Typo Error In E-Way Bill, Penalty Can't Be Imposed If There Is No Intention To Evade Tax: Allahabad High Court

The Allahabad High Court has held that a minor typographical error in the e-way bill without any other material establishing an intention to evade tax will not attract a penalty under Section 129 of the Goods and Service Tax Act, 2017.

Placing reliance on the decision of Allahabad High Court in M/s. Varun Beverages Limited v. State of U.P. and 2 others, the judgment of Supreme Court in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another, Justice Shekhar B. Saraf held that

“Upon perusal of the judgments, the principle that emerges is that the presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to the imposition of penalty.”

Factual Background

The petitioner is a duly registered dealer in cosmetics. The petitioner was supplying cosmetics to another registered dealer in Jharkhand when goods were intercepted. It was contended that the transaction was duly covered by tax invoice, bilty and e-way bill. A seizure order was passed because the vehicle number in Part B of the e-way bill was incorrect as the e-way bill showed the vehicle bearing No.DL1 AA 3552 instead of DL1 AA 5332. The penalty was also imposed on the sole ground that the vehicle number was not correctly mentioned.

Counsel for the petitioner contended that there was no allegation as to intention to evade tax on the part of the petitioner-assessee as the e-way bill, bility and the tax invoice were matching and the consignee was also a registered dealer. It was contended that there was a typographical error in the e-way bill regarding the vehicle number and the same mistake was also pointed out in the impugned order.

In support of his arguments, counsel for the petitioner relied on the decision of Allahabad High Court in M/s. Varun Beverages Limited v. State of U.P. and 2 others, the judgment of Supreme Court in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another.

Counsel for the respondent relied on a circular to argue that the Department has allowed non-imposition of penalty in cases where there is a mistake of two digits in the vehicle number and no further. The judgment of Allahabad High Court in M/s. Varun Beverages Limited was distinguished on the grounds that it was a case of stock transfer and there was no question of any tax liability in that case.

High Court Verdict

The Court observed that though there is a mistake of three digits as opposed to two digits as provided in the circular, “law is not to remain in a vacuum and has to be applied equitably in appropriate cases.”

The Court held that intention to evade tax is a sine qua non for imposition of penalty. The Court held that a penalty cannot be imposed based solely on a typographical error in the e-way bill without any further material establishing an intention to evade tax.

The Court held that mentioning '3552' instead of '5332' was a clear typographical error which was minor in nature and did not attract a penalty under Section 129 of the Act.

“In certain cases where lapses by the dealers are major, it may be deemed that there is an intention to evade tax but not so in every case. Typically when the error is a minor error of the nature found in this particular case, I am of the view that imposition of penalty under Section 129 of the Act is without jurisdiction and illegal in law.”

Accordingly, the writ petition was allowed.

Case Title: M/S. Hindustan Herbal Cosmetics vs. State Of U.P. And 2 Others [WRIT TAX No. - 1400 of 2019]

Case Citation: 2024 LiveLaw (AB) 9

Counsel for Petitioner: Shubham Agrawal

Counsel for Respondent: Ravi Shanker Pandey

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