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Reasonable grounds should be put before court for no intention of evading tax: Allahabad High Court

The Allahabad High Court while dismissing the petition observed that it is a well settled position of law that if there is no intention to evade tax on the part of a person then imposition of tax and penalty is not proper and justified. But there must be some reasonable grounds to show that there was actually no intention to evade tax on the part of the tax payer.

A Single Bench of Justice Shekhar B Saraf passed this order while hearing a petition filed by M/S Jhansi Enterprises, Nandanpura, Jhansi.

This is a writ petition under article 226 of the Constitution of India wherein the petitioner has prayed for the issuance of a writ of certiorari quashing the impugned appellate order dated August 31, 2019 passed by Additional Commissioner Grade-2 (Appeal), Commercial Tax, Jhansi/the respondent No 3 and the impugned penalty order dated March 16, 2019 passed by Assistant Commissioner, Commercial Tax, (Mobile Squad) Unit Orai/the respondent No 2.

Further, a mandamus has been sought directing the respondent authorities to refund the amount of tax and penalty deposited by the petitioner.

The facts of the cases as below:-

(a) The petitioner is a registered dealer under the provisions of Goods and Service tax act, 2017. On March 09, 2019, the petitioner had sold a consignment of TMT Bars (sariya) to one M/s Motilal Devendra kumar, Orai vide Tax Invoice No166.

(b) On March 10, 2019 at 10:43 A.M, the respondent No 2 intercepted the vehicle at Station Road, Orai and subsequently at 03:50 P.M issued an order for physical verification/inspection of the conveyance, goods & documents under section 68(3) of the Act on the ground that neither e-way bill nor any other document such as tax invoice, bill of supply, challan or bill of entry related to the goods in transit were produced before him at the time of interception.

(c) After the issuance of order for physical verification/ inspection of the conveyance, goods & documents, the documents related to the goods such as Tax Invoice and the e-way bill were produced before the respondent No 2. The said e-way bill was not accepted by respondent No 2 because it was generated after the interception took place. As per the respondent authorities, the aforementioned e-way bill was generated with a delay of almost 4 hours after the commencement of transportation of the goods.

(d) A show cause notice was issued to the petitioner under Section 129(3) of the Act stating that the movement of the goods was in contravention to the provisions of the Act.

(e) In pursuance of the show cause notice, the petitioner appeared before the authority and duly submitted his written reply. In his reply, the petitioner stated that due to non availability of computer operators, the e-way bill related to the goods in transit could not be generated at proper time but the same was generated later at 2:45 P.M on March 10, 2019. He also stated that the invoice related to the goods could not be produced because it was handed over to the receiver firm before the interception took place.

(f) Being dissatisfied with the reply of the petitioner, respondent no 2 rejected his reply and passed the order of demand of tax and penalty dated March 16, 2019.

(g) The petitioner thereafter deposited the amount of Rs 2,89,728/- towards tax and penalty, after which the respondent No 2, released the goods in favor of the petitioner. Aggrieved by the order dated March 16, 2019 passed by the respondent No 2, the petitioner preferred a statutory appeal before the respondent No 3.

(h) The respondent No 3, vide its order dated August 31, 2019, dismissed the appeal and upheld the order dated March 16, 2019, passed by the Respondent No 2.

(i) Aggrieved by the order dated August 31, 2019 passed by the Respondent No 3, the petitioner has preferred the petition before the Court.

The Court said that even though the petitioner failed to produce the e-way bill in time due to certain difficulties, the question which arises before me is whether or not there was any actual intention to evade tax on part of the petitioner.

The Court observed that,

In the case, it is an admitted fact that neither invoice nor e-way bill were accompanying the goods when it was intercepted by the authorities. This contravention of rules cannot be treated as a mere common mistake. In this situation, burden of proof for establishing that there was no intention to evade tax shifts to the assessee.

The court in case of M/s Akhilesh Traders V State of U.P and others (Writ Tax no 1109 of 2019 decided on February 20, 2024) has held that in cases where the goods are not accompanied by the invoice and e-way bill, a presumption may be raised that there is an intention to evade tax.

The petitioner, in the case, could not explain the absence of invoice and e-way bill with a proper and reasonable explanation. Ergo, he has not been able to rebut the presumption of evasion of tax.

“Mere furnishing of the documents subsequent to the interception cannot be a valid ground to show that there was no intention to evade tax. There must be some reasonable grounds to justify the non-production of documents at the proper time.

Furthermore, the judgments upon which the petitioner is relying are prior to April 2018, when there were actually some difficulties with the generation of e-way bills. But after April, 2018 those difficulties have been resolved and now there is no difficulty in generating and downloading the e-way bill.

The argument raised by the counsel appearing on behalf of the petitioner that the vehicle was parked at the godown for unloading is not supported by the facts. The interception of the vehicle was in a place away from the godown and this entire argument is obviously an afterthought. Accordingly, the application of Section 129(3) of the Act by the authorities is valid and just in law.

In light of the above, I am of the view that the petitioner herein has not complied with the provisions of law, hence the steps taken by the respondent authorities are proper and in accordance with the law and require no interference by the court”, the Court further observed while dismissing the petition.

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