In M/s Indeutsch Industries Pvt. Ltd. v. State of Uttar Pradesh & Others, the Allahabad High Court examined the legality of penalty proceedings initiated under Section 129 of the U.P. Goods and Services Tax Act, 2017, arising solely from a clerical discrepancy in the accompanying documents of goods in transit.

The petitioner was engaged in lawful movement of goods supported by valid tax invoices and an e-way bill. During transit, a change in the transporting vehicle occurred after generation of the e-way bill, resulting in a mismatch of the vehicle number mentioned in the e-way bill vis-à-vis the actual vehicle used. Apart from this discrepancy, all statutory documents were valid, and tax liability had already been duly discharged.

The tax authorities detained the goods and imposed penalty proceedings on the premise of alleged tax evasion. The petitioner contended that the error was purely clerical and unintentional, with no element of fraud, suppression, or intent to evade tax.

The High Court observed that a mere clerical or typographical error in documents, without any supporting material to indicate deliberate tax evasion, cannot automatically lead to penal consequences. The Court emphasized that when the alleged violation is only technical in nature, the initial burden lies on the department to demonstrate intent to evade tax.

The Court further held that the existence of mens rea is a necessary prerequisite for imposition of penalty under Section 129, particularly where the movement of goods is otherwise supported by genuine documentation and there is no revenue loss to the State. In the absence of any evidence establishing mala fide intent, the penalty proceedings were held to be unsustainable.

Accordingly, the Allahabad High Court quashed the impugned penalty orders, reaffirming that clerical mistakes alone cannot be equated with tax evasion, and enforcement powers under GST must be exercised in a reasonable and proportionate manner.

SOURCE LINK- https://www.mytaxexpert.co.in/uploads/1768213175_IndeutschIndustriesPvt.Ltd.v.StateofU.P.2024.pdf

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