Detention Order Can't Be Issued If Driver In Possession Of Valid E-Way Bill In Physical/Electronic Form: Madras High Court

The Madurai Bench of Madras High Court while quashing the detention order held that if an invoice, bill of supply, delivery challan, or bill of entry and a valid e-way bill in physical or electronic form for verification are available, then action may not be initiated.

The bench of Justice S.Srimathy has observed that the respondent department issued the notice, carried out the inspection on the same day, and also passed the order on the same day. As per the provisions prescribed, the respondents department ought to grant time for seven days to reply. Since the inspection, notice, and orders were passed on the same day, there is a clear violation of the principles of natural justice.

The petitioner/assessee is a private limited company engaged in the manufacturing and trading of compactors and is registered under GST. The petitioner had supplied a compactor to HDFC Limited. The goods were shipped. The goods were transported from the petitioner premises to Navi Mumbai with an E-way Bill. The vehicle was intercepted by the departure at Kodai Road. The driver produced the invoice as well as the E-way bill for verification, but the department ordered physical verification of conveyance and goods in Form Mov-02 for verification. After verification, a detention order under Section 129(1) of the GST Act in Form GST MOV-06, dated July 3, 2023, was issued for the reason "the address found on the 'Bill To' and 'Shipped To' addresses was found unregistered.

The department stated that before passing the final order, they tried to contact the supplier in Mumbai and the recipient in Thiruvanndapuram through the driver of the conveyance. The driver told me that both the supplier and the recipient blame each other for the fault committed; both are not ready to shoulder the responsibility and both are not ready to pay the penalty; hence, the notice and order were issued to the driver, who was not well educated; no one tried to contact the department; since the petitioner has not responded, the respondents have passed the order; hence, the petitioner cannot complain that there is a violation of the principles of natural justice.

The department contended that under Rule 1, if the place of delivery of the recipient was not registered, then the same is liable to be taxed. Under Section 2(85), the place of business includes a warehouse, godown, or any other place of store. The petitioner submitted that they have not violated Rules 138 to 138E, which relate to e-waybills, and Rule 46, which relates to tax invoices. Even though there is no violation under the other provisions, the petitioner has violated Rule 11, hence Section 129 was invoked. Moreover, the violation is not a major violation; if this type of transaction is allowed, then the taxpayer will take this as an example and will take liberty to send goods anywhere in India without proper registration. There will be confusion in maintaining the accounts, and thereby, it will pave the way for revenue leakage to the government. Hence, the department prayed to dismiss the writ petition.

The petitioner contended that the order was passed without jurisdiction. Since the supplier is bound to register under GST, the petitioner, being the supplier, has registered, disclosed the GST number, submitted an invoice, an e-way bill, as well as the vehicle, etc. It is not stated in Section 25 of the GST Act that the buyer should be registered and declare the place of the registration, etc. However, the department relied on Rule 1 of the GST Rules, 2017.

The court has held that the invoice/bill of supply/delivery challan/bill of entry and a valid e-way bill in physical or electronic form for verification were available with the driver, so the action must not have been initiated by the department.

The court held that the department was not within the purview of the law. Therefore, the department has clearly misconstrued the Act and passed the order, which is liable to be quashed.

Counsel For Appellant: Bharat Raichandani

Counsel For Respondent: K.Govindaraja

Case Title: Kompress India Private Limited Versus Union of India

Citation: 2024 LiveLaw (Mad) 300

Case No.: W.P.(MD) No.17461 of 2023

Click Here To Read The Order