Expired E-Way Bill Leads to Vehicle Seizure — But Court Quashes Orders Over Procedural Violations

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Case Name

M/s. AMI Enterprises Pvt. Ltd. vs. Union of India through its Commissioner, Central Goods & Services Tax and Central Excise & Others

Case No.: W.P.(T) No. 2312 of 2022

Court Name: High Court of Jharkhand at Ranchi

Bench: Hon’ble Mr. Justice Aparesh Kumar Singh & Hon’ble Mr. Justice Deepak Roshan

Date of Hearing: 10th August 2022

Key Takeaways

1. Procedural fairness is non-negotiable — Even in E-Way bill violation cases under Section 129 of the CGST Act, 2017, the law mandates a proper opportunity of hearing before any penalty order is passed.

2. Same-day proceedings are legally suspect — The law under Section 129(3) clearly provides a timeline: notice within 7 days of detention, and order within 7 days of notice. Compressing everything into a single day, without proper justification, is a procedural infirmity.

3. Mere expiry of E-Way bill ≠ automatic penalty — The petitioner argued there was no intention to evade tax, and the respondents themselves did not allege any such intention.

4. Payment under protest doesn’t mean you’ve accepted guilt — The company paid tax and interest to get the vehicle released but still had the right to challenge the proceedings in court.

5. Fresh proceedings are permissible — The court didn’t completely let the company off the hook. It set aside the orders but allowed the authorities to redo the proceedings correctly.

Issue

The central legal question was:

Were the adjudication order dated 20th September, 2021 (in Form GST MOV-09) and the appellate order dated 17th February, 2022 legally valid, given that:

• All proceedings (detention, show-cause notice, and adjudication) were completed on the same day?
• The petitioner was allegedly not given a proper opportunity of hearing as required under Section 129(4) of the CGST Act, 2017?

In simpler terms: Did the GST authorities follow the correct legal procedure before penalizing the company?

Facts

Step 1 — The E-Way Bill Expires

The vehicle bearing registration number JH05 AF 0361 was transporting goods. The E-Way bill for this consignment expired at 11:59 p.m. on 17th September, 2021. The company had not applied for an extension under Rule 138(10) of CGST Rules, 2017.

Step 2 — Vehicle Gets Intercepted

The very next morning, at 8:20 a.m. on 18th September, 2021, GST officers intercepted the vehicle, citing a violation of Section 129 of the CGST Act, 2017 read with Rule 68 thereof.

Step 3 — Everything Happens on One Day

Here’s where things get legally problematic. On 20th September, 2021 — just two days after interception — the following three things all happened on the same day:

• The vehicle was formally detained via Form GST MOV-06
• A show-cause notice was issued in Form GST MOV-07
• The adjudication order was passed in Form GST MOV-09

Step 4 — Company Pays Up to Get Vehicle Released

The company paid the full tax amount along with interest and got the vehicle released on 21st September, 2021.

Step 5 — Appeal Also Fails

The company filed an appeal, but it was dismissed by Respondent No. 2 (Joint Commissioner, Appeals, CGST, Ranchi) vide order dated 17th February, 2022.

Step 6 — Writ Petition Filed in High Court

Left with no other option, the company approached the Jharkhand High Court by filing W.P. (T) No. 2312 of 2022.

Arguments

Petitioner’s Arguments (M/s. AMI Enterprises Pvt. Ltd.)

1. No proper hearing was given — The entire proceedings were conducted ex parte (without the petitioner’s participation). Neither the petitioner nor the driver was given a proper opportunity to submit a reply or be heard.

2. No intention to evade tax — The petitioner strongly argued that there was absolutely no intention to evade tax. The E-Way bill had merely expired — it was a technical lapse, not a deliberate act of tax evasion.

3. Relied on Supreme Court precedent — The petitioner’s counsel cited the Supreme Court decision in Assistant Commissioner (ST) & Ors. vs. M/s. Satyam Shivam Paper Ltd. & another, passed in Special Leave to Appeal © No(s). 21132 of 2021, arguing that without intention to evade tax, the entire liability of tax along with interest would be vitiated.

4. Procedural violations — The detention, notice, and adjudication all happened on the same day, which is contrary to the timelines prescribed under Section 129(3) of the CGST Act.

Respondents’ Arguments (GST Authorities)

1. No need to prove intention — The respondents argued that Section 129 of the CGST Act does not require proof of intention to evade tax for imposing liability of tax, interest, and penalty. The mere fact of transporting goods without a valid E-Way bill is sufficient.

2. E-Way bill had expired, no extension sought — The vehicle was rightly intercepted because the E-Way bill had expired at 11:59 p.m. on 17th September, 2021, and no application for extension was made under Rule 138(10) of CGST Rules, 2017.

3. Proceedings were expedited at taxpayer’s own request — The respondents claimed that the proceedings were fast-tracked on the same day because the taxpayer himself requested it. They also stated that notice with seven days’ time to submit a reply was served on the authorized person of the company on 20th September, 2021, who was directed to appear at 11:30 a.m. but did not appear.

4. Taxpayer chose not to contest — According to the respondents, on the taxpayer’s own request, the vehicle was released on payment of tax and interest, as they did not want to submit anything on the issue. Hence, the case was adjudicated ex parte.

5. Orders are legally sound — The adjudication order dated 20th September, 2021 and the appellate order dated 17th February, 2022 do not suffer from any legal infirmity.

Key Legal Precedents & Provisions

1. Section 129 of the Central Goods and Services Tax Act, 2017 — Detention, Seizure and Release of Goods and Conveyances in Transit

This is the core provision of the entire case. Let me break it down simply:

• Section 129(1): If goods are being transported in violation of the CGST Act or Rules, the goods and the vehicle can be detained/seized. They can be released:
• (a) On payment of penalty equal to 200% of the tax payable (if the owner comes forward)
• (b) On payment of penalty equal to 50% of the value of goods or 200% of tax payable, whichever is higher (if the owner does not come forward)
• © On furnishing a security equivalent to the above amounts
• Section 129(3): The proper officer must issue a notice within 7 days of detention/seizure, specifying the penalty payable, and pass an order within 7 days from the date of service of such notice.

• Section 129(4): No penalty shall be determined without giving the person concerned an opportunity of being heard. This is the key sub-section that the petitioner relied upon.

• Section 129(5): On payment of the penalty amount, all proceedings shall be deemed concluded.

• Section 129(6): If the penalty is not paid within 15 days from receipt of the order, the goods/vehicle can be sold or disposed of to recover the penalty.

2. Rule 68 of CGST Rules, 2017

This rule was cited alongside Section 129 as the basis for the interception of the vehicle.

3. Rule 138(10) of CGST Rules, 2017

This rule provides the mechanism for extending the validity of an E-Way bill. The respondents pointed out that the petitioner had not applied for an extension under this rule, which is why the vehicle was intercepted.

4. Assistant Commissioner (ST) & Ors. vs. M/s. Satyam Shivam Paper Ltd. & another — Special Leave to Appeal © No(s). 21132 of 2021 (Supreme Court)

This Supreme Court decision was cited by the petitioner’s counsel to argue that where there is no intention to evade tax, the entire liability of tax along with interest would be vitiated. The petitioner used this to argue that a mere technical lapse (expired E-Way bill) without any dishonest intent should not attract the full brunt of Section 129 penalties.

Judgment

The Petitioner — M/s. AMI Enterprises Pvt. Ltd. — WON (partially). The writ petition was allowed.

What Did the Court Decide?

The court carefully examined the provisions of Section 129 of the CGST Act and found the following:

1. Procedural timelines were violated — Section 129(3) clearly mandates that:

• Notice must be issued within 7 days of detention
• Order must be passed within 7 days of service of notice

2. In this case, the detention notice (Form GST MOV-06), show-cause notice (Form GST MOV-07), and adjudication order (Form GST MOV-09) were all issued on the same day — 20th September, 2021. This is a clear procedural infirmity.

3. Respondents’ claim of taxpayer-requested expedition was unsubstantiated — The respondents claimed the proceedings were fast-tracked at the taxpayer’s own request, but the court noted there was nothing on record to substantiate this claim.

4. Right to be heard was violated — Section 129(4) mandates that no penalty shall be determined without giving the person concerned an opportunity of being heard. This fundamental principle of natural justice was not followed.

Court’s Orders:

The adjudication order dated 20th September, 2021 (Annexure-6, issued in Form GST MOV-09) was SET ASIDE.

The appellate order dated 17th February, 2022 (Annexure-9) was also SET ASIDE.

However, the respondents (GST authorities) are at liberty to take a fresh decision after giving due opportunity to the petitioner as provided under the Act. So this isn’t a complete win — the authorities can redo the proceedings correctly.

FAQs

Q1: Why did the court set aside the orders even though the E-Way bill had genuinely expired?

The court didn’t say the interception was wrong. It said the procedure followed after interception was flawed. The law requires proper notice periods and a genuine opportunity to be heard — none of which was properly followed here.

Q2: Does the company get its money back?

The judgment sets aside the orders but allows fresh proceedings. The question of refund would depend on the outcome of the fresh proceedings. The judgment doesn’t explicitly order a refund.

Q3: Can the GST authorities penalize the company again?

Yes! The court specifically said the respondents are “at liberty to take a fresh decision after due opportunity to the petitioner as provided under the Act.” So the company is not completely off the hook.

Q4: Is intention to evade tax required under Section 129?

The respondents argued it is NOT required. The petitioner argued (relying on the Supreme Court case of Assistant Commissioner (ST) & Ors. vs. M/s. Satyam Shivam Paper Ltd. & another in SLP © No. 21132 of 2021) that it IS relevant. The court decided the case on procedural grounds and did not give a definitive ruling on this substantive question.

Q5: What is an E-Way bill and why does its expiry matter?

An E-Way bill is an electronic document required for the movement of goods above a certain value under the GST regime. If it expires during transit and no extension is sought under Rule 138(10) of CGST Rules, 2017, the transporter is technically in violation of the law, which can lead to interception and detention of the vehicle under Section 129 of the CGST Act.

Q6: What should businesses learn from this case?

Two things: First, always ensure your E-Way bill is valid throughout the transit, and apply for an extension under Rule 138(10) if needed. Second, if you are ever subjected to GST proceedings, insist on your right to be heard under Section 129(4) and don’t let authorities rush through the process without proper notice and hearing.

Q7: What is Form GST MOV-09?

It is the official form used by GST authorities to pass the adjudication/penalty order in cases of detention or seizure of goods and conveyances in transit under Section 129 of the CGST Act.

Heard learned counsel for the parties.

2. On the alleged violation of Section 129 of Central Goods and Services

Tax Act, 2017 read with Rule 68 thereof as E-Way bill had expired at 11.59

p.m. on 17th September, 2021, the vehicle bearing no. JH05 AF 0361 was

intercepted at 08:20 a.m. on 18th September, 2021. However, the entire

proceedings starting from detention of the vehicle by issuance of Form GST

MOV-06, show-cause notice in GST Form MOV-07 and the adjudication order

in Form GST MOV-09 were passed on the same date i.e., 20th September,

2021. Petitioner went in appeal but lost there also vide order dated 17th

February, 2022 (Annexure-9) passed by respondent no. 2. Petitioner had

deposited the entire tax amount with interest and got the vehicle released on 21st September, 2021. Being aggrieved, writ petitioner has approached this Court.

3. Learned counsel for the petitioner submits that the entire proceedings

were held ex parte. No proper opportunity of furnishing reply or hearing was

accorded to the petitioner or his driver. There was no intention to evade tax.

The vehicle was seized in teeth of Section 129(1) of CGST Act. Learned

counsel for the petitioner has relied upon a decision of the Apex Court in the case of Assistant Commissioner (ST) & Ors. Vs. M/s. Satyam Shivam

Paper Ltd. & another passed in Special Leave to Appeal (C ) No(s). 21132

of 2021 in support of her contention that there is no intention to evade the tax.

Therefore, the entire liability of tax along with interest would be vitiated. Respondents have also not alleged any intention to evade the tax.

4. Respondents have filed their counter affidavit. Perusal of the statements

made at paragraphs-7, 8 and 11 indicate that the vehicle was intercepted on 18th September, 2021 since E-the Way bill had expired at 11:59 pm on 17th

September, 2021 and no extension have been sought of the E-Way bill by

moving an application under Rule 138(10) of CGST Rule, 2017. According to

the respondents, notice with seven days’ time to submit reply was served on the authorized person of the company on 20th September, 2021, who was also

directed to appear at 11: 30 a.m. on the said date, but he did not appear. On the request of the tax payer, the vehicle was released on payment of tax and interest as they did not want to submit anything on the issue. Therefore, the case was adjudicated ex parte. The vehicle has been released.

5. Learned counsel for the Respondent-CGST submits that the provisions

of Section 129 do not contemplate the requirement of an intention to evade tax for imposing liability of tax, interest and penalty. Therefore, the adjudication order dated 20th September, 2021 and the appellate order dated 17th February, 2022 do not suffer from any legal infirmity. Learned counsel for the respondent submits that the proceedings were expedited on the request of tax payer himself.

6. We have considered the submission of learned counsel for the parties

and taken note of the pleadings on record. The provisions of Section 129 of

CGST Act and Rule 68 are quoted hereunder:

Section 129. Detention, seizure and release of goods and

conveyances in transit.

(1) Notwithstanding anything contained in this Act, where any

person transports any goods or stores any goods while they are in

transit in contravention of the provisions of this Act or the rules

made thereunder, all such goods and conveyance used as a means of

transport for carrying the said goods and documents relating to such

goods and conveyance shall be liable to detention or seizure and after

detention or seizure, shall be released,-

(a) on payment of penalty equal to two hundred per cent. of

the tax payable on such goods and, in case of exempted

goods, on payment of an amount equal to two per cent. of the

value of goods or twenty-five thousand rupees, whichever is

less, where the owner of the goods comes forward for

payment of such penalty;

(b) on payment of penalty equal to fifty per cent. of the value

of the goods or two hundred per cent. of the tax payable on

such goods, whichever is higher, and in case of exempted

goods, on payment of an amount equal to five per cent. of the

value of goods or twenty-five thousand rupees, whichever is

less, where the owner of the goods does not come forward for

payment of such penalty;

(c) upon furnishing a security equivalent to the amount

payable under clause (a) or clause (b) in such form and

manner as may be prescribed:

Provided that no such goods or conveyance shall be detained

or seized without serving an order of detention or seizure on the

person transporting the goods.

(2) The provisions of sub-section (6) of section 67 shall, mutatis

mutandis, apply for detention and seizure of goods and

conveyances.

(3) The proper officer detaining or seizing goods or

conveyances shall issue a notice within seven days of such

detention or seizure, specifying the penalty payable, and thereafter,

pass an order within a period of seven days from the date of service

of such notice, for payment of penalty under clause (a) or clause (b)

of sub-section (1).

(4) No penalty shall be determined under sub-section (3)

without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all

proceedings in respect of the notice specified in sub-section (3)

shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of

such goods fails to pay the amount of penalty under sub-section (1)

within fifteen days from the date of receipt of the copy of the order

passed under sub-section (3), the goods or conveyance so detained

or seized shall be liable to be sold or disposed of otherwise, in such

manner and within such time as may be prescribed, to recover the

penalty payable under sub-section (3).

Provided that the conveyance shall be released on

payment by the transporter of penalty under sub-section (3) or one

lakh rupees, whichever is less:

Provided further that where the detained or seized goods

are perishable or hazardous in nature or are likely to depreciate in

value with passage of time, the said period of fifteen days may be

reduced by the proper officer.

A bare perusal of the provisions of Section 129 shows that no

goods or conveyance shall be detained or seized without serving an order of

detention or seizure on the person transporting the goods on the allegation of making transit in contravention of the provisions of the Act or Rule made

thereunder. Sub-section (3) indicates that the proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1). Sub-section (6) provides that where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty. Apparently, the proceedings have been initiated on the same date and concluded also on the same date. Though, learned counsel for the respondent has stated that the proceedings were expedited at the instance of the tax payer on the same date, but there is nothing to substantiate such contention. The impugned adjudication order and the appellate order therefore both suffer from procedural infirmities and lack of proper opportunity to the petitioner or the person transporting to defend

himself. As such, the impugned order dated 20th September, 2021 (Annexure-6)

issued in Form GST MOV-09 and the appellate order dated 17th February,

2022 (Annexure-9) are set aside. However, the respondents are at liberty to take a fresh decision after due opportunity to the petitioner as provided under the Act.

7. Writ petition is accordingly allowed in the manner and to the extent

indicated hereinabove.

(Aparesh Kumar Singh, J)

(Deepak Roshan,J)