Court Quashes Seizure Order: Incomplete E-way Bill Not Grounds for Goods Seizure

Case Name:

VSL Alloys(India) Pvt. Ltd. Vs. State of U.P. And Another

Writ Tax No. 637 of 2018

Key Takeaways:

- Merely not mentioning the vehicle number in Part-B of an e-way bill is not sufficient grounds for seizure of goods.

- When all required documents accompany the goods, authorities should consider the evidence before passing a seizure order.

- The court emphasized the importance of reasoned orders in such cases.

- The judgment highlights the significance of Rule 138(3) of the CGST Rules, 2017, particularly regarding transportation within 50 km.

Issue:

Was the seizure of goods and the penalty notice issued by the Assistant Commissioner valid when the only alleged irregularity was an incomplete Part-B of the e-way bill?

Facts:

- VSL ALLOYS (INDIA) PVT. LTD. is engaged in manufacturing and supplying industrial SS Tube and fittings.

- They received an order for 4942 kg of stainless steel welded pipes to be delivered to Rajkot, Gujarat.

- The goods were loaded onto a vehicle (U.P.16-AT-5489) for transportation to a transport company.

- The e-way bill was generated, but Part-B (vehicle details) was not filled.

- The vehicle was intercepted at Mohan Nagar, Ghaziabad on 08.04.2018.

- The Assistant Commissioner issued a seizure order and penalty notice on 09.04.2018.

Arguments:

Petitioner's Arguments:

- All required documents accompanied the goods.

- Both consignor and consignee are registered dealers, and IGST was charged.

- The vehicle was only transporting goods to the transport company, within 50 km.

- As per Rule 138(3) of CGST Rules, vehicle details weren't required for transportation within 50 km.

Respondent's Arguments:

- The e-way bill's Part-B was incomplete.

- This incompleteness justified the seizure of goods.

Key Legal Precedents:

The judgment primarily relies on Rule 138 of the CGST Rules, 2017, particularly the amendment made by Notification No.12/2018-Central Tax dated 07.03.2018. This rule states that for transportation up to 50 km within the state, from the consignor to the transporter, vehicle details in Part-B of Form GST EWB-01 may not be required.

Judgement:

The court ruled in favor of the petitioner:

- The seizure order dated 09.04.2018 under Section 129(1) of the UPGST Act, 2017 was quashed.

- The consequential show cause notice dated 09.04.2018 under Section 129(3) was also quashed.

- The court directed the respondents to release the seized goods and vehicle immediately.

The court reasoned that:

- All necessary documents accompanied the goods.

- Not mentioning the vehicle number in Part-B alone cannot be grounds for seizure.

- The authorities failed to consider the evidence and provide a reasoned order.

- The notification dated 07.03.2018 was not considered by the respondent.

FAQs:

Q1: Does an incomplete e-way bill automatically justify seizure of goods?

A1: No, the court ruled that merely not mentioning the vehicle number in Part-B of an e-way bill is not sufficient grounds for seizure.

Q2: What is the significance of the 50 km rule mentioned in the judgment?

A2: According to Rule 138(3) of CGST Rules, for transportation up to 50 km within the state from consignor to transporter, vehicle details in Part-B of the e-way bill may not be required.

Q3: What should authorities do before issuing a seizure order?

A3: Authorities should consider all evidence presented by the assessee and provide a reasoned order explaining their decision.

Q4: Can goods be seized if all other documents are in order?

A4: The court suggests that if all other required documents accompany the goods, seizure based solely on an incomplete e-way bill may not be justified.

Q5: What was the main flaw in the Assistant Commissioner's actions in this case?

A5: The Assistant Commissioner failed to provide reasons for the seizure and did not consider the notification dated 07.03.2018, which was relevant to the case.

We have heard the learned counsel for the petitioner and Sri C.B. Tripathi, learned Special Counsel for the State.

Brief facts of the case are that the petitioner is a private limited company and is engaged in manufacture and supply as well as export of industrial SS Tube, fittings and pipe fittings etc. The petitioner is registered under the provision of GST. The petitioner's office is situated at Industrial Area Sahibabad, District Ghaziabad. An order has been received by the petitioner

from one M/s Kansara Laljibhai Mohanlal, 7, Parsana Society, R.K. Watch Stree, 50 Feet Road, Rajkot, Gujarat for supply of 4942 kg of stainless steel welded pipes against the tax invoice dated 07.04.2018. The goods were being sold to the consignee situates at Rajkot for a sum of Rs.5,43,631/-. The petitioner has charged the IGST @ 18% on the aforesaid amount. The

aforesaid goods were booked through M/s Jai Hind Tempo Transport Service, Sahibabad, Ghaziabad. The goods were loaded in vehicle U.P.16- AT-5489 against the challan/GR no. 1116 dated 07.04.2018. The petitioner has downloaded e-way bill having Unique No.431003252396 dated 07.04.2018 at

08.05 P.M. from the web portal of the Central Government and e-way bill consisted of all the details of the consign or, consignee, the challan number, its date, value of the goods, its HSN Code, the place of delivery of goods and the reason for its transportation.

It is submitted by learned counsel for the petitioner that the validity of the e-way bill showed that it is not valid for movement as Part B is not entered. After loading the goods, the vehicle proceeded at about 8.33

P.M. on 07.04.2018 and the vehicle has procured a Kata Purchi and movement at about 9.20 P.M. from Sahibabad towards its destination namely Rajkot, Gujarat. During the course of transportation from Sahibabad i.e. from the factory of the petitioner upto the transporter, the vehicle has been intercepted at Mohan Nagar, Ghaziabad on 08.04.2018 by the respondent

no.2, the Assistant Commissioner (in-charge), Commercial Tax, Mobile Squad, Unit-III, Ghaziabad at 12.15 A.M. and respondent no.2 issued interception memo which was drawn by the respondent no.2 under Section 129(1) of the UPGST Act, 2017 (hereinafter referred as 'the Act'). The respondent no.2

was of the opinion that the goods, namely Stainless Steel welded pipes which were found loaded on the vehicle during intra-state transportation, were accompanied with e-way bill having Unique Code, however, Part-B of the said e-way bill was not filled up and no vehicle number has been quoted/ mentioned. The respondent no.2 has directed for physical verification of the goods.

On physical verification held on 09.04.2018, the respondent no.2 has found alleged irregularity, that Part-B of e-way bill was incomplete and, therefore, the respondent no.2 has detained the vehicle as well as goods by passing an order under Section 129(1) of the Act by which he has assessed the value of goods to the tune of Rs.5,43,631/-. Consequently, a notice under Section 129(3) of the Act has been issued by which the respondent no.2 has directed the petitioner to pay a sum of Rs.97,854/- towards the tax liability as well as the same amount towards the penalty.

Aggrieved by the said seizure order and issuance of the penalty notice, the instant writ petition has been filed.

Learned counsel for the petitioner has submitted that though all the documents were accompanied the goods even then the same was intercepted and it has been categorically submitted before the respondent no.2 that both the consignor and consignee are registered dealers and IGST @ 18% has been charged by the petitioner and that petitioner is registered bonafide dealer,

therefore, objection with regard to non filling Part-B of e-way bill is nothing but clearly an abuse of process of law.

The contention of the petitioner before the authority below was that there was no intention on the part of the petitioner to evade payment of tax during the course of intra-state sale of the goods. The contention of the petitioner before the authority below as well as before this Court is that, in fact, the goods loaded in vehicle No. U.P. 16-AT 5489 was only for the purpose of transporting the goods from petitioner factory up to transport

company, and as such, the petitioner at the time of generation of national e-way bill could not fill the vehicle number in Part-B due to the fact and for the reason that after unloading of the goods at the transport company the same were to be loaded in another vehicle which was supposed to transport from the godown of the transport company to place of consignee situate at Rajkot, Gujarat, by another vehicle the number whereof was

not known to the petitioner.

Counsel for the petitioner has also placed reliance on a Notification No.12/2008-Central Tax dated 07.03.2018 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise and Customs which provides further to amend CGST Rules, 2017 and substituted

Rule 138 which is quoted below;

"138. Information to be furnished prior to commencement of movement of goods and generation of e-way bill".-

(3) Where the e-way bill is not generated under sub-rule (2) and the goods are handed over to a transporter for transportation by road, the registered person shall furnish the information relating to the transporter on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A of FORM GST EWB-01:

Provided that the registered person or, the transporter may, at his option, generated and carry the e-way bill even if the value of the consignment is less than fifty thousand rupees.

Provided further that where the movement is caused by an unregistered person either in his own conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the e-way bill in FORM GST EWB-01 on the common portal in the manner specified in this rule:

Provided also that where the goods are transported for a distance of upto fifty kilometres within the State or Union Territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the recipient, or as the case may be, the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01.

Explanation 1.- For the purposes of this sub-rule, where the goods are supplied by an unregistered supplier to a recipient if the recipient is known at the time of commencement of the movement of goods.

Explanation 2.- The e-way bill shall not be valid for movement of goods by road unless the information in Part-B of FORM GST EWB-01 has been furnished except in the case of movements covered under the third proviso to sub-rule (3) and the proviso to sub-rule (5).

The contention of the learned counsel for the petitioner is that as per the Notification No.12/2018 dated 07.03.2018 in Rule 138(3) third proviso which clearly states that where the goods are transported for a distance of upto 50 kms within the State from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the recipient, as the case may be, the transporter may not furnish the details of conveyance in Part-B of Form GST EWB-01. As such, at the time of filling of the e-way bill, the petitioner was not under an obligation to fill Part-B of the e- way bill, therefore, the petitioner has not committed any error of law at the time of downloading e-way bill.

On the other hand, learned counsel for the respondent, though has supported the order of seizure but, has admitted that all the requisite documents were accompanied the goods when the vehicle has been intercepted and seizure order has been passed, but the Part-B of the e-way bill was found unfilled. He has also accepted that prima facie there appears no intention to evade

payment of tax for the reason that in the invoice the petitioner has charged IGST @ 18%. We have heard the learned counsel for the respective parties and

perused the documents which are enclosed along with the writ petition.

We are in full agreement with the submission of learned counsel for the petitioner and after perusal of the relevant documents, we find no ill intention at the hands of the petitioner nor the petitioner was supposed to fill up Part-B giving all the details including the vehicle number before the goods are loaded in a vehicle, which is meant for transportation to the same to its end destination.

In the present case, all the documents were accompanied the goods, details are duly mentioned which reflects from the perusal of the documents. Merely of none mentioning of the vehicle no. in Part-B cannot be a ground for seizure of the goods. We hold that the order of seizure is totally illegal and once the petitioner has placed the material and evidence with regard to its claim, it was obligatory on the part of the respondent no.2 to consider and pass an appropriate reasoned order. In this case, no reasons are assigned nor any discussion is mentioned in the impugned order of seizure and notice of penalty. The respondent no.2 has also not considered the above

notification dated 07.03.2018

In view of the aforesaid facts, the impugned seizure order dated 09.04.2018 passed under Section 129 (1) and also the consequential show cause notice dated 09.04.2018 passed/issued under Section 129 (3) of the Act are quashed. The respondents are directed to release the goods as well as vehicle, seized on 09.04.2018, forthwith in favour of the petitioner.

The writ petition stands allowed.

Order Date :- 13.4.2018

A.Kr.

[Ashok Kumar, J.] [Krishna Murari, J.]