Home GST No Penalty when there is no mens-rea for GST Evasion

No Penalty when there is no mens-rea for GST Evasion

No Penalty when there is no mens-rea for GST Evasion

Mistake in car quantity in E-way Invoice: No Penalty when there is no such thing as a mens-rea for GST Evasion

Info of the Case:

Petitioner is an organization, engaged in manufacturing Artist Brush and its supplies, for which Petitioner is duly registered underneath the GST regime with GSTN No.09AAACI2206F1Z2. Petitioner is having its manufacturing unit established in Noida Particular Financial Zone (hereinafter known as ‘SEZ’). In regular course of enterprise, petitioner bought 102 containers of Artist Brushes valuing Rs. 16,86,696.68/- to at least one M/s Pidilite Industries Ltd., Delhi (GSTIN No.07AAACP4156B1ZU) vide Tax Bill No.1819/CEN/23 dated 14.6.2018, after charging Built-in Items and Service Tax (hereinafter known as the ‘IGST’) at relevant charge of 18%. For the reason that transaction in query was from a SEZ unit to a Home Visitors Space (hereinafter known as ‘DTA’), therefore petitioner additionally charged customs obligation and SWS (customs) on the charge of 10% every and in addition filed Invoice of Entry in respect of the transaction in query.

After getting ready tax bill and invoice of entry, petitioner contacted transporter M/s Pawan Roadlines, for transportation of products, who agreed to move the products on car bearing registration no.UP14DT-8219. On the idea of the knowledge supplied by transporter, petitioner generated e-way invoice no. 4110 1410 2307 (legitimate until 22.6.2018), after importing all of the required particulars referring to the transaction. From the enquiries subsequently made by petitioner, it seems that attributable to non-availability of car bearing registration no. UP14DT-8219, the transporter supplied one other car bearing registration no.UP14BT8220 and attributable to inadvertence, petitioner additionally loaded the products within the stated car, with out even checking the car quantity talked about on e-way invoice.

When car loaded with items in query was crossing Ghaziabad through Vasundhara, the identical was stopped by Respondent No.3 for verification of products and paperwork. On being stopped, driver produced all the paperwork accessible with him together with e-way invoice, tax bill, invoice of entry and many others.. On examination of those paperwork, Respondent No. 3 directed driver to take the car to Business Tax Workplace, Mohan Nagar for bodily verification of products. Though the products have been being transported on the power of legitimate and real paperwork, specified underneath Rule 138A, then additionally Respondent No.3 handed detention order detaining the products on the bottom that the products have been being transported on a car completely different from that declared on e-way invoice.

No Penalty when there is no such thing as a mens-rea for GST Evasion:

Counsel showing on behalf of the petitioner has submitted that the products have been accompanied by the tax bill, packing listing, invoice of entry for house consumption and the e-way invoice. He submitted that the one mistake in all these paperwork was that the truck quantity written within the e-way invoice was incorrect. He submitted that this error had occurred due to an issue within the preliminary truck that was supposed to hold the products. He relied on a letter supplied by the transporter ‘M/s Pawan Roadlines’ that defined the explanations for the change of the truck. Counsel submitted that this transformation within the car was not famous by the consultant’s of the petitioner, and accordingly, the e-way invoice that has been generated based mostly on the sooner truck quantity was despatched alongwith the products. Counsel additional submitted that the invoice of entry for house consumption signifies that customized obligation had been paid and on such doc the variety of the truck that was carrying the products had been talked about. He additional submits that this invoice of entry had been issued on June 21, 2018 at NOIDA and the truck was, thereafter, despatched to the consignee’s tackle in Madoli, Delhi. Counsel additional submitted that there was no query of evasion of tax as the products left within the afternoon and have been intercepted at round 4 O’clock within the night by the authorities. Counsel additional positioned the impugned order handed in attraction and submitted that no the place within the order there may be any discovering that there had been any type of intention to evade tax. He submitted that as the products have been so as and there was no discrepancy in the identical with the e-way invoice and the invoices together with packing listing, there was no scope of imposition of penalty within the current case. He additional relied on a number of judgements of this Courtroom together with the judgement handed in Falguni Steels Vs. State of U.P. reported in (2024) 15 Centax 67 (All.) to buttress his argument that imposition of penalty is invalid in circumstances when there is no such thing as a mens-rea for evasion of tax.

Contentions of the Respondents

Per contra, Mr. Pandey, counsel showing on behalf of respondents submitted that within the current case the error by the petitioner can’t be seen as a clerical error because the truck quantity itself is completely different. He additional submitted that because the distance between NOIDA to Madoli, Delhi is just 100 kilometers, there may be all the time likelihood of the e-way invoice getting used on a number of events leading to evasion of tax. Counsel additional distinguished the judgement handed in Falguni Steels (Supra) by saying that the factual matrix therein in that matter was completely different from the current case.

Evaluation and Conclusion

Upon a perusal of the paperwork annexed to the writpetition, it’s fairly apparent that within the current transaction items have been shifting from a SEZ Unit to Home Visitors Space and the stated items have been checked by the Customized authorities. Customized obligation and in addition IGST had been paid on the stated items. The stated items have been intercepted solely twothree hours after the products have left the SEZ Unit, and subsequently, it can’t be stated that this e- approach invoice was wrongly getting used. It’s a indisputable fact that the burden of proof lies on the petitioner in sure circumstances to point out that there was no evasion of tax. Nonetheless, when the the error within the paperwork is just that of a clerical or typographical error, the preliminary burden of proof lies on the division to point out there was intention to evade tax. Within the current case the division has failed to take action and infact has not even tried to take action. The paperwork produced by the petitioner on the time of the interception itself signifies that the products have been transported from a SEZ Unit to the DTA after fee of customized obligation and fee of IGST. This truth has not been discredited by the division in any method in any way. Infact there may be full silence with regard to the very fact whether or not the petitioner made the fee as indicated within the invoices and the invoice of entry. The division has accordingly did not shift the burden of proof on the petitioner as the one error discovered by the division was that the car quantity was incorrect. Other than this one error within the e-way invoice, nothing has been proven by the division to justify the imposition of penalty underneath Part 129(3) of the Act. The impugned order additionally did not take into consideration the doc produced by the petitioner of the transporter whereby the reason was given with regard to the explanation for the error of the car quantity within the e-way invoice.

One might reiterate the ideas laid down within the judgmentof Falguni Steels (Supra) with regard to imposition of penalty. Related paragraph nos.19 and 20 are delineated under :-

“19. Mere technical errors, with out having any potential monetary implications, shouldn’t be the grounds for imposition of penalties. The underlying philosophy is to keep up a good and simply tax system, the place penalties are proportionate to the gravity of the offense. Within the realm of taxation, imposition of penalty serves as a important measure to make sure compliance with tax legal guidelines and laws. Nonetheless, a nuanced understanding prevails inside authorized frameworks that for penalties to be justly imposed, there should be a demonstrated precise intent to evade tax. This precept underscores the significance of distinguishing technical errors from deliberate makes an attempt to evade tax obligations. Penalties must be reserved for circumstances the place an intentional act to defraud the tax system is clear, moderately than for inadvertent technical errors. The authorized basis for this precept lies within the recognition that taxation statutes usually are not designed to punish inadvertent errors however moderately deliberate acts of noncompliance. The burden of proof, subsequently, rests on tax authorities to ascertain the precise intent to evade tax earlier than imposing penalties on taxpayers. This safeguards people and entities from punitive measures arising from trustworthy errors, administrative errors, or technical discrepancies that lack any malicious intent. Within the judgments cited above, the Courts therein have emphasised upon the necessity for a meticulous examination of the info and circumstances surrounding every case to ascertain the presence or absence of intentional tax evasion.

20. To conclude, the requirement of intent to evade tax for the imposition of penalties is a elementary precept that underpins the equity and integrity of taxation methods. Recognising the excellence between technical errors and intentional evasion is important for sustaining a balanced and equitable method to tax enforcement. As nations proceed their pursuit of efficient tax administration, upholding this precept turns into paramount in fostering voluntary compliance, preserving belief within the tax system, and making certain the even handed use of regulatory powers.”

Order of the Courtroom:

8. On the perusal of the above ideas, it’s clear that intention to evade tax is sine qua non earlier than imposition of penalty. In current case the division has failed to ascertain any such intention in any way. Moreover, the Appellate Authority has did not look into all of the paperwork that have been produced by the petitioner to rebut the allegation of the division with regard to intention to evade tax.

9. In gentle of the identical, impugned orders dated June 22,2019 and June 22, 2018 are quashed and put aside. The writ petition is allowed. Consequential reliefs to comply with.

10. Any quantity that has been deposited by the petitioner tobe refunded inside a interval of 4 weeks from date.

For Official Judgment Obtain PDF Given Under:

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