The Allahabad High Court said that ‘Governments should collect taxes like a honey bee collects honey from a flower without disturbing its petals’.
A Single Bench of Justice Shekhar B Saraf heard the petition filed by M/S Hawkins Cookers Limited.
This is an application under Article 226 of the Constitution of India, wherein the writ petitioner seeks a writ of certiorari for quashing the penalty order dated February 14, 2020 and the order passed in appeal dated October 13, 2020.
Petitioner is engaged in the business of manufacturing and selling of pressure cookers under the brand name of Hawkins. The principal place of business of the petitioner is situated at Β.Μ Market, Juhi, Kanpur, the factory of the petitioner is situated at SIDA Industrial Estate, Satharia, Jaunpur.
Petitioner purchases/stock transfers various parts/raw materials for manufacturing of pressure cookers from outside the state of UP, for being delivered in its factory (manufacturing unit) situated at Satharia, Jaunpur. The petitioner had purchased the raw materials for manufacturing of pressure cookers in the month of January 2020, from various suppliers situated in Maharashtra. Petitioner, thereafter, stock transferred certain raw materials from Maharashtra, for being delivered to its factory.
In four out of the 8 E-Way bills, the place of supply has been correctly mentioned to be the factory of the petitioner situated at Satharia, Jaunpur. In the other 4 E-Way bills, the place of supply has been wrongly mentioned to be the principal place of business of the petitioner situated at Kanpur, where no manufacturing is done. The reason for the aforesaid mistake having been made by some of the parties is that on filling the GSTIN (registration number) of the petitioner while generating the E-Way bill, the principal place of business is automatically reflected in the place of supply(which is auto populated). It is the duty of the person generating the E-Way bill to change the place of supply if the same is different from the principal place of business.
The goods were intercepted on January 31, 2020 and the memo of detention was issued on February 1, 2020 and subsequently the goods were seized on February 3, 2020 by issuing MOV-06.
Shubham Agarwal, Advocate has submitted that due to an inadvertent error/overlooking by the accountants of the suppliers who generate the E-Way bill, they failed to change the place of supply which is automatically displayed. Thus the E-Way bills have been generated containing the wrong place of supply of goods at Kanpur instead of Satharia, Jaunpur. The delivery of raw materials cannot be taken by the petitioner at Kanpur, since the raw materials are required for manufacturing of pressure cookers which is done only at its factory in Satharia, Jaunpur, and not at the principal place of business. Thus the mentioning of the wrong place of supply in the E-Way bill was merely a technical breach.
He further submitted that the addresses that were wrongly written in the four e-way bills were addresses of the registered office of the petitioner.
He also submitted that the same was a technical error only as there was no intention of the petitioner to hide the destination in the e-way bills. Infact, he submitted that all the invoices and the bilties that were accompanying the goods bear the correct address of destination that is Jaunpur. The mistake committed in the four e-way bills with regard to mentioning of the registered office of the petitioner can only be seen as a clerical and typographical error and nothing more.
He relied on a judgement of the Court in M/s Hindustan Herbal Cosmetics Vs State of U.P and 2 others in Writ Tax dated January 2, 2024, where the Court on a similar factual matrix had quashed the penalty order and the order passed in appeal.
Per contra, Ravi Shanker Pandey submitted that the error/ mistake in this case was grave in nature and raised a presumption of evasion of tax.
The Court observed that,
Upon a perusal of the detention order, the order imposing penalty and the order passed in appeal, a common thread appears to run through the same, i.e there was noncompliance of the Rules by putting the wrong address in four of the e-way bills. The common thread that also runs through these orders is that the invoices and the bilties in all the eight invoices and in four of the e-way bills were correct in all respects including the address.
Undisputedly, the address in four of the e-way bills was incorrect. However, what is to be seen is that this particular address was not an anonymous address, but was the address of the registered office of the petitioner. The explanation provided by the petitioner with regard to a mistake on the part of the supplier to have populated the incorrect address is not far fetched, especially since the correct addresses were mentioned in all the eight invoices and the eight bilties.
From the above factual matrix, it does not appear that there was any intention whatsoever to evade tax.
As held by the Court in umpteen cases, where penalty is being imposed under Section 129 of the Act an intention to evade tax should be present. Now, such an intention to evade tax may be presumed by the department in cases where there is wholesale disregard of the Rules. For example, in the event the goods are not accompanied by the invoice or the e-way bill is completely absent, a presumption may be raised that there is an intention to evade tax. Such a presumption of evasion of tax then becomes rebuttable by the materials to be provided by the owner/ transporter of the goods. However, when most of the documents are accompanied with the goods and there are some typographical and/or clerical errors, a presumption to evade tax does not arise. It is then upon the department to indicate that there was an intention to evade tax.
“In the case, it is palpably clear that the goods were accompanied with the relevant invoices, bilty documents and the e-way bills. It is to be noted that the invoices and bilty documents also contain the correct address of the destination and only four out of eight of the eway bills had the incorrect address. Even this incorrect address was the registered office of the petitioner. In such a case, no presumption to evade tax arises at all. The mere technical error committed by the petitioner cannot result in imposition of such harsh penalty upon the petitioner”, the Court observed while allowing the petition.
In the light of the above, the Court is of the view that the penalty imposed in this particular case is without any basis in law, and accordingly, the Court quashed and set aside the penalty order dated February 14, 2020 and the order passed in appeal dated October 13, 2020.