Nancy Trading Company Vs State of U.P.
Date: July 14, 2024
Subject Matter
Intention to evade taxes (mens rea) is necessary for proceedings under Section 129(3) to be valid
Summary
In the case, the petitioner challenged the penalty imposed on them for not generating an E-Tax Invoice according to the GST Rules while transporting goods. The authorities claimed non-compliance with Rule 48 as the basis for their actions. The petitioner argued that the goods in transit were accompanied by all required documentation, including the E-Way Bill, and that the failure to generate an E-Tax Invoice was a result of a bona fide mistake. Furthermore, prior to August 1, 2022, the petitioner was not required to generate an E-Tax Invoice due to their turnover being below the previous threshold of Rs. 20 crores, which had since been reduced to Rs. 10 crores. The court concluded that there was no established intention to evade taxes (mens rea) by the petitioner, which is necessary for proceedings under Section 129(3) to be valid. The court quashed the orders imposing the penalty and directed that any amount deposited during the proceedings be returned to the petitioner within a stipulated time frame. Thus, the writ petition was allowed, favoring the petitioner.
FULL TEXT OF THE ORDER OF ITAT ALLAHABAD
1. Heard Sri N.C.Gupta, learned counsel for the petitioner and learned standing counsel for the respondents.
2. By means of the present writ petition the petitioner has prayed for issuing a direction for quashing the order dated 26.12.2022 passed by respondent no.4 by which penalty has been imposed as well as the appellate order dated 26.5.2023 passed by respondent no.3 confirming the order dated 26.12.2022.
3. Learned counsel for the petitioner submits that the goods in question were in transit along with tax invoice, GR’s, E waybills. The said goods were detained on the ground that E Tax Invoice was not generated as per Rule 48 of the Goods and Services Tax Rules, 2017 (for short the Rules). He further submits that as per Rule 138A of the Rules there is no provision for carrying E Tax Invoice, hence it was not correct on the part of the authorities to seize the goods and pass the impugned orders against the petitioner. He further submits that once the E Waybill was generated, it was within the knowledge of the authorities about the movement of the goods, hence there was no intention to avoid payment of tax. He further submits that the authorities have not recorded any finding with regard to any intention to avoid tax. He further submits that the annual turn over of the petitioner was much less than the prescribed limit for generating the E Tax Invoice. He further submits that the dealers who were having annual turn over above Rs. 20 crores was required to issue E Tax Invoice. He further submits that now the said limit has been reduced to annual turn over of Rs. 10 crores by notification dated 1st August, 2022. He further submits that there was a bona fide mistake as the petitioner was not aware that the said limit has been reduced from Rs. 20 crores to Rs. 10 crores. He prays for allowing the writ petition.
4. Per contra, learned standing counsel submits that Section 129(3) of the UPGST and CGST Act 2017 empowers the authorities to initiate proceedings and the petitioner is duty bound to issue tax invoice as per Rule 48 (4) of the Rules which has not been done in the present case, therefore the action taken by the authorities is justified. He prays for dismissal of the writ petition.
5. After hearing the learned counsel for the parties, the Court has perused the records.
6. It is admitted that while transiting the goods in question all documents as required under Rule 138 A of the Rules were accompanying with the goods. Only a technical error has been committed by the petitioner for not generating E Tax Invoice before movement of goods in question. It is not in dispute that Waybill was generated. It is not the case of the Revenue that there was any discrepancy with regard to quality and quantity of the goods as mentioned in Tax Invoice, E Waybill as well as G.Rs accompanying the goods. The error committed by the petitioner for not generating E Tax Invoice before movement of goods is a human error. It is also not in dispute that prior to 1st August, 2022 the dealers who were having annual turn over of more than Rs. 20 crores was required to issue E Waybill. The said limit has now been reduced with effect from 1st August, 2022 to Rs. 10 crores, hence there was bona fide mistake on the part of the petitioner for not generating E Tax Invoice but in absence of any specific finding with regard to mens rea for evasion of tax, the proceeding under section 129 (3) of the Act should not have been initiated. On the pointed query to the learned standing counsel as to whether any finding was recorded by the authorities at any stage with regard to mens rea for evasion of tax has been recorded, the answer was very fairly in negative.
7. In view of the above, in absence of any finding with regard to mens rea the proceeding under section 129(3) of the Act cannot be initiated. The impugned order dated 26.12.2022 passed by respondent no.4 as well as the order dated 26.5.2023 passed by respondent no.3 are hereby quashed. The writ petition is allowed.
8. Any amount deposited in the said proceeding shall be returned back to the petitioner within a period of one month from the date of production of a certified copy of the order.