E-Way Bill Downloaded prior to Interception: Allahabad HC quashes GST SCN and Penalty Order for Non-Production of Hard Copy and alleged Tax Evasion [Read Order]

Recently, the Allahabad High Court has held that, it is clear that only violation is a technical  one wherein E-Way Bill was not present in the vehicle”, while quashing the Goods and Services Tax (GST) Show Cause Notice and Penalty Order for alleged tax evasion.

The petitioner’s vehicle was intercepted for transporting goods without an E-Way Bill, leading to a penalty under the presumption of tax evasion.

However, the E-Way Bill was downloaded prior to the interception of the vehicle. Despite this, the driver could not produce a hard copy of the E-Way Bill at the time of interception, leading to a technical violation.

The show cause notice and the penalty order were issued on the same day, indicating that no opportunity of hearing was given to the petitioner to submit his reply. This is a gross violation of the principles of natural justice.

Suyash Agrawal, Advocate appeared for the petitioner and Standing Counsel Arvind Kumar Mishra represented the respondent-GST Authorities.

Suyash Agrawal, counsel appearing on behalf of the petitioner made the following submissions:

The petitioner had downloaded the E-Way Bill for the goods in question on May 21, 2019 at 08:38 am and the interception took place on the same day at 08:52 am which means the E-Way Bill was downloaded prior to the interception of the goods.

In the show cause notice issued to the petitioner, a time limit of 7 days was mentioned to submit the reply but without waiting for 7 days and without giving an opportunity of hearing to the petitioner, the respondent No. 2 illegally passed the penalty order.

The minor mistake in documentation was without any  fraudulent intent or gross negligence and the same was later on rectified by downloading the E-Way Bill. This minor mistake of the petitioner is protected under Section 126 (1) of the Central Goods and Services Tax Act.

As provided under rule 138 (A) (b) of the Central Goods and Services Tax Rules, the  person in charge of a conveyance shall carry a copy of the E-Way Bill in physical form or E-Way bill number in electronic  form.

In the present case, although the driver of the vehicle  could not provide a hard copy of the E-Way Bill to respondent No. 2, yet he informed respondent No. 2 about the E-Way bill number.

It was also submitted that, Since the E-Way Bill was downloaded prior to the interception of the goods and the driver of the vehicle informed the respondent No. 2 about the E-Way Bill number, the respondent No. 2 was not justified in passing the penalty order.

The invoice and the E-Way Bill matched with the goods in the vehicle, inferring that there was no mens rea (intention) for tax evasion.

The respondent authorities failed to check the genuineness of the E-Way Bill number as informed by the driver from the GST portal and did not provide an opportunity of hearing to the petitioner, which was against the principles of natural justice.

The Allahabad High Court Bench of Justice Shekhar B. Saraf held that the presence of mens rea for evasion of tax is a sine qua non for the imposition of penalty. As a result, the impugned show cause notice and penalty order were quashed and set aside, and the writ petition was allowed.

It was also added that, “The respondent authorities are directed to refund the amount of tax and penalty deposited by the petitioner within a period of four weeks from the date of this judgment.”

To Read the full text of the Order CLICK HERE

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