Authenticity Of Transaction Cannot Be Disputed If E-Way Bill Not Cancelled Within Time: Allahabad HC

The Allahabad High Court held that once e-way bill has been generated by the assessee and the same has not been cancelled within the time prescribed in the Goods and Service Tax Act, 2017, movement of goods and genuineness of a transaction cannot be disputed by the Department.

While quashing the penalty order issued under Section 129(3) of the GST Act, Justice Piyush Agrawal held

“The purpose of e-way bill is that the department should know the movement of goods. Once the e-way bill has been generated and same has not been cancelled by the petitioner within the time prescribed under the Act, the movement of goods as well as genuineness of transaction in question cannot be disputed.”

Factual Background

Petitioner dispatched the consignment to M/s Hi-Tech Gears Limited, Bhiwadi, Rajasthan along with tax invoice and e-way bill through vehicle owned by Supersonic Carrier Private Limited. During the journey from Maharashtra to Rajasthan, the goods were passing through State of UP. The vehicle got stuck in mud at the side of road because of heavy load of consignment. Once the vehicle was removed from the mud, the vehicle broke down. After repair, the vehicle moved for its onward journey.

However, the vehicle was intercepted and show cause notice was issued to the petitioner on grounds that the e-way bill had expired. On finding the reply unsatisfactory, penalty of Rs. 8,43,456/- was imposed on the petitioner. Appeal against the penalty order was dismissed. Hence the present writ petition.

Counsel for petitioner argued that since the vehicle was stuck in mud, there was delay in delivery. Further, it was submitted that certain spare parts could not be arranged in time from the local vendors and had to be brought from other places to repair the vehicle. Accordingly, there was delay in transportation. It was argued that the authorities had imposed penalty without considering the reply of the petitioner. Further, it was argued that the first appellate authority had erred in rejecting the appeal on grounds that these grounds were not taken before the authority.

Defending the penalty order, counsel for respondent submitted that since proper documents as contemplated under the GST Act were not accompanying the goods, proceedings have rightly been initiated. Further, it was stated that the petitioner had failed to justify non-filing of documentary evidence at the time of detention.

High Court Verdict

The Court observed that the fact of breakdown of vehicle due to being stuck in mud has not been rejected by the authority.

“Under the G.S.T. regime, all the details are available on the G.S.T. portal and it is admitted that e-tax invoice was raised and e-way bill was generated and the same was not cancelled within 24 hours as provided under the Act. Once the said fact is not disputed and the petitioner has not exercised its right either to withdraw the tax invoice or e-way bill in question, it was well within the knowledge of the department that movement of the goods in question has been undertaken by the petitioner.”

The Court observed that merely because e-way bill had expired, movement of goods cannot be questioned. The Court held that once e-way bill has been issued and not cancelled within the stipulated time as prescribed under the GST Act, the movement of goods and genuineness of transaction cannot be disputed by the Department.

Further, the Court observed that intention to evade tax on part of the petitioner as not recorded in the penalty order.

Reliance was placed on M/s Shyam Sel & Power Limited Vs. State of U.P. & 2 Others, wherein the Allahabad High Court had held that for proceeding under Section 129(3) it is mandatory to record a finding regarding intention to evade tax. If there is no intention to evade tax, proceedings ought to be initiated under Section 122 of the GST Act, instead of Section 129.

The Court held that circumstances under which the vehicle could not reach its destination within time were beyond the control of the petitioner. The Court observed that there was no intention to evade tax.

Accordingly, the Court quashed the penalty order passed by the Department as well as the order of the first appellate authority.

Case Title: M/S Sun Flag Iron And Steel Company Limited vs. State Of U.P. And 3 Others [WRIT TAX No. - 837 of 2023]

Case Citation: 2023 LiveLaw (AB) 435

Counsel for Petitioner: Shubham Agarwal

Click Here To Read/Download Order