E-Way Bill Seizure Ruled Illegal: Court Orders Release of Perishable Goods

Case Name:

Proactive Plast Pvt. Ltd. Vs. State of U.P. And 2 Others

Writ Tax No. 87 of 2018

Key Takeaways:

- E-Way bill requirements differ for intra-state and inter-state transactions.

- The court emphasized the importance of applying the correct law based on the nature of the transaction.

- The judgment highlights the need for clarity in implementing new tax regulations like GST.

Issue:

Was the seizure of goods under Section 129(1) of the U.P. Goods and Services Tax Act, 2017 legal for goods in transit from outside the state?

Facts:

- The petitioner's goods were seized on 20.01.2018 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.

- The U.P. government had made E-Way bills mandatory from 21.07.2017 under Rule 138 of the U.P. GST Rules.

- The Central GST E-Way bill system was to be enforced from 1st February 2018

Arguments:

Petitioner's argument:

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

- U.P. GST rules shouldn't apply to goods brought from outside the state.

- Tax Authority's argument (represented by Sri Tripathi):

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

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

Key Legal Precedents:

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

- Section 20 of IGST Act

- Section 129(1) of Central GST Act

- Rule 138 of Central GST Rules

- Rule 138 of U.P. GST Rules

Judgement:

The court ruled in favor of the petitioner:

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

- Ordered the release of seized goods (being perishable) along with the vehicle.

- Release subject to the petitioner furnishing an indemnity bond and security for the proposed tax and penalty.

- Sri Tripathi (representing the tax authority) was allowed to seek instructions and file a counter affidavit within two weeks.

- The case was listed for admission/final disposal after filing of the counter affidavit.

FAQs:

Q1: Why did the court consider the seizure illegal?

A1: The court found that there was no provision for E-Way bills under Central GST on the date of seizure for goods brought from outside the state.

Q2: What's the difference between U.P. GST and Central GST in this case?

A2: U.P. GST applies to transactions within the state, while Central GST (along with IGST) applies to interstate transactions.

Q3: When did the E-Way bill system become mandatory under Central GST?

A3: According to the judgment, it was enforced from 1st February 2018.

Q4: Why did the court order the release of goods?

A4: The goods were said to be perishable, and the seizure appeared to be prima facie illegal.

Q5: What conditions did the court set for releasing the goods?

A5: The petitioner had to furnish an indemnity bond and security (other than cash and bank guarantee) for the proposed tax and penalty.

The petitioner is aggrieved by the seizure of his goods vide impugned order dated 20.01.2018 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 two weeks.

List for admission/final disposal after the filing of the counter affidavit.

In the meantime, as the goods seized are said to be perishable nature the same are directed to be released along with 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 :- 1.2.2018

piyush