Court quashes seizure order and penalty notice for lack of e-way bill, upholds bonafide transaction.

Case Name:

Writ Tax No. 563 of 2018: M/S Shaurya Enterprises vs. State of U.P. and 02 Others (High Court of Allahabad)

Key Takeaways:

- The court upheld the bonafide nature of the transaction, as the petitioner had paid the required GST and provided relevant documents. - The seizure order and penalty notice were quashed, as the e-way bill requirement was not mandatory until April 1, 2018. - The court emphasized that the authorities should have considered the relevant facts and not treated the transaction as non-bonafide. **Issue:** Whether the seizure order and penalty notice issued for not carrying an e-way bill during the transportation of goods were valid, given that the e-way bill requirement was not mandatory at the time of the incident. **Facts:** - The petitioner, a registered proprietorship firm, purchased iron and steel goods from M/s. Hi Tec Power & Steel Limited, Raipur. - The goods were loaded on a truck on March 23, 2018, for delivery from Raipur to Basti, U.P. - The seller provided a tax invoice and test certificate, and the transporter issued a goods receipt (GR). - On March 24, 2018, the truck was intercepted and checked at Sonbhadra, U.P., by the authorities. - The authorities were not satisfied with the documents and issued an interception memo, fixing the date for verification on March 25, 2018. - On March 25, 2018, the authorities passed a seizure order under Section 129(1) of the UPGST Act, 2017, estimating the value of goods at Rs. 7,92,002/-, citing the non-availability of the e-way bill. - The authorities also issued a show cause notice under Section 129(3) of the Act, proposing a penalty of Rs. 1,42,560/-. **Arguments:** - Petitioner's Argument: The e-way bill requirement was waived until March 31, 2018, and became mandatory from April 1, 2018. The petitioner downloaded the e-way bill immediately after the interception and submitted it to the authorities. The transaction was bonafide, and the petitioner had paid the required GST, as evident from the tax invoice and GR. - Authorities' Argument: The e-way bill was not accompanying the goods when the vehicle was intercepted, and filing it subsequently was an afterthought. Therefore, the seizure proceedings and penalty notice were within the authorities' domain. **Key Legal Precedents:** The court did not cite any specific legal precedents in this case. **Judgement:** - The court found that the goods were being purchased and sold by registered dealers, and the tax invoice clearly indicated the payment of IGST at 18% on the value of the goods. - The only reason for the seizure was the non-submission of the e-way bill at the time of interception, which the petitioner had submitted within half an hour of the detention. - The court failed to understand why the authorities did not consider the relevant facts and treated the transaction as non-bonafide, leading to the seizure of goods and vehicle. - The court held that the goods were bonafidely dispatched from Raipur for delivery at Basti and were illegally and arbitrarily detained by the authorities. - Consequently, the court set aside the seizure order passed under Section 129(1) of the UPGST Act, 2017, and the show cause notice issued under Section 129(3) of the Act. **FAQs:** 1. **What was the main issue in this case?** The main issue was whether the seizure order and penalty notice issued by the authorities for not carrying an e-way bill during the transportation of goods were valid, given that the e-way bill requirement was not mandatory at the time of the incident. 2. **Why did the court quash the seizure order and penalty notice?** The court quashed the seizure order and penalty notice because it found the transaction to be bonafide, as the petitioner had paid the required GST and provided relevant documents. Additionally, the e-way bill requirement was not mandatory until April 1, 2018, and the petitioner had submitted the e-way bill immediately after the interception. 3. **What was the court's reasoning behind treating the transaction as bonafide?** The court considered the fact that the goods were being purchased and sold by registered dealers, and the tax invoice clearly indicated the payment of IGST at the prescribed rate. The court also noted that the petitioner had submitted the e-way bill within half an hour of the detention, indicating no ill intention. 4. **What is the significance of this case?** This case highlights the importance of considering the relevant facts and circumstances before treating a transaction as non-bonafide and imposing penalties or seizures. It also emphasizes the need for authorities to exercise discretion and consider practical difficulties faced by taxpayers, especially during transitional periods when new requirements are introduced. 5. **What is the impact of this case on the law?** While the case did not establish any new legal principles, it reinforces the principles of fairness and reasonableness in the application of tax laws. It also serves as a reminder for authorities to consider the bonafide nature of transactions and not impose penalties or seizures arbitrarily, especially when there are genuine practical difficulties or transitional periods involved.

Supplementary affidavit filed today, is taken on record. We have heard Shri Raghwendra Prasad Mishra and Shri Vijay Babu, learned counsel for the petitioner and learned Standing Counsel appearing on behalf of the State-respondents.

The instant writ petition has been filed by which the petitioner has challenged the seizure order dated 25.3.2018 passed under Section 129 (1) of UPGST Act, 2017 (hereinafter referred to as the 'Act') and the show cause notice dated 25.3.2018 issued under Section 129 (3) of the Act for proposed penalty.

Learned counsel for the petitioner has submitted that the petitioner is a registered proprietorship firm and is carrying on the business of purchase and sale of iron and steel items. Certain goods have been purchased by the petitioner from one M/s. Hi Tec Power & Steel Limited, Raipur, Chattisgarh which were loaded at Raipur on 23.3.2018 in a truck for delivery from Raipur to Basti U.P. at the petitioner's place of business. The seller of Raipur has prepared the tax invoice as well as test certificate dated 23.3.2018 and the same were handed over to the transporter, namely, M/s Shah Transport Corporation, Raipur who has prepared the goods receipt (GR) dated 23.3.2018. During movement of the vehicle from Raipur to Basti, the truck has been intercepted and checked at Sonbhadra, U.P., by respondent No. 2. Before the respondent No.2 the truck driver has placed all the records/documents which were handed over to him, however, the respondent No. 2 was not satisfied with the documents accompanying the goods as such, has issued an interception memo dated 24.3.2018 mentioning therein the time of issuance at 6:10 PM. In the said interception memo, the respondent No. 2 has mentioned for verification of goods and documents while fixing the date for the same on 25.3.2018 at 11:00 AM. The respondent No. 2 has prepared a report dated 25.3.2018 in which the details with regard to transaction has been noted.

Since, the respondent No. 2 was not satisfied with the documents, therefore, a seizure order has been passed on the same date, namely, on 25.3.2018 wherein the value of the goods has been estimated at Rs. 7,92,002/- excluding the IGST, which has been clearly mentioned in the tax invoice as well as in the GR issued by the transporter. Vide seizure order dated 25.3.2018, the respondent No. 2 has indicated that the goods and vehicle has been seized on the ground of non availability or non submission of E-way bill.

Learned counsel for the petitioner has submitted that on account of some practical difficulties the necessity of the E-way bill has been waived of till 31st March, 2018 and the same has become mandatory with effect from 1st April, 2018. Learned counsel for the petitioner has submitted that since the respondent No. 2 has directed for furnishing/presentation of the E-way bill, the same has been downloaded from the official portal on 24.3.2018 at 7:30 PM i.e. just after half an hour from detention/interception of the vehicle.

According to the learned counsel for the petitioner, the petitioner has complied with the requirement of submission of E-way bill and the same has been produced immediately after interception of the vehicle, therefore, there was no ill intention on the part of the petitioner nor the petitioner stands benefited in any manner whatsoever in not accompanying the E-way bill.

It is further submitted by the learned counsel for the petitioner that it may be a human error which has to be considered by the respondent No.2 when all other requirement were complied with by the petitioner and particularly the IGST has been charged at the prescribed rate of 18% which is self explanatory from the bare perusal of the tax invoice as well as good receipt which clearly indicating the value and tax charged separately mentioning in the tax invoice.

Learned counsel for the petitioner has also challenged the show cause notice issued under Section 129 (3) of the Act by which the respondent No. 2 has proposed to impose the penalty to the extent of Rs. 1,42,560/- i.e. equal to the liability of tax which has been assessed at the rate of 18% on the value of the goods.

On the other hand, learned Standing Counsel has pointed out before us that E-way bill was admittedly not accompanying with the goods when the vehicle was intercepted and filing of the E-way bill subsequently has nothing but an after thought, therefore, the seizure proceedings and the show cause notice under Section 129 (3) are well within the domain of the authorities.

We have heard learned counsel for the respective parties and found that admittedly the goods were being purchased by a registered dealer and the same are sold by the registered dealer. While issuing the tax invoice which is enclosed as Annexure-1 to the writ petition clearly indicates the charge of IGST at the rate of 18% on value of the goods has been paid. We have also noticed that even the net value which includes the value of the goods as well as tax charged has been duly mentioned by the transporter while issuing the goods receipt.

There is no other reason except of non submission of the E-way bill at the time of interception of the vehicle in question. We have also perused the E-way bill which has been generated by the person In charge of the vehicle immediately within half an hour from the time of detention/interception of the vehicle mentioning therein all the requisite details and submitting the same before the authority. We failed to understand as to why the authority has not considered all the aforesaid relevant facts and has arrived to a conclusion that the transaction in question was not a bonafide transaction and has seized the goods and vehicle. Admittedly, till 31st March, 2018 it was not mandatory to download the E-way bill from the official portal. We find the substance in the submission of the learned counsel for the petitioner that only with effect from 1st April, 2018 the requirement of downloading of the E-way bill is compulsory. However, without going into the said controversy at this stage, we find that the goods were bonafidely dispatched and are travelled from Raipur for the delivery at Basti are illegally and arbitrarily detained by the respondent No.2. We see no reason in seizing the goods and asking for the penalty.

In view of the aforesaid facts and the reasons given here-in-above, the order passed under Section 129 (1) of the Act passed on 25.3.2018 and the show cause notice issued under Section 129 (3) of the Act are hereby set aside.

The writ petition is allowed.

Order Date :- 5.4.2018

Ravi Prakash

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