HC Quashes GST Penalty for Expired E-way Bill When Breakdown Proves No Intent to Evade.

HC Quashes GST Penalty for Expired E-way Bill When Breakdown Proves No Intent to Evade.

Issue

Whether a penalty under Section 129 of the CGST Act can be imposed for a technical violation (an expired e-way bill) when the delay was caused by a genuine, verifiable reason (vehicle breakdown) and there is no evidence of any mens rea (intention) to evade tax.

Facts

• The petitioner, a GST-registered company, was transporting GPS devices to a Government department under a valid contract.
• The movement of goods was properly documented with tax invoices and valid e-way bills.
• During transit, the vehicle suffered a breakdown, forcing the driver to shift the goods to another vehicle to complete the delivery.
• This unforeseen delay caused the original e-way bill to expire while the goods were still in transit.
• The goods were intercepted by GST authorities.
• Before any penalty order was passed, the petitioner generated a fresh e-way bill for the movement.
• Despite these facts, the authorities passed a penalty order under Section 129(3), which was subsequently upheld by the appellate authority.

Decision

• The High Court quashed both the penalty order and the appellate order.
• It held that the facts of the case—genuine documents, supply to a government department, a verifiable vehicle breakdown, and the generation of a fresh e-way bill—were undisputed.
• The court relied on established precedents which hold that the mere expiry of an e-way bill is a technical lapse and, in the absence of any other adverse findings, does not by itself demonstrate an intention to evade tax.
• Since the penalty under Section 129 is intended to curb tax evasion, it cannot be imposed for a technical breach that is supported by bona fide reasons.

Key Takeaways

• Mens Rea (Intent to Evade) is Key: This judgment reinforces the principle that Section 129 is an anti-evasion provision. To sustain a penalty, the tax department must demonstrate an intention to evade tax, not just a simple procedural lapse.
• Technical Lapses vs. Evasion: A clear distinction is made between a bona fide, explainable technical error (like an expired e-way bill due to a breakdown) and a substantive violation (like no invoice or e-way bill at all) which would indicate an intent to evade.
• Bona Fide Reasons are a Valid Defense: Verifiable, genuine reasons for a delay or procedural error, such as a vehicle breakdown, serve as a strong defense against the imposition of a penalty.
• Mitigating Actions Matter: The taxpayer’s good faith, demonstrated by generating a fresh e-way bill before the order was passed, supported their case and showed a lack of ill intent.