GST Goods Detained for Dual E-Way Bills & Wrong Transport Mode — Court Orders Release on Bank Guarantee

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Case Name

Febin Marine Foods v. Assistant State Tax Officer, Intelligence Squad No. 2, State Goods and Service Tax Department & Others

Court Name: High Court of Kerala at Ernakulam

Case No.: WP(C) No. 16344 of 2020

Decision on: 11th August 2020

Key Takeaways

1. Two e-way bills for one invoice is a red flag — Generating two e-way bills against a single tax invoice raises legitimate concerns for GST authorities and can justify detention of goods.

2. Mode of transport mismatch matters — If the e-way bill says “road transport” but goods are actually moved by railway, that’s a discrepancy that authorities can act upon under Section 129 of the GST Act.

3. Detention doesn’t mean automatic confiscation — The Court balanced the interests of both sides by allowing release of goods against a bank guarantee, rather than keeping them detained indefinitely.

4. Adjudication must follow due process — The Court directed that adjudication under Section 130 of the GST Act must be completed after hearing the petitioner, within one month.

5. Practical explanation existed — The petitioner explained that the first e-way bill (for road) was generated to move goods from the supplier’s premises to the railway station, and the second was generated to move goods from Ernakulam Railway Station to the final destination.

Issue

The central legal question here is:

Was the detention of goods under Section 129 of the GST Act justified, given that two e-way bills were generated for a single invoice and the mode of transport mentioned in the e-way bill (road) did not match the actual mode used (railway)?

And a secondary practical question:

Should the goods be released pending adjudication, and if so, on what conditions?

Facts

• The Supplier: M/s Sri Aurobindo Packagers Pvt. Ltd., Thiruvallur, Tamil Nadu sold printed and laminated pouches to Febin Marine Foods, charging IGST @ 18%.

• Tax Invoice: Invoice No. SAPPL/20-21/0708 dated 24-07-2020 was raised for this transaction.

• First E-Way Bill (Ext. P2): E-Way Bill No. 521191139048 dated 24-07-2020, generated at 11:51 AM by the consignor (supplier). This bill mentioned the mode of transport as road — because the goods were first moved from the supplier’s place of business to the railway station using their own vehicle.

• Goods Dispatched by Train: The goods were then dispatched via Southern Railway, Chennai to Ernakulam (Railway Receipt No. A1258330 dated 24-07-2020).

• Second E-Way Bill (Ext. P3): E-Way Bill No. 521191559895 dated 27-07-2020, generated by the petitioner (Febin Marine Foods) to transport the goods from Ernakulam Railway Station to Eramalloor after collecting them from the railway.

• Detention: On 27-07-2020, the goods were intercepted at Ernakulam South Railway Station by the 1st Respondent (Assistant State Tax Officer, Intelligence Squad No. 2). Notices in MOV-02, MOV-04, MOV-06, and MOV-07 dated 27-07-2020 and 28-07-2020 were issued demanding tax and penalty under Section 20 of the IGST Act, 2017.

• Grounds for Detention: Two e-way bills for the same invoice, and goods moved by railway while the e-way bill showed road transport.

Arguments

Petitioner’s Side (Febin Marine Foods):

• The petitioner challenged the detention notice (Ext. P4) by filing a Writ Petition before the Kerala High Court.

• They explained that the first e-way bill (showing road transport) was generated to cover the movement of goods from the supplier’s premises to the railway station — which was indeed by road.

• The second e-way bill was generated by the petitioner to cover the movement from Ernakulam Railway Station to their final destination at Eramalloor — which is a legitimate and separate leg of the journey.

• The petitioner’s counsel sought permission to clear the goods by furnishing a bank guarantee for the amounts demanded in the detention notice, rather than paying the disputed tax and penalty upfront.

Respondents’ Side (GST Intelligence Squad):

• The authorities maintained that having two e-way bills for a single invoice was irregular and suspicious.

• The mode of transport mismatch — road in the e-way bill vs. actual railway transport — was a valid ground for detention.

• The Government Pleader represented the respondents but did not oppose the bank guarantee arrangement for release of goods.

Key Legal Precedents

The judgment in this case is relatively brief and does not cite any prior case law or judicial precedents. However, it does reference the following statutory provisions:

Section 129 of the GST Act

Deals with detention, seizure, and release of goods and conveyances in transit. This is the provision under which the goods were detained.

Section 130 of the GST Act

Deals with confiscation of goods or conveyances and levy of penalty. The Court directed adjudication under this section.

Section 20 of the IGST Act, 2017

The provision under which tax and penalty were demanded in the detention notice.

Note: No prior judicial precedents were cited in this judgment. The Court relied purely on the statutory framework and the facts presented before it.

Judgment

This was a partial win for the petitioner — the goods were not immediately released unconditionally, but the Court provided a practical middle-ground solution.

What Did the Court Decide?

The Court made the following key observations and orders:

1. Detention was prima facie justified — The Court noted that on a reading of the detention notice (Ext. P4), the detention “cannot be said to be unjustified” given the two e-way bills and the transport mode mismatch.

2. Goods to be released on Bank Guarantee — The Court directed the 1st Respondent (Assistant State Tax Officer) to permit the petitioner to clear the goods and the vehicle upon furnishing a bank guarantee for the amount demanded in Ext. P4.

3. Adjudication ordered under Section 130 — After releasing the goods, the 1st Respondent was directed to forward the files to the adjudicating authority for a proper adjudication of the dispute under Section 130 of the GST Act.

4. Hearing mandatory — The adjudication must be completed only after hearing the petitioner.

5. Time limit set — The adjudication must be completed within one month from the date the files are forwarded to the 2nd Respondent.

6. Petitioner to produce copy of judgment — The petitioner was directed to produce a copy of this judgment along with the writ petition before the 1st Respondent for further action.

FAQs

Q1: Why were the goods detained in the first place?

The GST Intelligence Squad detained the goods because there were two e-way bills generated against a single tax invoice, and the mode of transport mentioned in the first e-way bill was road, whereas the goods were actually found at the Ernakulam South Railway Station — a clear mismatch.

Q2: Was the petitioner doing something wrong by generating two e-way bills?

Not necessarily. The petitioner explained that the first e-way bill covered the movement from the supplier’s premises to the railway station (by road), and the second covered the movement from the railway station to the final destination. This is a common real-world scenario in multi-modal transport. However, the Court found the detention prima facie justified, meaning the issue needed proper adjudication.

Q3: What is a bank guarantee in this context?

A bank guarantee is a commitment from the petitioner’s bank that if the petitioner fails to pay the demanded tax and penalty after adjudication, the bank will pay on their behalf. It’s essentially a security deposit that allows the goods to be released without the petitioner having to pay the disputed amount upfront.

Q4: What happens next after the goods are released?

The GST officer must forward the case files to the adjudicating authority, who will then conduct a proper hearing and decide whether the tax and penalty demand is valid. This must happen within one month.

Q5: What is the difference between Section 129 and Section 130 of the GST Act?

• Section 129 is about the temporary detention of goods in transit and their release (with or without payment/security).
• Section 130 is about the formal adjudication process that can lead to confiscation of goods and imposition of penalties if violations are confirmed.

Q6: What does this case tell businesses about e-way bill compliance?

This case is a good reminder that:

• E-way bills must accurately reflect the mode of transport at each leg of the journey.
• In multi-modal transport (e.g., road + rail), businesses should ensure proper documentation for each leg.
• Discrepancies between e-way bills and actual transport can lead to detention and demands for tax and penalty.

1. The petitioner has approached this Court challenging the detention notice issued to him (Ext.P4) under Section 129 of the GST Act. On a perusal of the detention notice, I find that the objection of the respondents was essentially with regard to the transportation of the goods having been covered by two e-way bills, when there was only one invoice covering the transportation. It is also stated that the mode of transportation shown as per the e-way bills was through a road, whereas the goods were intercepted at the Ernakulam South Railway Station. On a consideration of the reasons shown in Ext.P4, I am of the prima facie view that the detention cannot be said to be unjustified.

2. I have heard the learned counsel for the petitioner as also the learned Government Pleader for the respondents.

The learned counsel for the petitioner seeks permission to clear the goods on furnishing of a bank guarantee to cover the amounts demanded in Ext.P4. Taking note of the said submission, I dispose the writ petition by directing the 1st respondent to permit the petitioner to clear the goods and the vehicle on furnishing a bank guarantee for the amount demanded in Ext.P4. Thereafter, the 1st respondent shall forward the files to the adjudicating authority for an adjudication of the dispute under Section 130 of the GST Act, which adjudication shall be completed only after hearing the petitioner, within a period of one month from the date of the files being forwarded to the 2nd respondent. The petitioner shall produce a copy of this judgment together with a copy of the writ petition before the 1st respondent for further action.

Sd/-

A.K.JAYASANKARAN NAMBIAR

JUDGE