Non-Filling of E-Way Bill Part-B Alone Does Not Attract Section 129 Penalty Without Intent to Evade Tax.

Non-Filling of E-Way Bill Part-B Alone Does Not Attract Section 129 Penalty Without Intent to Evade Tax.

Issue:

Whether the mere non-filling of Part-B of an e-way bill for goods in transit is sufficient to attract penalty under Section 129 of the Central Goods and Services Tax Act, 2017 (CGST Act) / Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act), without any evidence or finding of an intent to evade tax.

Facts:

Goods were being transported, and during transit, it was discovered that Part-B of the e-way bill was not filled up. Consequently, a penalty was imposed under Section 129(3) of the CGST/UPGST Act.

Decision:

In favor of the assessee: The court held that, apart from noting the violation of Rule 138 (due to the non-filling of Part-B of the e-way bill), nothing else in the facts indicated any attempt to evade tax. The court emphasized that mere non-filling of Part-B of an e-way bill would not attract a penalty under Section 129 unless an attempt was made to evade tax and a finding in this regard was recorded. Since no such finding or evidence of tax evasion was presented, the impugned order imposing the penalty was set aside.

Key Takeaways:

• Purpose of Section 129: Section 129 of the CGST Act deals with the detention, seizure, and release of goods and conveyances in transit where there is a contravention of the provisions of the Act or the rules made thereunder. The overarching purpose of this section is to address cases where goods are transported in violation of tax laws, often implying an intent to evade tax.
• Intent to Evade Tax is Crucial for Section 129: This judgment reinforces the principle that for a penalty under Section 129 to be attracted, especially for minor procedural discrepancies like the incomplete e-way bill (Part-B), there must be a discernible intent to evade tax. Mere technical or procedural non-compliance, without an accompanying element of mens rea (guilty mind) or an attempt to defraud the revenue, should not automatically lead to a Section 129 penalty.
• Finding of Tax Evasion Required: The tax authorities are required to record a specific finding that an attempt to evade tax was made. Simply pointing out the non-compliance with a rule is insufficient. They need to demonstrate how the non-compliance directly relates to a larger scheme of tax evasion.
• Distinction from Minor Penalties: While other sections of the GST Act might impose lesser penalties for mere procedural lapses (e.g., Section 122), Section 129 involves detention/seizure and substantial penalties, and thus, a higher threshold of proven evasion intent is often expected by courts.
• Judicial Interpretation: This ruling aligns with a trend of judicial pronouncements that differentiate between genuine tax evasion and mere procedural irregularities under GST law, especially concerning e-way bills.