M/S Sonal Automation Industries vs. State Of Uttarakhand

Held

The Court held that the imposition of penalty under Section 129(1) was not justified. The Court reasoned that the error in the invoice number was a minor, inadvertent human error and not a deliberate attempt to deceive the State or evade revenue. The Court found that all other particulars provided by the petitioner, including the e-way bill details, corresponded correctly to the tax invoice, indicating no intention to mislead. The Court interpreted Clause 5 of Circular No. 64//38/2018-GST dated September 14, 2018, rationally, concluding that such minor discrepancies, which do not affect financial implications or tax liabilities, should be excused. The Court distinguished the case of Achal Industries Vs. State of Karnataka, stating it was factually different as it dealt with the charging section of a tax statute, whereas the present case involved the interpretation of a circular concerning procedural errors. Consequently, the impugned order and the appellate order were quashed. The Court also directed the refund of the penalty amount, which had already been deposited by the petitioner.

Facts

The petitioner, M/s Sonal Automation Industries, filed a writ petition challenging an order dated August 20, 2019, passed by Respondent No. 3 under Section 129(1) of the GST Act, imposing a penalty of Rs. 6,84,000/-. The petitioner also challenged the appellate order dated November 28, 2019, which dismissed their appeal and affirmed the penalty. The sole reason for invoking Section 129 was an inadvertent error in the invoice description, where the invoice number was mentioned as '235' instead of the correct 'SAI/V235'. All other details in the waybill and tax invoice, including the number of goods, mode of delivery, and vehicle number, were accurate and undisputed.

Key Issues

1. Whether the inadvertent error in mentioning the invoice number as '235' instead of 'SAI/V235' constitutes a violation that warrants the imposition of a penalty under Section 129(1) of the GST Act, especially when other details commensurated with the tax invoice and there was no intention to deceive the revenue? (Mixed question of law and fact, turning on Section 129(1) of the GST Act and Circular No. 64//38/2018-GST). Petitioner's arguments: The error in the invoice number was a human error and not intentional. The petitioner relied on Circular No. 64//38/2018-GST dated September 14, 2018, which provides that minor discrepancies in waybills or tax invoices should be overlooked before invoking Section 129(1). They argued that the error did not affect the financial implications or tax liability. Revenue's arguments: The benefit of the circular dated September 14, 2018, is not available to the petitioner as the nature of the error in the invoice number does not fall within the ambit of Clause 5 of the said circular. They also cited the Supreme Court judgment in Achal Industries Vs. State of Karnataka, emphasizing the strict interpretation of taxing statutes.