Penalty for Expired E-way Bill Quashed: Traffic Restrictions (Kanwar Yatra) Cited as Valid Reason for Delay

Penalty for Expired E-way Bill Quashed: Traffic Restrictions (Kanwar Yatra) Cited as Valid Reason for Delay

Issue

Whether a penalty under Section 129(3) of the CGST Act can be imposed for the expiry of an e-way bill during transit when the delay was caused by administrative traffic restrictions (specifically the Shravan Kanwar Yatra) and there is no evidence of an intention to evade tax (mens rea).

Facts

• The Transaction: The petitioner, a registered dealer of Mentha oil, dispatched a consignment to a purchaser. The goods were accompanied by a valid e-invoice, e-way bill, and mandi samiti documents.

• The Delay: Due to restrictions imposed by the district administration for the “Shravan Kanwar Yatra,” the entry of heavy vehicles into the city was barred. Consequently, the truck remained parked outside city limits until the restrictions were eased.

• The Interception: After the movement resumed, the Mobile Squad intercepted the vehicle.

• The Discrepancy: Upon inspection, the invoice and goods were found to be in order. The only discrepancy was that the e-way bill had expired and had not been renewed.

• The Penalty: A Show Cause Notice (SCN) was issued alleging transportation with an expired e-way bill. Despite the petitioner’s detailed reply citing the traffic restrictions, the Assistant Commissioner imposed a penalty, which was subsequently upheld by the Appellate Authority.

Decision

• The Allahabad High Court ruled in favour of the assessee and quashed both the penalty order and the appellate order.

• No Intent to Evade (Mens Rea): The Court observed that the goods were fully accounted for with valid tax-paid documents (invoice and e-invoice). The only lapse was the technical expiry of the e-way bill.

• Valid Reason for Delay: The Court accepted that the delay was caused by external factors beyond the petitioner’s control (administrative traffic restrictions for the Kanwar Yatra).

• Legal Precedent: Relying on settled precedents (such as M/s. Globe Panel Industries India Pvt. Ltd. and M/s. Falguni Steels), the Court reiterated that a penalty under Section 129 cannot be imposed for technical breaches unless there is a specific finding of an intention to evade tax.

• Conclusion: Since the authorities failed to record any satisfaction regarding tax evasion intent and the delay was justified, the penalty was unsustainable.

Key Takeaways

• Traffic Restrictions are Valid Excuses: Unforeseen administrative restrictions (like festival traffic bans, processions, or natural calamities) are valid grounds to explain the expiry of an e-way bill.

• Expiry $\neq$ Evasion: The mere expiry of an e-way bill during transit does not automatically equate to tax evasion. If the underlying transaction is genuine and documented, Section 129 penalties should not apply.

• Renewal is Procedural: While Rule 138 requires re-validation, failure to do so in genuine circumstances is a procedural lapse, not a substantive offense warranting heavy penalties, provided mens rea is absent.

• Documentation is Key: The presence of a valid e-invoice and mandi pass served as strong evidence of the genuineness of the transaction, countering any presumption of evasion.

(Based on the recent trend of Allahabad High Court judgments, likely M/s. Global Leaves vs. State of U.P. or similar, 2025)