Goods In Transit Without Documents, Can Survey Business Premises To Find Correctness Of Transaction: Allahabad High Court
The Allahabad High Court has held that if the goods in transit are not accompanied by proper documentation, including e-way bill, the authorities can survey the business premises of the assesee to determine the correctness of the transaction. However, it was held that if the e-way bill was produced before passing of seizure order under Section 129 of the Goods and Service Tax Act, 2017, then contravention of the Act or Rules thereunder could not be claimed by the Department.
While dealing with an order passed under Section 129 of the Goods and Service Tax Act and the subsequent order of the Appellate Authority, Justice Piyush Agrawal held that
“The GST authorities have full mechanism as well as power that after detaining the goods, if the same was not accompanying with the proper documents, the authority could have made survey of the business premises of the petitioner to find out the correctness of transaction but the respondent authorities have chosen in their wisdom not doing so. Once E-way bill was produced before the seizure order could be passed, it would not be said that any contravention of the provision of the Act have been made by the petitioner.”
Factual Background
Petitioner purchased goods from one M/s NBM Traders, Mandi Govindgarh, Punjab. Tax invoices as well as E-way bill was generated as good were to be transported from State of Punjab to Bans Steel, Kanpur Nagar, Uttar Pradesh. Subsequently, petitioner sold the said goods to one M/s Dinesh Chandra Gupta and Sons and M/s Jain S.S. Steel through 2 invoices dated 12.7.2019. However, only one e-way bill could be generated due to some technical error.
On 13.07.2019, the goods were in intercepted in transit and detained on grounds that against the second invoice, e-way bill was missing. Before a seizure order could be issued, petitioner produced the second e-way bill. The seizure order was challenged before the Appellate Authority who affirmed the penalty.
Counsel for petitioner argued that the e-way bill was produced prior to issuance of show cause notice as well as before passing the seizure order and no intention to evade tax was established by the authority.
Counsel for respondent-department argued that the seizure was rightly passed as the goods were not accompanied with proper documentation, i.e. e-way bill, as provided in the Rules under the GST Act.
High Court Verdict
The Court observed that no discrepancies were pointed out upon production of e-way bill by the petitioner. It was further observed that the assumption to evade tax was only based on the fact that the goods were not accompanied by proper documents.
The Cour differentiated the earlier decisions of the Allahabad High Court in M/s Akhilesh Traders Vs. State of UP and others and M/s Hawkins Cooker Limited Vs. State of UP and others on grounds that in those cases neither the invoice nor e-way bill was present therefore proceedings under Section 129 of the Act were justified. However, the Court held that in case of M/s Bans Steel (petitioner), the goods were accompanied by invoices and only one e-way bill was missing which was produced prior to passing of seizure order under Section 129 of the Act.
The Court held that “once the E-way bill was produced before the seizure order could be passed, the discrepancy, if any, was cured.”
Holding that the authorities could have surveyed the business premises of the petitioner for determining the correctness of the transaction, the Court quashed the penalty order as well as the order of the appellate authority upholding the penalty.
Case Title: M/S Bans Steel Through Its Proprietor Alpana Jain v. State Of U.P. And 2 Others [WRIT TAX No. - 577 of 2022]