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No Penalty for Technical Error Without Intent to Evade Tax: Allahabad High Court Quashes SGST Orders


In the matter of M/s Ashoka P.U. Foam (India) Pvt. Ltd. v. State of U.P. and Ors[i], the Petitioner filed a writ petition under a. 226 of the Constitution of India, 1949 (‘Constitution’), challenging penalty orders dated 13.09.2018 and 03.10.2029 passed by the Assistant Commissioner and Additional Commissioner Grade-2 (Appeal) of State Goods and Services Tax (‘GST’), Agra. The Allahabad High Court (‘AHC’) held that focusing solely on insignificant technicalities ignores the broader financial impact and fairness in tax law administration.

Brief Facts

  • The Petitioner’s case was that certain goods accompanied with the invoice and e-way bill were loaded onto a specific vehicle which broke down. Accordingly, the said goods were transferred into another vehicle but the driver was unable to update the e-way bill with the changed vehicle number due to Bharat Bandh.

  • Unfortunately, the authorities seized the goods of the Petitioner from the latter vehicle, despite the Petitioner providing a revised e-way bill with the updated vehicle information before the seizure order was issued.

  • The Respondents argued that any technical error in accompanying documents, even in the absence of an intention to evade tax, constitutes a violation of both s. 129 of the Uttar Pradesh GST Act, 2017 and r. 138 of its corresponding rules. The appellate authority affirmed the same.

  • Aggrieved by the penalty orders dated 13.09.2018 and 03.10.2019, the Petitioner filed a writ petition under a. 226 of the Constitution praying for quashing of the same.


  • The AHC quashed the penalty orders and directed a refund of the deposited amount on the ground that the impugned orders exceeded jurisdiction and were not in line with the relevant statutory provisions. It was observed that despite acknowledging the Petitioners’ arguments, the appellate authority had failed to address them in its decision and had further recorded the Petitioners’ submissions inaccurately.

  • The AHC relied upon the decisions in M/s Modern Traders v. State of U.P. & Ors.[ii], M/s Galaxy Enterprises v. State of U.P. & Ors.[iii], and Hindustan Herbal Cosmetics v. State of U.P. & Ors. [iv], where the respective Courts held that the presence of mens rea for evasion of tax is an absolute necessity for imposition of a penalty and mere technical errors would not attract any penalties.

  • The AHC held that minor technical errors in tax filings should not attract penalties, especially if they do not affect the amount of tax owed. This would ensure a fair and just tax system where penalties match the severity of offences. It was noted that the goal of tax penalties was to stop deliberate tax evasion, not to punish honest mistakes and hence, penalties should only be applied when there is clear evidence of intentional tax evasion.

  • The AHC further laid down that the burden of proof in such cases lay with the tax authorities and therefore, it was their responsibility to prove that someone intended to cheat on taxes before penalizing them. Hence, it was important to distinguish between accidental technical errors and intentional tax evasion.


The AHC’s decision in this case establishes a significant precedent that elucidates the distinction between unintentional technical mistakes and deliberate tax evasion in tax law enforcement. This judgment, while considering the provisions of s. 129 of the UPGST Act and r. 138 of its corresponding rules, concerning the detention, seizure, and release of goods and conveyances in transit and the generation of e-way bills, underlines the principle that penalties should be levied only upon clear evidence of intent to evade taxes, emphasizing fairness and justice within the taxation system. The AHC has made it clear that minor technical discrepancies without financial consequences and lacking mens rea, will not attract penalties.

The objective of tax penalties is to deter intentional non-compliance rather than to punish taxpayers for honest errors or administrative oversights. This decision provides a safeguard against punitive measures for inadvertent mistakes due to unforeseen circumstances, ensuring that penalties are reserved for deliberate violations. This ensures that penalties are proportionate to the severity of offences, thereby preserving the integrity and fairness of the taxation system. By quashing the orders challenged and allowing for a refund, the AHC set a directive for tax authorities and taxpayers, fostering a more understanding, fair, and just tax administration system.

End Notes:

[i] [2024] 159 328 (Allahabad) [24.01.2024]

[ii] 2018 SCC OnLine All 6054

[iii] [2023] 156 291 (Allahabad) [06.11.2023]

[iv] [2024] 158 200 (Allahabad) [02.01.2024]

Authored by Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute a legal opinion.


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