Using One E-way Bill for Multiple Invoices is a Technical Error, Not Tax Evasion; HC Quashes Penalty.

Using One E-way Bill for Multiple Invoices is a Technical Error, Not Tax Evasion; HC Quashes Penalty.

Issue

Can a penalty under Section 129 of the CGST Act be imposed for a technical/procedural irregularity (like using a single e-way bill for multiple invoices) when there is no evidence of any mala fide intention to evade tax?

Facts

• A consignment of goods in transit was intercepted.
• The goods were found to be covered by four separate tax invoices, which had been issued on different dates.
• However, the consignment was accompanied by only one e-way bill, which reflected the consolidated value of all four invoices.
• The tax invoices themselves were valid, and the e-way bill was also valid and within its expiry period.
• The department imposed a penalty under Section 129, treating the movement of goods against multiple invoices with a single e-way bill as a violation of the Act.

Decision

• The Allahabad High Court quashed the penalty order.
• It held that the core requirement for imposing a penalty under Section 129 is the presence of an intention to evade tax (mens rea).
• The court viewed the use of one consolidated e-way bill for four separate (but valid) invoices as a “technical error” or a procedural lapse, not an act of tax evasion.
• The taxpayer’s transparency—having valid tax invoices for all goods and a valid e-way bill covering the total value—demonstrated their bona fides.
• Since there was no evidence of any mala fide intention, the penalty could not be sustained. The court directed the department to refund the amount the taxpayer had deposited.

Key Takeaways

• Intent to Evade is Mandatory: A penalty under Section 129 cannot be imposed for every procedural lapse. The department must provide “cogent material” showing a clear intention to evade tax.
• Technical Error vs. Substantive Breach: Consolidating multiple valid invoices into one valid e-way bill is a technical irregularity, not an act of tax evasion, especially when the value of the goods matches the documents.
• Transparency Negates Evasion: The taxpayer’s transparency—by having valid invoices and reflecting the full consolidated value in the e-way bill—negates any inference of mala fide intent.
• Bona Fides Matter: The court (citing precedent) held that a valid e-way bill that has not been cancelled within its validity period establishes the bona fides of the taxpayer.