GST E-Way Bill: No Penalty when absence of e-way bill just technical lapse, not fraud
The present judgment, M/s Kunal Aluminium Company Vs. State of Himachal Pradesh & Ors., CMPMO No. 40/2025 (Neutral Citation No. 2025:HHC:20034), is being served in the High Court of Himachal Pradesh before Justice Tarlok Singh Chauhan and Justice Sushil Kukreja. M/s Kunal Aluminium Company is the petitioner here, and the State of Himachal Pradesh & Others are the respondents. In this case, the issue is regarding the penalty imposed under GST law due to the lack of an e-way bill at the time of transport, whether such a penalty is valid if tax was already paid, and whether there was no intent to evade tax.
Background of Case:
- A truck carrying aluminium scrap (HSN 760220010) was intercepted in Solan, Himachal Pradesh, on November 05, 2020. The driver was caught with no e-way bill.
- The authorities stopped and held the vehicle under Section 129 of the CGST Act. Despite explaining that all taxes were paid (including customs and IGST), the tax department imposed a tax of Rs. 3,56,183 and a penalty amount of Rs. 3,56,183.
- The petitioner gave a bank guarantee for the aforementioned amount under protest to release goods and appealed the penalty order.
- However, the Appellate Authority rejected the appeal on August 22, 2024.
Arguments by Petitioner:
The learned counsel for the petitioner, Mr Ajay Vaidy, served the following arguments in the court:
- They said there was no intention to evade tax; tax was already paid, and the absence of an e-way bill was just a technical lapse, not a fraud.
- Penalty laws under GST are civil liabilities but require intent to evade tax.
- Therefore, imposing such a huge amount of tax and penalty without any guilty intention is harsh, arbitrary, and illegal.
High Court’s Observations
- Mens rea (guilty mind) is essential for a penalty under Section 129. Meaning, there must be an intention to evade tax.
- Only the absence of an e-way bill or generating it after detention does not completely prove a guilty intention.
- Numerous High Courts and the Supreme Court, in the case of Satyam Shivam Papers 2022, have said that if there is no intention to avoid paying tax, then minor mistakes in following rules (procedural lapses) should not lead to a penalty.
- In this case, the petitioner had paid all due taxes, and no evidence against the petitioner was found that relates to the intention to evade tax.
- The Appellate Authority wrongly assumed tax evasion without any valid and solid proof.
- The high court also took reference from the previous similar cases, including Modern Traders, Roli Enterprises, and Hindustan Herbal, ruling penalties unjustified where documents were proper but technical errors occurred.
Final Judgement:
After deeply analysing the case, the high court passed the following orders:
- The penalty order and tax demand were quashed.
- The Court directed the release of the bank guarantee along with applicable interest.
- The Court highlighted justice, fairness, and the need to distinguish technical errors from intentional tax fraud.