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No Penalty if eway bill generated with clerical error

In the case of M/S Indeutsch Industries Private Limited V. State of UP, the Allahabad High Court Passed its judgement on 02 Feb 2024 that


6. Upon a perusal of the documents annexed to the writ petition, it is quite obvious that in the present transaction goods were moving from a SEZ Unit to Domestic Traffic Area and the said goods have been checked by the Custom authorities. Custom duty and also IGST had been paid on the said goods. The said goods were intercepted only two-three hours after the goods have left the SEZ Unit, and therefore, it cannot be said that this e-way bill was wrongly being used. It is a fact that the burden of proof lies on the petitioner in certain cases to show that there was no evasion of tax. However, when the the error in the documents is only that of a clerical or typographical error, the initial burden of proof lies on the department to show there was intention to evade tax. In the present case the department has failed to do so and infact has not even tried to do so. The documents produced by the petitioner at the time of the interception itself indicates that the goods have been transported from a SEZ Unit to the DTA after payment of custom duty and payment of IGST. This fact has not been discredited by the department in any manner whatsoever. Infact there is complete silence with regard to the fact whether the petitioner had made the payment as indicated in the invoices and the bill of entry. The department has accordingly failed to shift the burden of proof on the petitioner as the only error found by the department was that the vehicle number was incorrect. Apart from this one error in the e-way bill, nothing has been shown by the department to justify the imposition of penalty under Section 129(3) of the Act. The impugned order also failed to take into account the document produced by the petitioner of the transporter wherein the explanation was given with regard to the reason for the mistake of the vehicle number in the e-way bill.


7. One may reiterate the principles laid down in the judgment of Falguni Steels (Supra) with regard to imposition of penalty. Relevant paragraph nos.19 and 20 are delineated below :-

"19. Mere technical errors, without having any potential financial implications, should not be the grounds for imposition of penalties. The underlying philosophy is to maintain a fair and just tax system, where penalties are proportionate to the gravity of the offense.


20. To conclude, the requirement of intent to evade tax for the imposition of penalties is a fundamental principle that underpins the fairness and integrity of taxation systems. Recognising the distinction between technical errors and intentional evasion is essential for maintaining a balanced and equitable approach to tax enforcement. As nations continue their pursuit of effective tax administration, upholding this principle becomes paramount in fostering voluntary compliance, preserving trust in the tax system, and ensuring the judicious use of regulatory powers."


8. On the perusal of the above principles, it is clear that intention to evade tax is sine qua non before imposition of penalty. In present case the department has failed to establish any such intention whatsoever. Furthermore, the Appellate Authority has failed to look into all the documents that were produced by the petitioner to rebut the allegation of the department with regard to intention to evade tax.


9. In light of the same, impugned orders dated June 22, 2019 and June 22, 2018 are quashed and set aside. The writ petition is allowed. Consequential reliefs to follow.


10. Any amount that has been deposited by the petitioner to be refunded within a period of four weeks from date. Order Date :- 19.2.2024



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