InWrit Tax No. 603 of 2023 -ALL HC- Allahabad High Court emphasizes that intent to evade tax is essential prerequisite for initiating proceedings under Sections 129 & 130 of the CGST Act
Justice Piyush Agrawal [05-10-2023]

Read Order:M/s Shyam Sel and Power Limited v. State of U.P. and 2 Others

Chahat Varma

New Delhi, October 11, 2023: The Allahabad High Court has ruled in favour of M/s Shyam Sel and Power Limited (petitioner), by quashing the penalty imposed on them for transporting goods using a cancelled e-way bill. The Court emphasized that the intent to evade tax is an essential prerequisite for initiating proceedings under Sections 129 and 130 of the Central Goods and Services Tax Act (CGST Act).

In summary, the petitioner was involved in the manufacturing and sale of industrial-grade steel components, such as channels and beams. On 17.11.2021, the petitioner transported varying quantities of steel channels and beams to M/s Maa Ambey Steels. The transportation was supported by tax invoices, e-way bills, and GRs. However, during the transit, the goods were intercepted at Maharajpur, Kanpur. Upon verification, it was discovered that one of the e-way bills had been cancelled by the purchasing dealer, leading to the seizure of the goods. The petitioner later responded, asserting that all e-way bills were correctly filled out and that they were unaware of the cancellation. The petitioner maintained that the goods in question were sold by a registered dealer to a registered purchasing dealer and were accompanied by legitimate documentation. Despite the reply, an order was issued under Section 129(3) of the CGST Act, imposing a penalty. Dissatisfied with this decision, the petitioner filed an appeal, which was subsequently dismissed.

The single-judge bench of Justice Piyush Agrawal noted that even though the e-way bill had been cancelled by the purchaser, there was no indication that this cancellation had been communicated to the petitioner.

The bench stated that to initiate proceedings under Section 129(3) of the CGST Act, Section 130 of the CGST Act had to be read together. Section 130 requires the presence of intent to evade tax as a mandatory element. However, in the present case, during the issuance of the notice or when passing orders for detention, seizure, or imposition of penalties or taxes, no such intent to evade payment of tax by the petitioner was evident.

The bench commented that given the dealer had informed about the circumstances surrounding the cancellation of the purchasing dealer's e-way bill, it constituted a minor breach. In this situation, the authority had the option to initiate proceedings under Section 122 of the CGST Act rather than invoking Section 129 of the CGST Act.

The court said, “Once the authorities have not observed that there was intent to evade payment of tax, proceedings under section 129 of the CGST Act ought not to have been initiated….”

Thus, considering the facts and circumstances of the present case, the writ petition was allowed, and the challenged orders were consequently quashed.