Intent to Evade Tax is a Prerequisite for imposition of Sections 129 & 130 Proceedings - Allahabad HC

Appeal Number Writ Tax No. 603 of 2023 Dated 05/10/2023 of Shyam Sel And Power Limited Vs State Of U.P (Allahabad High Court)

The case of Shyam Sel And Power Limited vs. State of U.P. before the Allahabad High Court has spotlighted the importance of “intent to evade tax” when invoking the provisions of Sections 129 and 130 of the Central Goods and Services Tax (CGST) Act. The judgment is notable due to the absence of a GST Tribunal in the State of Uttar Pradesh, necessitating the court’s intervention.

Case Background: The petitioner, Shyam Sel And Power Limited, contested two key orders issued by the respondents. The first order, dated 25.11.2021, confirmed a demand/penalty of Rs. 5,51,602. The second order, dated 18.06.2022, dismissed the petitioner’s appeal. The petitioner transported steel goods to a registered dealer, M/s Maa Ambey Steels, accompanied by relevant tax invoices, e-way bills, and GRs.

Cancellation of E-way Bill: The controversy arose when it was discovered during an interception that the e-way bill accompanying the goods had been canceled by the purchasing dealer. A Goods and Services Tax (GST) MOV 06 form was prepared, and the goods were seized.

Response and Penalty: The petitioner’s response stated that all e-way bills were duly filled out, and the petitioner was unaware of the cancellation by the purchasing dealer. Nevertheless, an order was passed under section 129(3) of the CGST Act, imposing a penalty on the petitioner.

Intent to Evade Tax: The crux of the case centered on whether there was an “intent to evade payment of tax.” The petitioner argued that there was no such intent and that the penalty should have been levied under a different section of the CGST Act.

Court’s Decision: The court concluded that, while the proceedings had been initiated under section 129 of the CGST Act, intent to evade tax was not observed. The court referenced section 130 of the CGST Act, which requires the presence of such intent, and found that the penalty should have been levied under section 122(ix) of the CGST Act. Furthermore, the court noted that the petitioner had taken appropriate action, including informing the authorities, after discovering the canceled e-way bill.

Conclusion: The judgment in the case of Shyam Sel And Power Limited vs. State of U.P. reiterates the significance of establishing “intent to evade tax” when applying Sections 129 and 130 of the CGST Act. In this instance, the court found that there was no such intent and that proceedings should have been initiated under a different section of the Act. This case underscores the importance of a fair and balanced interpretation of taxation statutes, ensuring that penalties are levied appropriately.