Non-filling of E-way bill Part-B, without a finding of tax evasion intent, does not attract Section 129 penalty.

Non-filling of E-way bill Part-B, without a finding of tax evasion intent, does not attract Section 129 penalty.

Issue:

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

Facts:

• The assessee was transporting goods.
• During transit, the goods were intercepted by authorities.
• It was discovered that while an e-way bill was being carried, Part-B of the e-way bill had not been filled up.
• Consequently, a penalty was imposed on the assessee.
• The assessee contended that the non-filling of Part-B was merely a technical breach, that there was no intention to evade tax, and crucially, that the authorities had not recorded any finding regarding an intent to evade tax.

Decision:

The court ruled in favor of the assessee. It observed that in the impugned order, except for noting the violation of the provisions of Rule 138 (pertaining to e-way bills) due to the non-filling of Part-B, not a single word was indicated pertaining to any attempt to evade tax. Citing a series of its own previous orders, the court reiterated that unless an attempt is made to evade tax and a clear finding in this regard is recorded by the authorities, mere non-filling of Part-B of the e-way bill would not attract a penalty under Section 129 of the Act. Therefore, the impugned penalty order was set aside.

Key Takeaways:

• Purpose of Section 129: Section 129 of the CGST/UGST Act deals with the detention, seizure, and release of goods and conveyances in transit, often accompanied by a penalty, primarily for tax evasion.
• Mens Rea (Guilty Mind) in Penalties: For penalties under tax statutes, especially those involving significant financial implications like Section 129, the presence of mens rea (i.e., intention to evade tax) is often a critical element. While not explicitly stated in all provisions, courts frequently read in this requirement to prevent harsh penalties for minor or technical breaches.
• Technical Breach vs. Tax Evasion: The court distinguishes between a purely technical or procedural lapse (like incomplete e-way bill details without intent to evade) and an act committed with the specific intention to defraud the revenue.
• Necessity of a Finding of Tax Evasion: The judgment emphasizes that for a penalty under Section 129 to be sustainable, the authorities must not only identify the procedural violation but also record a specific finding, based on evidence, that there was an attempt to evade tax. A mere conclusion of violation is insufficient.
• Burden on Department: The burden is on the department to prove the intent to evade tax when imposing a penalty that is punitive in nature.
• Consistent Judicial View: The reference to “series of orders passed by instant Court” indicates a consistent judicial stance that minor technical breaches of e-way bill rules, without an underlying intent to evade tax, should not lead to the harsh consequences of Section 129. This brings a degree of predictability and fairness to enforcement.
• Consequences: Setting aside the penalty order means the assessee is relieved of the financial burden imposed under Section 129.