Court Orders Release of Seized Goods Upon Security in GST Dispute

Case Name:

M/s. Om Disposals Vs. State of U.P. And 4 Others

Writ Tax No. 41 of 2018

Key Takeaways:

- The court questioned the state's authority to prescribe documents for interstate trade under GST.

- The judgment highlights the confusion in implementing GST laws, especially regarding E-way bills.

- The court ordered the release of seized goods upon furnishing security.

- The case was referred to a larger bench due to conflicting judgments on the issue.

Issue:

Can the State of Uttar Pradesh require and enforce the carrying of specific documents (like E-way bills) for interstate movement of goods under the GST regime?

Facts:

- M/s Om Disposals, a paper cup manufacturer in Bijnor, U.P., ordered a paper cup making machine from Delhi.

- The machine was intercepted by Mobile Squad Officials on 19.11.2017 while being transported to U.P.

- The goods were seized for not carrying an E-way bill as required by a U.P. government notification.

- The petitioner generated an E-way bill on 20.11.2017 after learning about the interception.

- Despite this, a penalty was imposed on 22.11.2017.

- The petitioner's appeal was dismissed by the appellate authority on 14.12.2017.

Arguments:

Petitioner's Arguments:

- The State of U.P. has no jurisdiction to prescribe documentation for interstate transactions under IGST Act.

- Only the Central Government can specify documents for interstate movement of goods.

- The E-way bill was generated immediately after learning about the interception and should have been considered.

State's Arguments:

- The validity of the notification dated 21.07.2017 has been upheld by a previous Division Bench judgment.

- The State has the authority to prescribe documents for goods in transit.

Key Legal Precedents:

- M/s Ascis Trading Company v. The Assistant State Tax Officer 2017 (71) STJ 143 (Madras High Court)

- Sri Shaji Gregory G.S. Vs. The State of Kerala 2017 (71) STJ 164 (Kerala High Court)

- Satyendra Goods Transport Corporation (Writ (M/B) No. 5536 of 2018, Allahabad High Court)

- U.P. Kar Adhivakta Sangathan Vs. State of U.P. and others (PIL No. 38246 of 2017, Allahabad High Court)

Judgement:

The court did not make a final decision on the validity of the state's notification. Instead, it:

- Ordered the release of goods and vehicle upon furnishing an indemnity bond.

- Referred the matter to a larger bench due to conflicting judgments on the issue.

- Formulated specific questions for the larger bench to address regarding the state's authority to prescribe E-way bills for interstate transactions.

FAQs:

Q1: What is an E-way bill?

A1: An E-way bill is a document required for the movement of goods under the GST regime.

Q2: Why did the court refer the matter to a larger bench?

A2: The court found conflicting judgments on the state's authority to prescribe documents for interstate trade under GST.

Q3: What immediate relief did the court provide to the petitioner?

A3: The court ordered the release of seized goods and vehicle upon furnishing an indemnity bond.

Q4: What are the main questions referred to the larger bench?

A4: The questions relate to the correctness of previous judgments and the state's power to prescribe documents for interstate movement under GST.

Q5: Does this judgment apply to all similar cases?

A5: While the judgment provides some relief, the final decision on the state's authority is pending with the larger bench.

By means of this petition filed under Article 226 of the Constitution of India petitioners have challenged the authority of the State of U.P. for issuing the notification dated 21.07.2017 whereby which E-way bill-01 has been prescribed for the purposes of import of goods for an amount over and above Rs.50,000/- from outside the State of U.P. into the State of U.P. under the newly introduced provisions of Goods and Service Tax Laws. The aforesaid aforesaid requirement has been prescribed by the State under Rule 138 of the U.P. Goods and Service Tax Rules (herein short 'GST Rules').

The questions involved in all the writ petitions are identical and

for the facility, the facts of Writ Tax No. 41 of 2018 (M/s Om Disposals, Dhanoura Road, Near J.P. Public School, Chandpur, Bijnor, U.P.) are being referred to.

We have noticed that the aforesaid writ petition has been filed in the month of January and while entertaining the said writ petition, this Court has granted time to the Standing Counsel for filing counter affidavit but till date no counter affidavit has been filed by any of the respondents.

Brief facts of the case are that the petitioner is proprietorship concerned and is engaged in the process of manufacturing of disposable paper cups, plates etc. The petitioner is registered under the provisions of GST Laws and the competent authority empowered to grant registration to a dealer has allotted GSTIN number to the petitioner. The petitioner manufacturing unit is situated near J.P. Public School, Chandpur, Bijnor, U.P. An order was placed by the petitioner to M/s JV Engineering Works, CB-103, Ring Road, Naraina, New Delhi for purchase of paper cup making machine. The said machine was to be dispatched by the seller situated at New Delhi to petitioner manufacturing unit situate at Bijnor (U.P.). The seller situated at New Delhi issued an advance receipt evidencing receipt of Rs.7,08,000/- from the petitioner towards the supply of paper cup making machine. Due to some reason, delivery was delayed though advance payment has been made by the petitioner. After gap of certain period, dealer at Delhi has dispatched the machine without intimating the petitioner and has issued invoice no.014 dated 18.11.2017. The goods were being transported by Lorry receipt dated 18.11.2017 issued by one M/s Mithila Transport Service. The vehicle was intercepted by the Mobile Squad Officials and interception memo no.106 dated

19.11.2017 was issued under Section 129(1) of the U.P. SGST Act, 2017. The reason specified/mentioned in the aforesaid interception memo was that the goods were being transported without E-way bill.

Consequential show cause notice dated 20.11.2017 was issued

under Section 129(3) of the Act which was served on the driver

of the vehicle.

The contention of the learned counsel for petitioner is that the

petitioner came to know about the dispatch of the goods only

after interception by the Mobile Squad Authorities. Immediately

after knowing the said interception and the defect indicated by

the Mobile Squad Authorities, the petitioner generated E-way

bill on 20.11.2017 itself.

The petitioner thereafter filed his reply on 20.11.2017 and has

provided all supporting documents along with E-way bill which

was generated by it in original.

On 22.11.2017, the consignment was seized eventually and

penalty order was passed by the authority directing the

petitioner to pay a sum of Rs.1,08,000/- towards tax and sale

amount towards penalty. The sole ground for passing the order

was at the time of interception the goods were not accompanied

with E-way bill-01.

Against the order dated 22.11.2017 appeal has been preferred

by the petitioner before the Additional Commissioner, Grade-2

(Appeals)-1, State Taxes, Noida, which was dismissed by the

appellate authority vide order dated 14.12.2017 mentioning

therein the same reason as were mentioned by the Mobile

Squad Authorities.

The contention of the petitioner is that the State authority has

no jurisdiction to prescribe any documentation in respect of

transaction which is covered under IGST Act. This issue has not

been dealt with by the appellate authority. It is submitted by the

petitioner that in view of the fact that the Tribunal contemplated

under the GST Act has not yet been constituted and the fact that

challenge is to a notification issued by the State of U.P., the

petitioner has filed instant writ petition with a prayer that the

notification dated 21.07.2017 which provides that E-way bill-01

for importing goods for more than Rs.50,000/- be quashed.

A further prayer has also been made for quashing of the order

passed by Mobile Squad and confirmed by the appellate

authority.

The contention on behalf of the petitioners, in nutshell, is that

under Section (xx) and Section (xv) of the IGST, provisions of

CGST Act, 2017 pertaining to interception, search, imposition

of interest and penalty have been made applicable to transaction

covered under the IGST Act. He further submits that Section

2(9) of IGST Act as also Section 2(53) of CGST Act, defines

'Government' to be the 'Central Government'. Rule 138 of the

CGST empowers the Central Government, specify by means of

a notification, the documents that a person incharge of

conveyance carrying any consignment of goods shall carry till

such time as E-way bill system is developed and approved by

the council. The Act only authorizes the Central Government to

specify the documents in respect of transaction covered under

the IGST Act or CGST Act.

Learned counsel for the petitioner further submits that the

notification dated 21.07.2017 issued in exercise of power under

Rule 138 of the U.P. GST Rules can be apply to transaction and

movement of the goods within the State as the U.P. GST Rules

are only applicable to such movements of the goods. Inter-State

transaction falls within the purview of IGST Act, and it is the

Central Government alone which can specify the documents

that are required to be carried by transporter or other person

during inter-State movements of the goods. He further submits

that the Central Government having not prescribed any

documents in this regard, the petitioner was under no obligation

to carry any documents apart from tax, invoice, challan, goods

receipt etc along with consignment.

Lastly, the learned counsel for the petitioner submitted that the

consignment, in question, could not be detained, seized and

subjected to levy of penalty for not carrying any form/document

which the State of U.P. has prescribed as it has no jurisdiction to

prescribe, any document for inter-State movement of goods.

We have considered the arguments and perused the record.

The issue came up for consideration before Kerala, Madras and

Telangana and Andhra Pradesh High Courts which have

categorically held that the State Legislature or the State

Government has no power to make law/rules to govern

interstate movement of goods and cannot even detain a

consignment for not carrying documents prescribed by them for

transporting goods in the course of interstate trade. Reference

may be made to the judgment of the Hon'ble Madras High

Court in M/s Ascis Trading Company v. The Assistant State Tax

Officer 2017 (71) STJ 143 and the judgment of High Court of

Kerala in Sri Shaji Gregory G.S. Vs. The State of Kerala 2017

(71) STJ 164.

Sri Rahul Agarwal, learned counsel for the petitioner has also

placed reliance upon a Division Bench decision of this Court

dated 13.04.2018 rendered in Writ (M/B) No. 5536 of 2018,

Satyendra Goods Transport Corporation. In the said case 220

pieces of Chocholate Display Cooler of M/s Voltas Ltd. were

being transported from Pant Nagar, State of Uttarakhand to

Radiant Enterprises, Kolkata, West Bengal. The consignment

was intercepted at Lucknow in State of U.P. on the ground that

original TDF form was not available. Notice under Section

129(3) of U.P. GST Act, 2017 was issued and an order under

clause (b) of Section 129(1) for payment of tax and penalty was

passed by proper officer.

On a challenge being made the Division Bench held as under:

"A process for initiation of a new indirect taxation regime was put into

motion by the Constitution (101st Amendment) Act 2016 dated 8.9.2016 by

which Articles 246-A, 269-A, 279-A and other provisions of the

Constitution were amended. As per the amended Article 269-A, which

pertains to levy and collection of Goods and Services Tax in the course of

inter-state trade or commerce such tax shall be levied and collected by

the Government of India and such tax such tax shall be apportioned

between the Union and the States in the manner as may be provided by

Parliament by law on the recommendations of the Goods and Service Tax

council. Import within the territory of India was included within the

meaning of the term "Inter-State Trade or Commerce" and in respect of it

tax, as aforesaid, would be levied and collected by the Government of

India.

In pursuance to the aforesaid 101st Amendment of the Constitution three

enactments were passed by the Parliament, i.e. the Integrated Goods and

Services Tax Act 2017; the Central Goods and Services Tax Act 2017; the

Union Territory Goods and Services Tax Act 2017 (hereinafter referred as

''U.T.G.S.T. Act'). In addition to the aforesaid three enactments, the

Legislature of the State of Uttar Pradesh passed an enactment known as

the ''U.P.G.S.T. Act 2017'.

In matters of inter-State Trade and Commerce including import into the

territory of India and out of it, the I.G.S.T. Act 2017 applies, whereas, in

matters of intra-State trade and commerce the ''C.G.S.T. Act 2017' and

the State Goods and Services Tax Acts, which in this case is ''U.P.G.S.T.

Act 2017', apply.

Section 3 of the I.G.S.T. Act 2017 provides that the Board may appoint

such Central Tax Officers as it thinks fit for exercising powers under this

Act. There is no dispute about the fact that by virtue of section 4 of the

I.G.S.T. Act 2017 the officers appointed under the State Goods and

Services Tax Act or the Union Territory Goods and Services Tax Act are

authorized to be the proper officers for the purposes of the said Act,

subject to such exceptions and conditions as the Government shall, on the

recommendations of the Council by notification, specify. Similarly for

enforcement of C.G.S.T. Act 2017 by virtue of section 6 thereof State

Authorities under U.P.G.S.T. Act 2017 are also empowered to enforce

C.G.S.T. Act 2017.

It is also not in dispute that by virtue of section 20(xv) of the ''I.G.S.T. Act 2017' the provisions of ''C.G.S.T. Act 2017' apply in respect of matters

covered by the I.G.S.T. Act 2017 on the subject of inspection, search,

seizure and arrest. Chapter XIV of the C.G.S.T. Act 2017 deals with

inspection, search, seizure and arrest. While section 67 of C.G.S.T. Act

2017 deals with the power of inspection, search and seizure, section 68

deals with inspection of goods in movement and it is this provision with

which we are primarily concerned. It reads as under:

"68. Inspection of goods in movement

(1) The Government may require the person in charge of a conveyance

carrying any consignment of goods of value exceeding such amount as

may be specified to carry with him such documents and such devices as

may be prescribed.

(2) The details of documents required to be carried under sub-section (1)

shall be validated in such manner as may be prescribed.

(3) Where any conveyance referred to in sub-section (1) is intercepted by

the proper officer at any place, he may require the person in charge of the

said conveyance to produce the documents prescribed under the said

sub-section and devices for verification, and the said person shall be

liable to produce the documents and devices and also allow the inspection

of goods."

As would be evident from its reading, the documents which the

Government may require the person in charge of a conveyance carrying

any consignment of goods of value exceeding such amount as may be

specified, are such, as may be prescribed. Now this prescription has been

made under Rule 138 of the C.G.S.T. Rules 2017 which reads as under:

"138. E-way rule Till such time as an E-way bill system is developed and approved by the Council, the Government may, by notification, specify the documents that the person in charge of a conveyance carrying any consignment of goods shall carry while the goods are in movement or in transit storage."

As would be evident from a reading of the aforesaid rule it refers to an E-

way bill System which is to be developed by the G.S.T. Council and it

provides for an interim arrangement by the Government till an E-way Bill

System is so developed and approved. The words "Government" used

therein is defined in section 2(53) of C.G.S.T. Act 2017 to mean the

"Central Government". It is not in dispute that on the date of interception

of the vehicle in question E-way Bill System had not been developed,

therefore, the documents which were required to be carried during

movement of any consignment of goods were those which may have been

notified by the Central Government under Rule 138 of the C.G.S.T. Rules

2017, as, by virtue of section 20(xv) thereof, it is this rule which is

applicable to matters pertaining to I.G.S.T. Act 2017. Neither the State of

U.P. nor the Government of India has brought on record any such

notification which may have been issued prescribing the relevant

documents to be carried in the course of such movement as is referred in

section 68 of the C.G.S.T. Act 2017 and Rule 138 of the C.G.S.T. Rules

2017. In fact, Dr. Deepti Tripathi, learned counsel for the Government of

India made a categorical statement on the basis of instructions that T.D.F.

Form was not required to be carried for movement of inter-State goods to

which the I.G.S.T. Act 2017 applies. In fact, as per Dr. Deepti Tripathi,

learned Advocate appearing for the Government of India, C.G.S.T. Rules

2017 were amended on 30th August 2017 and vide another notification

dated 29.12.2017 this amendment containing the E-way Bill system was to

come into force from 1.2.2018, but, the notification dated 29th December

2017 was rescinded by a subsequent notification dated 2.2.2018.

Thereafter the notification dated 7th March 2018 has been issued

regarding E-way Bill System.

Thus, E-way bill system has been prescribed only recently by a

notification of the Government of India dated 7th March 2018 whereby

Rule 138 of the C.G.S.T. Rules 2017 has been amended and other Rules

have been incorporated in this regard. These amendments are to come

into force from a date to be specified by the Central Government.

Be that as it may, the fact of the matter is that on the date of incident i.e. 17.12.2017 neither there was any E-way Bill System nor any notification

by the Central Government under Rule 138 of the C.G.S.T. Rules 2017

requiring the carrying of a T.D.F. Form or any other such document in the

course of inter-State supply/movement of goods, as such, the very basis for

passing the impugned orders and taking action against the petitioner as

impugned herein is apparently erroneous and illegal. In view of the above

it cannot be said that there was any intent to evade tax.

As regards the contention of Sri Rahul Shukla, based on the notification

issued under Rule 138 of the U.P.G.S.T. Act 2017, no doubt the said

notification also takes into consideration the requirement of carrying

documents i.e. T.D.F. Form-1, in respect of inter-State movements of

goods, but, in our view it is only the Government of India which is

empowered to issue such a notification in respect of inter-State trade

under section 20(xv) of the I.G.S.T. Act 2017 read with section 68 of the

C.G.S.T. Act 2017 and Rule 138 of the C.G.S.T. Rules 2017 made

thereunder, as, the term ''Government' used in Rule 138 is defined in

section 2(53) of the C.G.S.T. Act 2017 to mean the ''Central Government',

just as, under section 2(9) of the I.G.S.T. Act 2017 ''Government' means ''

the Central Government'. Moreover, with respect to Goods and Service

Tax in relation to inter-State Trade the Parliament alone has the authority

to legislate as would be evident from the 101st Amendment to the

Constitution.

In this view of the matter we are of the considered view that on the

relevant date i.e. 17.12.2017 there was no requirement of carrying T.D.F.

Form-1 in the case of an inter-State supply of goods. In fact on the

relevant date there was no prescription of the documents to be carried in

this regard under Rule 138 of the C.G.S.T. Act 2017, accordingly, the

seizure and penalty imposed upon the petitioners based on the notification

dated 21.7.2017 issued under Rule 138 of the U.P.G.S.T. Act 2017, which

was not applicable, is clearly illegal.

Cross-empowerment under section 4 of I.G.S.T. Act 2017 and section 6 of

C.G.S.T. Act 2017 merely means that State Authorities empowered under

the U.P.G.S.T. Act 2017 can also enforce the provisions of C.G.S.T. Act

2017 or I.G.S.T. Act 2017, but it does not mean that they can apply the

provisions of U.P.G.S.T. Act 2017 or Rules made thereunder to cases of

inter-State trade in violation of section 20(xv) of I.G.S.T. Act 2017. It does not mean that the State Government can issue a notification under Rule

138 of U.P.G.S.T. Rules made under U.P.G.S.T. Act 2017 to prescribe

documents to be carried in an inter-state supply of goods and services

regarding which only the Central Government has the power under

section 20(xv) of I.G.S.T. Act 2017 read with section 68 of C.G.S.T. Act

2017 and Rule 138 of C.G.S.T. Rules 2017.

The fact that the authorities under the State Act were empowered to

exercise the powers under the C.G.S.T. Act 2017, assuming it to be so, is

inconsequential, as, it is not their jurisdiction to exercise power of seizure which is under question, but, the manner in which they have exercised it on the basis of an inapplicable provision of law, as, they have proceeded on the presumption that T.D.F. Form-1 prescribed under a notification issued by the State Government under Rule 138 of the Rules made under the U.P.G.S.T. Act 2017, was required to be carried, which is not the

requirement in law. For this very reason the judgment dated 29.1.2018

passed by a Coordinate Bench of this Court in Writ Tax No.95 of 2018

does not apply to the instant case, as the challenge therein was to the very

power of the State Authorities under U.P.G.S.T. Act 2017 to seize goods

involved in inter-state supply. Here the question is whether petitioner was

required to carry T.D.F. Form I or not, which we have answered in the

negative.

As regards the provisions of section 129 U.P.G.S.T. Act 2017 under which

the impugned action has been taken, the same is not applicable to an

inter-State trade or commerce. By virtue of section 20 of the I.G.S.T. Act

2017 it is section 129 of C.G.S.T. Act 2017 that would apply, but this is not the ground on which we are invalidating the impugned action, as, if it is traceable to the aforesaid provision of C.G.S.T. Act 2017 which is pari

materia to the State Act, then mere wrong mentioning of a provision would

be too technical a ground for interference. We are invalidating the action

on account of absence of any notification by the Central Government

under Rule 138 of C.G.S.T. Rules 2017 and in view of incorrect

application of notification issued by the State Government under Rule 138

of U.P.G.S.T. Rules."

The contention of the petitioner that the appellant authority has

recorded its reasons that the E-way bill having been

downloaded after the interception of the consignment (even

though produced along with the reply to the show cause notice)

and should therefore be disregarded, runs contrary to several

decisions of this Hon'ble Court in which it has specifically

opined that the purpose of issuing show cause notice is to

provide an opportunity to a dealer to remove the defects and

explain its conduct, in case document furnished along with the

reply to the show cause notice were not given due credence or

not taken into account, the purpose of issuance of show cause

notice stand defeated. For this purpose, the petitioner relies

upon the judgment of this Court in Ganpati Udyog Vs. C.C.T.

2012 NTN (vol. 49) 142 and Balaji Timber Paints Vs. C.C.T.

2010 NTN (vol. 43) 53 and P.S. Sales Pvt. Ltd. Vs. C.C.T. 2015

NTN (vol. 58) 379.

It is further submitted that under Section 129(1) of the UPGST

Act or the CGST Act, where "any person" transports any goods

in contravention of the provisions of the Act, they are subject to

detention, seizure and penalty. Section 129(4) specifically

provides that no tax, interest or penalty shall be determined

without giving "the person concerned" an opportunity of being

heard.

On the other hand, Sri A.C. Tripathi, learned Standing Counsel

for the State has invited our attention to a final order dated

24.08.2017 passed by another Division Bench of this Court in

PIL No. 38246 of 2017 (U.P. Kar Adhivakta Sangathan Vs.

State of U.P. and others) and submitted that the validity of the

notification dated 21.07.2017 has already been upheld by a

Coordinate Bench of this Court. Challenge to the same

notification cannot now be entertained, as the notification dated

21.07.2017 (and the Circulars issued thereunder) issued by the

State of U.P. prescribing various documents and the Forms of

documents liable to be carried along with the goods in transit

has already been upheld. Shri Tripathi further submits that the

judgment of the Lucknow Bench dated 13.04.2018 in Satyendra

Goods Transport Corporation (supra) has not considered the

judgment dated 24.08.2017 delivered in PIL No. 38246 of 2017

U.P. Kar Adhivakta Sangathan (supra).

Rebutting the aforesaid submissions of the Standing Counsel,

Shri Agarwal submits that the judgment dated 24.08.2017

passed in U.P. Kar Adhivakta Sangathan (supra) has itself failed

to notice that the relevant legal provisions particularly the

definition of the government under Section 2(53) of the CGST

Act and Section 2(9) of the IGST Act. The judgment in U.P. Kar

Adhivakta Sangathan (supra) seems to have been delivered in

the context of the provisions of the U.P. GST Act and not in the

context of the IGST Act or the CGST Act and the transaction

covered there-under. Learned counsel for the petitioner submits

that the judgment dated 24.08.2017 in U.P. Kar Adhivakta

Sangathan (supra), when read in context, cannot be said to have

affirmed the power of the State of U.P. to also prescribe

documents in respect of interstate transactions that fall under

the IGST Act.

Prima facie, Shri Rahul Agarwal appears to be correct in

submitting that Section 20 (xx) and Section (xv) of the IGST

Act, when read along with the Rule 2(53) of the CGST Rules

and Rule 138 of the GST Rules, provide authority to the Central

Government to specify, by notification, the documents that the

person in-charge of a conveyance carrying any consignment of

goods shall carry while the goods are in movement or in transit

storage. The temporary arrangement contemplated under Rule

138 of the CGST Rules (till such time as E-Way Bill system is

developed and approved by the GST Council) contemplate the

Central Government to specify the documents by issuing the

notification. These provisions have been appropriately referred

to by the judgments of the Madras High Court, the Kerala High

Court and the Lucknow Bench in Satyendra Goods Transport

Corporation (supra).

However, the judgment dated 24.08.2017 passed in U.P. Kar

Adhivakta Sangathan (supra) referred to by Sri A.C. Tripathi,

learned Standing Counsel does not refer to these provisions but

upholds the power of the State of U.P. in issuing the notification

dated 21.07.2018. The relevant findings/conclusions of the

judgment dated 24.08.2017 read as under:

" The petitioner is not challenging the validity of any provision of U.P.

Goods and Services Tax Act, 2017 (hereinafter referred to as 'the Act') or

the Rules framed thereunder, namely, Section 165 of the Act or Rule 138 of

the Rules.

The submission of Sri N.C. Gupta, learned counsel for the petitioner is

that in view of Article 279A added to the Constitution of India, a council

has been constituted and therefore, until and unless the council

recommends the documents and the format of the various forms, the State

Government has no authority or jurisdiction in law to prescribe the

documents to be carried with the goods in transit or even the forms in

which the said documents should exist.

Section 165 of the Act empowers the government, i.e. the State

Government to make regulations consistent with the Act and the Rules to

carry out the provisions of the Act by issuing a notification thereof.

Simultaneously, Rule 138 of the Rules provides that till such time E-Way

bill system is developed and approved by the council, the Government

may, by notification, specify the documents that the person in charge of

conveyance carrying any consignment of goods shall carry while the

goods are in movement or transit storage.

The aforesaid Rule is clear and there is no ambiguity therein. It provides

that until and unless an E-Way bill system is developed and approved by

the council, the Government of U.P. may prescribe the documents which

are supposed to be carried with the goods in movement or in transit

storage and this can be done by issuing a notification." (emphasis

supplied by us)

To ascertain the real controversy before the Division Bench in

Kar Adhivakta Sangathan (supra), we directed that the records

of Public Interest Litigation No. 38246 of 2017 be placed

before us. We have perused the memo of public interest petition

and examined the grounds of challenge made to the authority of

the State of U.P. to issue notification we find that the

submissions now being raised to challenge the authority of the

State of U.P. in issuing the notification dated 21.07.2017, were

not even raised before the Bench deciding U.P. Kar Adhivakta

Sangathan (supra). The submissions now being urged by Mr.

Agarwal were never brought to the notice of the Division

Bench; the Division Bench had no opportunity to peruse the

relevant statutory provisions and adjudicate upon the legality of

the notification issued by the State of U.P. in that light.

At the same time, the judgment in U.P. Kar Adhivakta

Sangathan (supra) has not been considered and discussed by the

Lucknow Bench, may be for the reason that it was never placed

before it. The judgment in U.P. Kar Adhivakta Sangathan

(supra) is an unreported decision, and but for the fact that the

Standing Counsel had earlier defended the validity of the

notification and was aware of the decision, the judgment in U.P.

Kar Adhivakta Sangathan (supra) would have escaped our

notice too.

We are therefore, faced with two judgments given by the

Coordinate Benches of this Court with diametrically opposite

conclusions:

a) the earlier judgment in U.P. Kar Adhivakta Sangathan (supra)

has affirmed the notification dated 21.07.2017 issued by the

State of U.P.,

b) the judgment dated 13.04.2018 in Satyendra Goods

Transport Corporation (supra), while not invalidating the

notification, has effectively held that the seizure and penalty

imposed upon the petitioner based on the notification dated

21.07.2017 issued under Rules 138 of the U.P. GST Rules was

illegal.

While one judgment seems to have not considered relevant

statutory provisions, the other judgment seems to have

overlooked the earlier judgment which may, otherwise, have

constituted binding precedent. In such situation, it may be said

that the doctrine of per incuriam applies to both judgments,

though in different contexts.

In our considered opinion, in such a situation, it would not be

appropriate for us to comment on the correctness of either of

the two judgments delivered by co-ordinate Benches of this

Court or embark on a third independent course of our own.

Judicial propriety requires us to refer the matter to a larger

Bench for an affirmative pronouncement on the validity of the

notification dated 21.07.2017 and the Circulars issued there-

under (as modified from time to time) in so far as it pertains to

the requirement of form E-way bill-01 to be carried for import

of consignment valued not more than Rs.50,000/- in a case of

inter-State transaction and the legality of seizure/penalty

proceedings undertaken by the authorities of the State of U.P.

for violation thereof.

The Supreme Court in U.P. Power Corporation Ltd. Vs. Rajesh

Kumar (2012) 7 SCC 1 has, in paragraph 17, observed that

judicial discipline commands that where there is disagreement

between Coordinate Benches of a Court, the matter ought to be

referred to a larger Bench for resolution. Prompted by judicial

decorum and discipline, we direct the Registry to place the

papers before the Hon'ble the Chief Justice for nomination of

appropriate larger Bench to decide the following questions of

law:

"(a) Whether the judgment of the Division Bench dated 24.08.2017 in U.P.

Kar Adhivakta Sangathan (supra), having not noticed the relevant

provisions of the IGST Act and the CGST Act and yet affirmed the

notification dated 21.07.2017 issued by the State of U.P., does not lay

down the correct law and does not constitute binding precedent?

(b) Whether the judgment dated 13.04.2018 delivered by another Division

Bench at Lucknow in Satyendra Goods Transport Corporation (supra),

having not noticed the earlier Division Bench judgment in U.P. Kar

Adhivakta Sangathan (supra), can be said to have correctly nullified the

impact of the notification dated 21.07.2017 issued by the State of U.P. on

the ground that State of U.P. could not have prescribed any E-way bill or

TDF in respect of an inter-State transaction under the Goods and Services

Tax regime?

(c) Whether the State Government is empowered under Rule 138 of U.P.

GST Rules to issue a notification prescribing carrying of any forms or

documents along with a consignment during inter-State movement?

During the course of hearing, it was pointed out by learned

counsel for the petitioner that the goods and the vehicle are both

lying seized since they were first detained by Mobil Squad

Officials. In the interest of justice, we provide that the goods

and the vehicle shall stand released forthwith upon the

petitioner furnishing an indemnity bond for the value of the tax

and penalty levied by the authorities as confirmed by the order

of the first appellate authority dated 14.12.2017.

In Writ Tax No. 645 of 2018 (M/s Fenasia Vs. State of U.P. and

others) in which the petitioner is registered under the Goods and

Services Tax Act in the State of West Bengal and not in the

State of U.P. and whose consignment has been seized on

12.03.2018, we provide that the goods and the vehicle shall be

released upon the petitioner furnishing security other than Cash

or Bank Guarantee to the satisfaction of the Mobile Squad

Officials. It has been pointed out by the learned Standing

Counsel that the other issue pertaining to the revival of the

earlier notification upon its repeal and thereafter rescission of

the repealing provision has already been heard and judgment

reserved by another coordinate Bench of this Court. We are

consequently not entering into this controversy and would

prefer to await the judgment to be pronounced by the coordinate

Bench.

In Writ Tax No. 157 of 2018, by order dated 08.02.2018, the

goods and the vehicle have directed to be released, no interim

order is, therefore, required in the matter.

Let the papers be placed by the Registry before the Hon'ble the

Chief Justice for nomination/constitution of an appropriate

larger Bench.

Order Date :- 30.4.2018