction and
Interception:
- The petitioner sold goods to M/s
Alok Steel Traders.
- The consignment was transported by
vehicle UP65 R 8124.
- During the transportation on 20.11.2020,
the vehicle was intercepted by the Mobile Squad.
- All documents—tax invoice, GR, and
other relevant documents—were found with the goods except the e-way
bill, which could not be generated due to technical glitches (slow
internet).
Key Developments:
- Before the seizure order was passed,
a properly filled e-way bill was produced by the petitioner.
- Despite this, the authorities passed
a seizure order and imposed penalty and tax under Section
129(3) of the UP GST Act.
- The first appeal filed by the
petitioner was dismissed on 27.07.2021.
Thus, the petitioner
approached the High Court challenging both orders.
3. Legal
Issues Raised
The following key issues
were raised:
1. Whether
the absence of an e-way bill at the time of interception, despite later
production before seizure, justifies penalty under Section 129?
2. Whether
technical lapses without intent to evade tax are sufficient to attract penal
consequences?
3. Whether
the authorities followed the principle that "intention to evade" is
mandatory for imposing penalty?
4. Whether
procedural compliance was correctly interpreted by the lower authorities?
4.
Submissions by the Petitioner
Counsel for the
petitioner, Mr. Harsh Vardhan Gupta, argued:
- The goods were accompanied by all
relevant documents, except for the e-way bill at the time of
interception.
- The e-way bill was duly generated
and presented before the seizure order was passed.
- No discrepancy in goods
was found—goods matched the tax invoice.
- No finding of intention to evade tax
was recorded by the authorities.
- Reliance was placed on:
- M/s Falguni Steels vs. State of U.P.
(Writ Tax No. 146/2023, decided on 25.01.2024).
- M/s Bans Steel vs. State of U.P.
(Writ Tax No. 577/2022, decided on 09.08.2024).
These cases held that mere
absence of e-way bill at interception, if cured before seizure, and absent
mala fide intention, cannot lead to penalty.
5.
Submissions by the Respondent
The Standing Counsel
for the State submitted:
- Absence of an e-way bill
at the time of interception itself suggested an attempt to evade tax.
- The subsequent generation of the
e-way bill was an afterthought.
- Thus, penalty was rightly imposed
under Section 129.
However, notably, the
State could not produce any evidence of actual intent to evade tax.
6. Relevant
Legal Framework
Section 129(3) of the
CGST Act, 2017
- Provides for detention, seizure,
and penalty if goods are transported without proper documentation.
- However, courts have emphasized that intention
to evade tax is a sine qua non (essential precondition) for
attracting penalty.
Important Precedents
Cited:
- M/s Falguni Steels vs. State of U.P.
(2024)
- M/s Bans Steel vs. State of U.P.
(2024)
- Hindustan Herbal Cosmetics vs. State
of U.P. (2024)
All of these judgments
establish that mere technical defaults, without mala fide intention, cannot
sustain penal actions.
7. Court’s
Analysis and Findings
Hon’ble Justice Piyush
Agrawal observed:
- No dispute existed
regarding the quantity, description, or taxability of goods.
- The e-way bill was duly generated
and produced before the seizure order—this fact was not disputed by
the State.
- No authority had recorded a finding
of intentional evasion of tax at any stage.
- The ratio laid down in Falguni
Steels and Bans Steel was squarely applicable.
In Falguni Steels,
it was held:
“If penalty is imposed in
the presence of all valid documents even if the e-Way Bill was delayed, in
absence of intent to evade tax, it cannot be sustained.”
Similarly, in Bans
Steel, the Court ruled:
“Once the E-way bill is
produced before the seizure order, the discrepancy, if any, stands cured.”
Thus, intention to
evade tax is crucial for sustaining penalties, and in the present case, such
intention was absent.
The Court finally
observed:
“The essence of any penal
imposition is intrinsically linked to the presence of mens rea (guilty mind), a
facet conspicuously absent from the record.”
8. Judgment
and Final Order
Based on the above
reasoning, the Court held:
- The impugned seizure order dated
20.11.2020 and the first appellate order dated 27.07.2021 are quashed.
- The writ petition is allowed.
- The State authorities are directed
to refund any tax and penalty deposited by the petitioner within
four weeks.
Thus, full relief was
granted to S/S Banaras Industries.
9.
Conclusion
The judgment of the
Allahabad High Court reaffirms some critical principles:
- Procedural mistakes
like late e-way bill generation, without mala fide intent, do
not justify detention or penalty.
- Mens rea (intent to evade tax)
must be established before penal action under Section 129.
- Compliance must be judged
substantively, not mechanically or rigidly.
- Authorities must act fairly and
proportionately, respecting taxpayer rights.
The ruling fortifies
businesses against arbitrary enforcement actions based on minor
technicalities.
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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