GST E-Way Bill Lapses due to Vehicle's Slow Movement from Engine Default, Authorities should consider Factual Aspects: Allahabad HC quashes Penalty u/s 129 [Read Order]

The Allahabad High Court has quashed the penalty under Section 129 of the Goods and Services Tax ( GST ) Act stating that the breach committed by the petitioner by not extending the E- way bill is technical and cannot be considered as a sole ground for imposing penalty.

The bench of Justice Shekhar B. Saraf observed that “GPS tracking system clearly indicate that the truck was moving slowly due to mechanical fault in the engine of the vehicle. This factual aspect should be considered by the authorities below. The breach committed by the petitioner with respect to not extending time period of the e-way bill is only a technical breach and it cannot be the sole ground for penalty order being passed under Section 129(3) of Act.”

The decision, handed down in response to a writ petition under Article 226 of the Constitution of India, addressed the grievances of the petitioner regarding an order dated April 6, 2022, imposing penalties, and an order in appeal dated June 22, 2022.

During the proceedings, Sri Aloke Kumar and Sri Gaurav Mahajan, learned counsels representing the petitioner and the GST council respectively, presented their arguments. Additionally, Sri Ravi Shankar Pandey, learned Additional Standing Counsel for the State, provided insights on behalf of the state.

The petitioner contended that although the e-invoice and e-way bill accompanied the goods, the e-way bill had expired four days before the vehicle's detention.

Counsel for the petitioner further explained that the vehicle's engine overheated during transit, compelling the driver to slow down and intermittently stop the vehicle to prevent further damage.

Evidence from the GPS tracking system corroborated the vehicle's movement along the designated route. Citing a similar case precedent in M/s Globe Panel Industries India Pvt. Ltd. v. State of U.P. and Others, counsel argued for a favourable interpretation.

In response, counsel for the respondents argued that the petitioner failed to seek an extension for the expired e-way bill, thus contravening the rules. They maintained that the penalty imposed under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017, was warranted.

The Court referenced previous judgments, including M/s Hindustan Herbal Cosmetics v. State of U.P. and M/s Falguni Steels v. State of U.P., emphasising the necessity of mens rea to justify tax evasion penalties.

It concluded that the factual circumstances of the case did not indicate any intent to evade taxes. Rather, the slow movement of the vehicle stemmed from a mechanical fault in the engine, rendering the breach of the e-way bill's time extension a technical matter.

Consequently, the Court quashed the penalty orders dated April 6, 2022, and June 22, 2022, and directed the respondents to refund the deposited tax and penalty amount within four weeks.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates