Court Overturns Seizure of Goods in Transit, Citing Lack of E-Way Bill Requirement

Case Name:

M/s. Navyug Airconditioning vs. State of U.P. and 02 Others

Writ Tax No. 551 of 2018

Key Takeaways:

- The court clarified the applicability of different GST laws for interstate transactions.

- The judgment highlighted the importance of timing in the implementation of E-Way bill requirements.

- The court emphasized the need for proper legal grounds in the seizure of goods in transit.

Issue:

Was the seizure of goods in transit from outside the state legal under the applicable GST laws, given the E-Way bill requirements at the time?

Facts:

- The petitioner's goods were seized on March 25, 2018, under Section 129(1) of the U.P. Goods and Services Tax Act, 2017.

- The seized goods were in transit from outside the state of U.P.

- At the time of seizure, there was no provision for E-Way bills under the Central GST for interstate transactions.

- The U.P. GST had made E-Way bills mandatory from July 21, 2017, but only for intrastate transactions.

Arguments:

Petitioner's Argument:

- The transaction should be covered by the Integrated Goods and Services Tax Act, 2017 (IGST) and Central GST, not U.P. GST.

- The seizure was illegal as there was no E-Way bill requirement for interstate transactions at the time.

State's Argument:

- The seizure was actually made under Section 6 of the IGST read with Section 129(1) of the Central GST.

- The wrong mention of the provision on the seizure order doesn't invalidate the seizure.

Key Legal Precedents:

The judgment doesn't mention specific case laws but refers to the following legal provisions:

- Section 129(1) of the U.P. Goods and Services Tax Act, 2017

- Section 6 of the Integrated Goods and Services Tax Act, 2017

- Section 129(1) of the Central Goods and Services Tax Act

- Rule 138 of the Rules framed under the Central GST

- Section 20 of the IGST

Judgement:

The court ruled in favor of the petitioner, stating:

- The seizure appears to be illegal as there was no provision for E-Way bills under Central GST on the relevant date.

- The goods seized should be released along with the vehicle.

- The release is subject to the petitioner furnishing an indemnity bond and security (other than cash and bank guarantee) for the proposed tax and penalty.

FAQs:

Q1: Why was the seizure considered illegal?

A1: The seizure was deemed illegal because there was no E-Way bill requirement for interstate transactions under Central GST at the time of the seizure.

Q2: What's the difference between IGST, CGST, and state GST in this context?A2: IGST covers interstate transactions, CGST is for central taxation, and state GST (like U.P. GST) applies to transactions within the state.

Q3: When did the E-Way bill requirement come into effect for interstate transactions?

A3: According to the judgment, the E-Way bill requirement for interstate transactions under Central GST came into effect from February 1, 2018.

Q4: What conditions did the court set for releasing the seized goods?

A4: The court ordered the release of goods and vehicle subject to the petitioner furnishing an indemnity bond and security (excluding cash and bank guarantee) for the proposed tax and penalty.

Q5: What's the significance of Rule 138 in this case?

A5: Rule 138 of the Central GST Rules provides for the development of the E-Way bill system and allows the government to specify documents required for goods in transit until the system is fully implemented.

Heard Sri Nishant Mishra, learned counsel for the petitioner assisted by Sri Vipin Kumar Kushwaha, Advocate and Sri C.B. Tripathi, Special Counsel for the State of U.P.

The petitioner is aggrieved by the seizure of his goods vide impugned order dated 25.03.2018 passed under Section 129(1) of the U.P. Goods and Services Tax Act, 2017 (hereinafter referred to as the U.P.G.S.T.).

The submission is that as admittedly the seized goods were in transit from outside the State the transaction would be covered by the Integrated Goods and Services Tax Act, 2017 (I.G.S.T.) read with Central G.S.T. and that the provisions of the U.P. G.S.T. or its Rules or the notifications issued therein would not apply.

Sri Tripathi, has submitted that actually the order of seizure has been passed under Section 6 of the I.G.S.T. read with Section 129(1) of the Central G.S.T. and therefore, mere wrong mention of the provision on the order of seizure would not invalidate the same.

The provisions of U.P.G.S.T. are applicable to transactions within the State of U.P. whereas I.G.S.T. covers the interstate transactions.

Section 20 of the I.G.S.T. makes applicable the provisions of Central G.S.T. in respect to matters relating to inspection, search and seizure under the said Act.

Rule 138 of the Rules framed under the Central G.S.T. provides that till such time E-Way bill system is developed and approved by the Council, the Government by notification may specify the documents which are to be carried with the consignment of goods. In exercise of the said power a notification has been issued which provides for the carrying of E-Way bill with the goods in transit but the same is applicable has been enforced w.e.f. 1st February, 2018 and not before.

Simultaneously, U.P.G.S.T. also contains similar provisions and in exercise of the power under Rule 138 of the Rules framed under the U.P.G.S.T. by a notification dated 21.07.2017 has made E-Way bill mandatory but that may apply only in respect of goods in transit within the State of U.P. and not for goods brought from outside the State.

Therefore, even if the seizure is treated to be under Section 129(1) of the Central G.S.T., as there was no provision of E-Way bill on the relevant date under the Central G.S.T. prima facie the seizure appears to be illegal. Sri Tripathi, may seek instructions and file counter affidavit within three weeks.List along with writ petition no. 87 of 2018 for admission/final

disposal after the filing of the counter affidavit.

In the meantime, the goods seized be released along with the vehicle subject to the petitioner furnishing indemnity bond and security (other than cash and bank guarantee) in respect of the proposed tax and penalty on the value of the goods shown in the documents accompanying the same.

Order Date :- 3.4.2018

SK Srivastava

(Ashok Kumar,J.) (Krishna Murari,J.)