Important Case Laws related to E-Way Bill provisions

One of the primary objects of the introduction of the GST regime in India was a seamless movement of goods and hassle-free trade between various states. The concept of check-posts was to be abolished which was anticipated to promote free movement of goods. However, the law-maker did not intend free movement as to movement without any control. And hence, provisions related to electronic way bills, commonly known as e-way bills, have been enacted in the GST law.

However, the provisions related to e-way bills have created so much confusion in the minds of taxpayers as well as the officers of CBIC. In this article, the author has made a compilation of case laws to answer several issues relating to e-way bill provisions which shall be of use to the taxpayers as well as the professionals practicing in the field of indirect taxation.

The relevant provisions have been outlined herewith below for the ease of reference and understanding of the readers:

Sec 68: Inspection of goods in movement

Rule 138: Information to be furnished prior to commencement of movement of goods and generation of e-way bill

Rule 138A: Documents and devices to be carried by a person-in-charge of a conveyance

Rule 138B: Verification of documents and conveyances

Rule 138C: Inspection and verification of goods

Rule 138D: Facility for uploading information regarding detention of vehicle

Rule 138E: Restriction on furnishing of information in Part A of FORM GST EWB-01

Sec 129: Detention, seizure and release of goods and conveyances in transit

Sec 130: Confiscation of goods or conveyances and levy of penalty.

The provisions related to e-way bills have created so much confusion in the minds of taxpayers as well as the officers of CBIC that various circulars had to be issued to clarify certain matters. Circular No. 41/2018 dated 13-4-2018 was issued clarifying the procedure for interception of conveyances for inspection of goods in movement, and detention, release and confiscation of such goods and conveyances. It was later modified by Circular No. 49/2018 dated 21-6-2018. Another important circular which brought a major relief to taxpayers was Circular No. 64/2018 dated 14-9-2018 which provided for a token penalty of Rs. 1000/- under Sec 125 of the CGST Act in cases of minor discrepancies. Almost all the cases of interception having any minor or major discrepancy have resulted into payment of hefty penalties by the taxpayers. Some of them even had to knock the doors of judiciary to get relief. In this article, we have made an attempt to include the case laws which shall be of use to the taxpayers as well as the professionals practicing in the field of indirect taxation.

Can the provisions of Sec 130 be invoked directly without invoking Sec 129?

The Hon Gujarat High Court in the case of Synergy Fertichem (P.) Ltd. v. State of Gujarat [2020] 116 taxmann.com 221 had the occasion to discuss this crucial matter and the observations of the Court have been reproduced below:

“99. It is practically impossible to envisage various types of contravention of the provisions of the Act or the Rules for the purpose of detention and seizure of the goods and conveyances in transit. The contravention could be trivial or it may be quite serious sufficient enough to justify the detention and seizure.……

101. We are of the view that at the time of detention and seizure of goods or conveyance, the first thing the authorities need to look into closely is the nature of the contravention of the provisions of the Act or the Rules. The second step in the process for the authorities to examine closely is whether such contravention of the provisions of the Act or the Rules was with an intent to evade the payment of tax.….

102. In such circumstances, referred to above, we propose to take the view that in all cases, without any application of mind and without any justifiable grounds or reasons to believe, the authorities may not be justified to straightway issue a notice of confiscation under section 130 of the Act. For the purpose of issuing a notice of confiscation under section 130 of the Act at the threshold, i.e., at the stage of section 129 of the Act itself, the case has to be of such a nature that on the face of the entire transaction, the authority concerned is convinced that the contravention was with a definite intent to evade payment of tax.

104. In the aforesaid context, we would like to clarify that we do not propose to lay down, as a proposition of law, or we should not be understood to have taken the view that, in any circumstances, the authorities concerned cannot invoke section 130 of the Act at the threshold, i.e., at the stage of detention and seizure.”

Held that: For the purpose of issuing a notice of confiscation under section 130 of the Act at the threshold, i.e., at the stage of detention and seizure of the goods and conveyance, the case has to be of such a nature that on the face of the entire transaction, the authority concerned should be convinced that the contravention was with a definite intent to evade payment of tax. The action, in such circumstances, should be in good faith and not be a mere pretence. In other words, the authorities need to make out a very strong case. Mere suspicion may not be sufficient to invoke Section 130 of the Act straightway.

Can penalty u/s 129 be invoked in cases of clerical and/or minor errors?

• Tirthamoyee Aluminium Products v. State of Tripura [2021] 127 taxmann.com 680/85 GST 740 (Tripura)

Applicant-company was engaged in business of manufacturing aluminium utensils and its unit was located at Agartala – It purchased certain aluminium products which would be supplied from Kolkata to Agartala by road – Invoice was generated which showed that goods would be transported from Kolkata and would be delivered at Agartala but due to clerical error distance from Howrah to Agartala, was shown as 470 Kms. instead of actual distance of 1470 Kms. in E-way Bill and system, thus, automatically generated validity period of five days for E-way bill – When goods arrived at Tripura border inspecting agency intercepted goods and issued a memo of detention on ground that transporter had not produced valid E-way bill and applicant was called upon to pay total GST and penalty under section 129.

The Hon HC of Tripura by relying on Circular No. 64/2018 dated 14-9-2018 has held that in case goods are accompanied by an invoice as also an E-way bill, proceedings under section 129 should not be initiated if defect in E-way bill was as a result of a minor oversight and a clerical error and it was solely on account of incorrect distance being shown while generating E-way bill.

• R. K. Motors v. State Tax Officer [2019] 102 taxmann.com 337/72GST 501 (Mad.)

The assessee, an authorised dealer for Bajaj Auto Limited, had placed order with the principal for delivery of certain two wheelers at Virudhunagar. The goods were moved from Pune on 23-12-2018. The vehicle transporting two wheelers instead of halting at Virudhunagar had moved towards Sivakasi. When the vehicle was enroute to Sivakasi and 7 km away from Virudhunagar, the Competent Authority intercepted the vehicle and detained the goods as well as the vehicle and also levied the penalty upon the assessee.

Held that: When the assessee is a registered dealer, when the tax in respect of the goods has already been remitted and when the transportation of goods is duly covered by proper documentation, the Competent Authority ought to have taken a sympathetic and indulgent view of the lapse committed by the driver of the vehicle. The detention order and the penalty order suffer from vice of gross unreasonableness and disproportionality. The goods in question are two wheelers. They cannot be sold without proper registration with the Motor Vehicle Authorities. Therefore, in a case of this nature, the assessee could not have evaded its statutory obligations in any manner. Competent Authority was to be directed to release goods as well as vehicle on payment of Rs. 5000 by assessee.

• K.B. Enterprises v Asstt. Commissioner of State Taxes & Excise [2020] 115 taxmann.com 250 (AA- GST – HP)

Appellant’s vehicle was carrying goods (Beedi) to transport said goods to purchasing dealer – Said vehicle was intercepted for checking by Commercial Tax Officer – Driver/person in-charge of vehicle had tendered documents accompanying vehicle such as invoice, Goods Receipt Note, E-way Bill in respect of consignment – Commercial Tax Officer found all documents were in order except mistake in vehicle no. in part-B of e-way bill – Goods were detained by Commercial Tax Officer and penalty was imposed under section 129(1)

Held that: In case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated in case of minor mistakes like error in one or two digits/characters of the vehicle number. Penalty to the tune of Rs. 500/- each under section 125 of the CGST Act and the respective HPSGST Act should be imposed.

Can valuation or classification of goods be challenged at the time of interception of goods?

• K.P. Sugandh Ltd. v. State of Chhattisgarh [2020] 122 taxmann.com 291 (Chhattisgarh)

The petitioners are the manufacturers of ‘Pan Masala and Tobacco Products’. Competent Authority detained goods of assessee under transport as well as vehicle on ground that there were discrepancies in valuation of goods being transported, i.e., valuation did not seem to have been properly conducted – He further passed an order under section 129(3) and demanded tax and penalty from assessee.

Held that: Merely because the manufacturer sells his products to its customer or dealer at a price lower than the MRP, as such cannot be a ground on which the product or the vehicle could be seized or detained. The Inspecting Authorities for the alleged discrepancy could have only intimated the Assessing Authority for initiating appropriate proceedings. The respondents are forthwith directed to release the goods belonging to the petitioners based on the invoice bill as well as the e-waybill.

• Daily Fresh Fruits India (P.) Ltd v. Asstt. State Tax Officer [2020] 115 taxmann.com 181/80 GST 89 (Ker.)

The assessee classified the goods, namely, carbonated fruit drinks under Heading No. 2202 99 20 and discharged GST at the rate of 12 per cent. The Competent Authority of Kerala detained the goods of the assessee under transport from Tamil Nadu to Kerala on the ground that the goods were not correctly classified under Heading No. 2202 99 20 and they would fall under Heading No. 2202 10 were liable to tax at the higher rate of 28 per cent. He further issued on the assessee a notice under section 129(3).

Held that: In case of a bona fide dispute with regard to the classification between a transitor of the goods and the Squad Officer, the Squad Officer may intercept the goods and detain them for the purpose of preparing the relevant papers for effective transmission to the judicial Assessing Officers and nothing beyond. In the instant case, it is a case of bona fide miscalculation as to whether the goods would be exigible to 12 per cent or 28 per cent. The impugned order of detention and consequential notice issued under section 129(3) are not sustainable and deserved to be quashed.

Can the irregularities be rectified later on?

• Axpress Logistics India (P.) Ltd. V. Union of India [2018] 100 taxmann.com 34 (All.)

The goods were being booked and transported from Panvel Raigarh, Maharashtra to M/s. Bosch Ltd. Local Distribution Centre Khasra No. 1482 NH 56 B Jaiti Kheda, Lucknow, which is a registered dealer. The goods proceeded on 24-3-2018 to be delivered at Lucknow and in between, the Competent Authority of Uttar Pradesh Goods and Services Tax Department had seized goods of assessee under transport from Maharashtra to Uttar Pradesh as well as vehicle on ground that goods were not accompanied by E-way bill.

Held that: E-way bill under the UPGST Act has been downloaded by the petitioner, much before the detention and seizure of the goods and the vehicle, disclosing all the necessary information. We find no irregularity in the present transaction and, therefore, the seizure order as well as penalty notice dated 28-3-2018 issued under sections 129(1) and 129 (3) of the Act as well as the consequential proceedings are hereby set aside.

• Integrated Constructive Solutions v. ACST & E-Cum-Proper Officer [2020] 121 taxmann.com 104/82 GST 772 (AA-GST-HP)

Competent Authority detained goods of assessee under transport on ground that vehicle No. at time of checking was PB10CT6249; whereas in E-way Bill vehicle No. was PB35Q8464 and initiated proceedings under section 129(3) – Assessee’s explanation before Competent Authority was that due to break down of vehicle No. PB35Q8464 goods had been shifted to new vehicle No. PB10CT6249 and updation of new vehicle in already generated E-way Bill could not be done due to weak internet connectivity – In between assessee had also updated Part-B of E-way Bill – However, Competent Authority vide order passed under section 129(3) imposed tax and penalty upon assessee amounting to Rs. 16.28 crores.

Held that: Since Competent Authority had passed order in a mechanical manner and had ignored corrected and updated E-way Bill as produced by assessee within two hours of detaining goods, tax and penalty imposed under section 129(3) was unsustainable. As assessee had made procedural lapse and violated provisions of GST Act, it was liable to pay minor penalty under section 122.

Other relevant issues:

• Hemanth Motors v. State of Karnataka, [2021] 124 taxmann.com 550/84 GST 394 (Kar.)

Assessee purchased certain goods from a dealer located at Husur, Tamil Nadu under tax invoice dated 31-12-2018 – Said dealer dispatched goods to business premises of assessee situated at Bengaluru after generating e-way bill – E-way bill was valid from 31-12-2018 to 1-1-2019 – Conveyance carrying goods reached at assessee’s business premises on 1-1-2019 before expiry of validity of e-way bill but goods could not be unloaded on same day and were being unloaded on next day, i.e., on 2-1-2019 – In meanwhile Competent Authority visited business premises of assessee and taking view that e-way bill had to be valid even at time of inspection when goods were being unloaded from conveyance passed an order under section 129(3) and raised demand upon assessee – Appellate Authority dismissed appeal filed by assessee.

Held that: There is no dispute that the conveyance had reached the place of destination well within the expiry of e-way bills, and the conveyance was being unloaded without any further transit. The appellate authority should have considered the merits of the proceedings against the petitioners in the light of the provisions of rule 138(10) of the Central Goods and Services Tax Rules, 2017 which prescribes the validity of an e-way bill with the extension of further period by eight hours after the expiry. The failure to consider the petitioner’s case in the light of the provisions of rule 138(10) of the Central Goods and Services Tax Rules, 2017 has resulted in an improper and untenable order.

• Veer Pratab Singh v. State of Kerala [2021] 123 taxmann.com 110 (Ker.)

Competent Authority had detained goods of assessee under transport and also vehicle on ground that consignment in question was accompanied by a tax invoice and an e-way bill showing payment of IGST as also transportation of goods was from Coimbatore to Gujarat, however evidence had been obtained that suggested that loading of consignment was effected in Palakkad – Thereafter, an order of confiscation was passed under section130, confiscating goods and vehicle.

Held that: The petitioner had admitted his liability to IGST by declaring the same in the invoice, and if the goods, even assuming that they were loaded from Palakkad, were destined to Gujarat, it is the IGST that had to be paid by the 1st petitioner/consigner of the goods. To that extent, therefore, it cannot be said that there was any intention to evade payment of tax because the tax liability, in either event, would be the same. The proceedings initiated against the petitioners under section130 of the GST Act, cannot be legally sustained.

• Neva Plantation (P.) Ltd. v. ACSTE-CUM-PROPER OFFICER NORTH [2020] 114 taxmann.com 740 (AA-GST-HP)

Assessee was engaged in supply of exempted goods – It sent a machine for repair to its supplier in a vehicle and issued delivery challan – In delivery challan it was specifically mentioned that ‘not for sale’ and ‘only for repair’ – Competent Authority intercepted said machine and having found that E-way Bill had not been generated for movement of machine detained machine and imposed tax and penalty under section 129(3) upon assessee.

Held that: The assessee had transported machine without the cover of proper documents (E-way Bill was one of them). Hence the assessee had violated provisions of the CGST Act/Himachal Pradesh GST Act. For violating provisions of the Act, it would be liable to pay penalty under section 122(1). The tax and penalty imposed upon the assessee under section 129(3) deserved to be set aside.

As can be observed from above mentioned case laws that even for matters which are squarely covered by clarification given by CBIC itself, taxpayers have to resort to filing writ petitions to get the relief. Not everyone has the luxury of time and money to exercise writ jurisdictions under Art 226 of our constitution. It is the need of the hour that the matters related to e-way bills are simplified and the harassment being caused to taxpayers is stopped.