Medha Servo Drives Private Limited And Anr vs. Assistant Commissioner Of State Tax, Bureau Of Inv. (South Bengal) Durgapur Zone And Ors
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The appellants, Medha Servo Drives Private Limited & Anr., are challenging orders passed by the Assistant Commissioner of State Tax and subsequent orders of the learned Single Bench of the High Court. The dispute arose from the interception of two trucks carrying goods on August 25, 2021, after their e-way bills expired on August 23, 2021. The appellants contended that the goods were for a large public sector undertaking, Chittaranjan Locomotive Works, and due to their size, multiple e-way bills were generated for three trucks. One truck had reached the consignee. The appellants argued there was no intention to evade tax. Despite this, the Adjudicating Authority imposed full tax and penalty. The First Appellate Authority's order, though lengthy, allegedly lacked discussion on the crucial issue of mens rea. The appellants are before the High Court via an intra-Court appeal against the Single Bench's order extending time for affidavit-in-opposition and declining interim relief.
Held
The Court held that the order passed by the First Appellate Authority dated 6.4.2022 was deficient because it failed to discuss the crucial aspect of mens rea. While the order was extensive, it merely extracted submissions and cited decisions, with discussion confined to a single page. The Court found no reasoning on how mens rea was established, which is a prerequisite for imposing full tax and penalty under Section 129(1)(a). The Court reiterated that simply using the term 'mens rea' is insufficient; authorities must record reasons demonstrating a willful attempt to evade tax. Consequently, the Court found it necessary to remand the matter back to the Appellate Authority for a fresh consideration of the mens rea issue. The Court also directed the appellants to furnish a bond instead of a bank guarantee for the tax and penalty amount. The Court explicitly stated that its observations were not to influence the Appellate Authority's decision on merits.
Key Issues
1. Whether the First Appellate Authority erred in passing an order that failed to discuss the essential element of mens rea on the part of the appellants in contravening Section 129(1)(a) of the Central Goods and Services Tax Act, 2017, read with the West Bengal Goods and Services Tax Act, 2017? Arguments for the Appellants: The appellants argued that the First Appellate Authority's order, despite its length, did not adequately address the issue of mens rea. They contended that the mere expiry of e-way bills did not automatically establish a willful attempt to evade tax, and the authority was required to record specific reasons for establishing mens rea. They relied on well-settled principles that the expression 'mens rea' alone does not equate to a willful attempt to evade tax. Arguments for the Revenue: The judgment does not record specific arguments made by the Revenue or State regarding the mens rea issue or any other contention. It notes that the Revenue was represented and time was extended for filing their affidavit-in-opposition.
Sections Cited
Section 129(1)(a)
AI-generated summary — verify with the full judgment below
Item no. 08 IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURI ICTION
APPELLATE SIDE Present: The Hon’ble Justice T.S. Sivagnanam And The Hon’ble Justice Hiranmay Bhattacharyya MAT 1751 of 2022 with IA No.: CAN 1 of 2022 IA No.: CAN 2 of 2022
Medha Servo Drives Private Limited & Anr. vs. The Assistant Commissioner of State Tax, Bureau of Investigation (South Bengal), Durgapur Zone & ors. Appearance: For the Appellants : Mr. Ankit Kanodia Ms. Megha Agarwal Mr. Jitesh Sah For the Respondents : Mr. A. Ray, Ld. G.P. Mr. T.M. Siddiqui Mr. D. Ghosh Mr. D. Sahu Heard on : 17.11.2022 Judgment on : 17.11.2022 T.S. Sivagnanam J.: In Re. CAN 1 of 2022
We have perused the affidavit filed in support of the application for condonation of delay and we are satisfied that sufficient causes have been shown in preferring the instant appeal. Hence, the delay is condoned and the application for condonation of delay is allowed. In Re : MAT 1751 of 2022 IA No. CAN 2 of 2022 This intra-Court appeal filed by the writ petitioners is directed against the orders dated 20th April, 2022 and 22nd June, 2022 passed in WPA No. 6537 of 2022, in which the learned Single Bench extended the time for filing affidavit-in-opposition by the respondent and simultaneously declined to grant any interim order to the appellant. With this grievance the appellants are before us by way of this appeal. We need not to take much trouble to take a decision in this matter. In fact, the writ petition itself can be disposed of. We are convinced to say so after reading the order passed by the appellate authority, being the Senior Joint Commissioner of State Tax (Appeals), Commercial Estate, City Centre, Durgapur dated 6.4.2022. The order is a 23 pages order. At the first blush, it gives us an impression that this is a speaking order after discussing all issues which were canvassed by the appellants/writ petitioners. However, on a closer reading of the order, we find that discussion is only at page 23 and page nos.1 to 22 are extract of the submissions made by the appellants and various decisions which were cited by the appellants and also certain decisions 2
which the appellate authority appears to have included on his own. In any event, the short question is to whether full tax and penalty could have been demanded from the appellants on the alleged ground that they contravened Section 129(1)(a) of the Central Goods and Services Tax Act, 2017 read with West Bengal Goods and Services Tax Act, 2017. The case of the appellants is that a single invoice was raised by the appellants to M/s. Chittaranjan Locomotive Works, a public sector undertaking, carrying on operation in the State of West Bengal. The goods which were to be supplied to the said Public Sector Undertaking was of very huge in size and, therefore, the appellants had raised multiple e-weigh bills and loaded the goods into three trucks. One of the three trucks had already reached the consignee which was not disputed by the Revenue. The other two trucks could not reach the destination within the validity of the e-weigh bills i.e. 23.08.2021. The vehicle along with the goods were intercepted by the authorities on 25.08.2021. The appellants had explained that there is absolutely no mens rea on their part and there was no intention to evade payment of tax. Nevertheless, the Adjudicating Authority had imposed full tax and penalty upon the appellants and aggrieved by such order, the appellant had filed the appeal before the First Appellate Authority. The short issue which the Appellate Authority was required to consider as to whether there is any mens rea on the part of the appellants in attempting to evade payment of tax. Unfortunately, though the order passed by the Appellate Authority is 22 pages order, there is absolutely 3
no discussion on the question as to whether the mens rea was established. It is well settled that by merely using the expression “mens rea”, it would not amount to concluding that there was a willful attempt on the part of the dealer to evade the payment of tax. The concerned authority or the First Appellate Authority, is required to record the reasons in writing as to how and in what manner mens rea was established. Since this is lacking in the order passed by the Appellate Authority dated 6.4.2022, we are of the considered view that the matter should be remanded back to the Appellate Authority for fresh consideration to decide this short issue as to whether there is any mens rea on the part of the appellants to evade payment of duty. Accordingly, the appeal and the connected application stand allowed. Consequently, the writ petition is allowed and the orders passed by the learned Single Judge dated 20.04.2022 and 22.06.2022 are set aside and the matter stands remanded to the Appellate Authority for fresh consideration and the Appellate Authority is directed to consider the aspect of the mens rea and afford an opportunity of personal hearing to the authorized representative of the appellants and pass a fresh order on merits and in accordance with law. We make it clear that we have not dealt with the matter on merits and it is the Appellate Authority to take a decision without being influenced in any manner by any observations which we have made in this order. 4
The appellants have furnished a bank guarantee for the entire amount of tax and penalty. Since we have set aside the order passed by the Appellate Authority and remanded the matter back to the Appellate Authority for fresh consideration, the Appellant/Writ petitioner is not required to keep the bank guarantee alive. Instead of bank guarantee we direct the appellants to furnish a bond to the satisfaction of the concerned authority for the entire amount of tax and penalty. There shall, however, no order as to costs. (T. S. Sivagnanam, J.) (Hiranmay Bhattacharyya, J.) RP/Amitava (AR. CT.) 5
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.