2025 (7) TMI 1327 - HC - GST

Initiation of proceedings u/s 129 of the GST Act - in tax invoice and e-way bill one digit was different - existence of mens rea or not - reliance placed upon circular dated 14.9.2018 - HELD THAT - This Court in the case of M/s Cavendish Industries Ltd. 2024 (4) TMI 1144 - ALLAHABAD HIGH COURT specifically in para nos. 5 and 6 has held mens rea to evade tax is essential for imposition of penalty. The impugned orders cannot be sustained in the eyes of law and same are hereby quashed - Petition allowed.

Summary

ISSUES:

Whether a clerical or typographical error in the e-way bill or tax invoice number, without any mens rea to evade tax, justifies seizure of goods and imposition of penalty under Section 129 of the GST Act.Whether proceedings under Section 129 of the GST Act can be initiated when there is an error in one or two digits of the document number mentioned in the e-way bill.Whether the impugned orders of seizure and penalty can be sustained in the absence of intention to evade tax.

RULINGS / HOLDINGS:

The Court held that "mens rea to evade tax is essential for imposition of penalty" under Section 129 of the GST Act, and a "typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to imposition of penalty."The Court relied on a circular dated 14.9.2018 which "categorically" states that proceedings under Section 129 of the GST Act "may not be initiated, if there is any error in one or two digits of the document number mentioned in the e-way bill."Accordingly, the impugned orders of seizure and penalty were quashed and set aside as they were "without jurisdiction and illegal in law" due to lack of mens rea and presence of only a minor clerical error.Any amount deposited pursuant to the impugned orders shall be refunded with interest at 4% from the date of deposit until actual payment.

RATIONALE:

The Court applied the legal framework under Section 129 of the GST Act, emphasizing the necessity of mens rea for imposing penalties related to tax evasion.Precedents were considered, including prior decisions holding that minor typographical errors in e-way bills do not constitute intent to evade tax and thus do not warrant penalties or seizure.The Court referred to a specific circular dated 14.9.2018 clarifying that minor errors in document numbers on e-way bills should not trigger proceedings under Section 129.No dissenting or differing opinions were recorded; the judgment followed established principles reinforcing the protection of taxpayers against penalties arising from clerical mistakes absent fraudulent intent.