Kunal Aluminum Co. vs. State of Himachal Pradesh (Himachal HC)
Court : Himachal Pradesh (Himachal HC)
What Happened?
A truck carrying goods was stopped in Himachal Pradesh because the transporter couldn't show a valid e-way bill during checking. The tax department detained the vehicle under Section 129 of the CGST Act, 2017, arguing it was a violation of Rule 138 of CGST Rules,which requires an e-way bill for goods movement.
Arguments in Court
Company's Side:
- The goods were already duty-paid (imported after paying customs duty and IGST).
- The missing e-way bill was just a technical mistake, not tax evasion.
- Since tax was already paid, penalizing for a paperwork error was unfair.
Tax Department's Side:
- The law (Rule 138 of CGST Rules) Clearly requires an e-way bill during transit.
- No exception for "technical errors"—rules must be followed strictly.
Court’s Decision
The Himachal Pradesh High Court referred to the Supreme Court’s ruling in Satyam Shivam Papers and held:
- Just a missing e-way bill doesn’t mean tax evasion.
- Penalty under Section 129 should apply only if there’s intent to evade tax, not for genuine mistakes.
- The tax department must prove intent before imposing penalties.
Why It Matters
- The court made a clear difference between careless mistakes (no penalty) anddeliberate fraud (penalty applies).
- Protects businesses from harsh penalties for small technical errors when taxes are already paid.
- Confirms that tax laws should punish fraud, not honest errors.
Key Legal Point
Significance
The judgment ensures fairness in GST enforcement, preventing excessive penalization for technical breaches while maintaining strict action against deliberate tax evasion. It aligns with the principle of proportionality in tax administration—penalties must match the gravity of the violation.