GST | Only Typographical/ Clerical Error In Documents, Initial Burden On Department To Prove Intention To Evade Tax: Allahabad High Court

The Allahabad High Court has held that in case of no discrepancies or clerical errors in the documentation, the initial burden to prove that there is intention to evade tax lies on the department.

While quashing penalty under Section 129 of the Uttar Pradesh Goods and Service tax Act, 2017, Justice Shekhar B. Saraf held that

“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 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.”

Factual Background

Petitioner's manufacturing unit is established in Noida Special Economic Zone. Petitioner sold Artist Brushes to M/s Pidilite Industries Ltd., Delhi through tax invoice charging Integrated Goods and Service Tax at the applicable rate of 18%. Since the transaction in question was from a SEZ unit to a Domestic Traffic Area, petitioner also charged customs duty and SWS (customs) at the rate of 10% each and filed Bill of Entry in respect of the transaction in question.

For transportation of goods, the transporter generated the e-way bill with one vehicle number. However, since that vehicle was not available, the goods were transported in another vehicle. Due to inadvertence, petitioner did not check the vehicle number mentioned in the e-way bill while uploading the goods. The goods were detained by the Respondent Authorities on grounds that the vehicle number on the e-way bill was different from that of the vehicle carrying the goods.

Counsel for petitioner submitted that the only error in the entire documentation was wrong vehicle number in the e-way bill which was due to inadvertence. It was argued that the bill of entry had the correct vehicle number on which the goods were loaded. Further, it was argued that there was no intention to evade tax established by the department as there was no discrepancies in the goods or any other documentation.

Counsel for respondent argued that since the distance between the two places was 100kms there was a chance that the e-way bill was being used on several occasions resulting in evasion of tax.

High Court Verdict

The Court observed that the petitioner had duly paid the custom duty and IGST on the goods being transported from SEZ Unit to Domestic Traffic Area. Since the goods were intercepted 2-3 hours after leaving the place of manufacture, the Court held that it could not be said the e-way bill was being misused.

The Court held that the department did not attempt to discharge its burden prove intention to evade tax on part of the petitioner. The Court observed that the Department had completely disregarded the fact that the petitioner had duly paid specified taxes on the transaction.

“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.”

The Court observed that the impugned order was silent as to the liability of the transporter in filing the vehicle number in the e-way bill.

Relying on its earlier decision in Falguni Steels v. State of U.P, the Court held that “intention to evade tax is sine qua non before imposition of penalty.” Since the Department had failed to discharge its burden to prove intention to evade tax, the Court quashed the penalty order as well as the order of the appellate authority.

Case Title: M/S Indeutsch Industries Private Limited vs. State Of U.P. And 2 Others 2024 LiveLaw (AB) 113 [WRIT TAX No. - 1314 of 2019]

Case citation: 2024 LiveLaw (AB) 113

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