J.M. Petrochemicals Pvt. Ltd. Vs State of U.P. (Allahabad High Court)
Summary: The Allahabad High Court allowed the writ petition filed by J.M. Petrochemicals Pvt. Ltd. challenging the detention order dated 2 June 2020 and the appellate order dated 24 June 2021 concerning a consignment of mineral oil. The petitioner, a Mathura-based trader in oil and chemicals, had sold 12,000 litres of mineral oil valued at ₹5,52,240, inclusive of CGST and SGST of ₹42,120 each, to a registered dealer in Sikandarabad. The consignment was accompanied by a tax invoice, builty and an e-way bill generated on 26 May 2020, valid until 28 May 2020. Following the original driver’s unavailability during the Covid-19 lockdown, another driver was engaged. A mechanical breakdown subsequently delayed the vehicle by three days. The transporter did not inform the petitioner of the delay, preventing timely extension of the e-way bill’s validity. The authorities intercepted the vehicle solely because the e-way bill had expired and collected tax and penalty of ₹1,68,480 for release of the goods and vehicle.
The petitioner argued that the expiry arose from a bona fide breakdown during lockdown restrictions and that there was no intention to evade tax. The State defended the action on the ground that the expired document contravened Rule 138. The Court found that the invoice and builty correctly recorded the description, quantity, value and tax charged; the e-way bill particulars matched the invoice; and physical verification disclosed no discrepancy apart from expiry. The breakdown explanation was supported by the record and had not been rebutted by either authority. The Court held that an adverse inference of tax-evasion intent could not be drawn merely from expiry where the explanation remained unrebutted and no independent enquiry tested its veracity. Relying on Agrim Wholesale and CJ Darcl Logistics, it concluded that Section 129(3) proceedings were unsustainable in the absence of material establishing an intention to evade tax. Both impugned orders were quashed, and any amount deposited was directed to be refunded in accordance with law.
Cases Discussed
- Deepam Packaging and Food (P) Ltd. v. Additional Commissioner Grade -2 — 112 GST 725/[2026] 104 GSTL 180 (Allahabad); Writ Tax No. 885 of 2023. Cited by the petitioner in support of its challenge; the Court did not separately analyse or expressly rely on this decision in its reasoning.
- CJ Darcl Logistics Ltd. v. State of U.P. — 102 GSTL 229 (Allahabad); Writ Tax No. 193 of 2021. Cited by the petitioner and relied upon by the Court for the proposition that Section 129(3) is not attracted without material establishing an intention to evade payment of tax.
- Agrim Wholesale (P.) Ltd. v. State of U.P. — Writ Tax No. 2375 of 2024, dated 19-12-2024 (Allahabad High Court). Cited by the petitioner and relied upon by the Court for the proposition that the absence of material establishing tax-evasion intent prevents invocation of Section 129(3).
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Rishi Raj Kapoor, learned counsel for the petitioner and learned Additional Chief Standing Counsel for the opposite parties.
2. By means of the present writ petition, the petitioner is assailing the order dated 24.6.2021 passed by respondent no. 2 in Appeal No. 0064/2020 as well as the order dated 02.6.2020 passed by respondent no. 3 (MOV-09 No. 2021609X3042001) under Section 129(3) of the U.P. Goods and Services Tax Act, 2017.
3. Learned Counsel for the petitioner submits that the petitioner, a private limited company registered at Mathura and is engaged in the trading of oil and chemicals. He submits that it sold 12,000 litres of mineral oil valuing Rs. 5,52,240/-, inclusive of CGST and SGST @ 9% each amounting to Rs. 42,120/- apiece, to M/s Indian International, Sikandarabad, U.P., a registered dealer, vide Tax Invoice No. 82 dated 26.5.2020 and builty dated 26.5.2020, for transshipment from Mathura to Sikandarabad. An E-way Bill No. 421119023245 dated 26.5.2020, valid up to 28.5.2020, was duly generated for the consignment. He further submits that after loading of the goods, the original driver became unavailable on account of the Covid-19 lockdown, whereupon the transporter engaged another driver. During transit, the vehicle developed a mechanical snag and its repair consumed three days on account of the lockdown restrictions then in force. The transporter failed to apprise the petitioner of the delay, in consequence whereof the validity of the e-way bill could not be extended, although the invoice, builty, vehicle number and consignment particulars remained correctly and consistently reflected in both the tax invoice and the e-way bill. He further submits that while the consignment was in transit from Mathura to Sikandarabad via Aligarh, the vehicle was intercepted by respondent no. 3 on the sole ground that the e-way bill had expired. Upon physical verification, no discrepancy whatsoever was found in the description, quantity or value of the goods, or in the accompanying documents except the expiry of the e-way bill. Notwithstanding this, an order of detention followed by proceedings u/s 129(3) of the Act was passed, and tax and penalty of Rs. 1,68,480/- were levied and realised as a condition for release of the goods and vehicle against ehich an appeal has been filed which was dismissed by respondent no. 2 vide order dated 24.6.2021, giving rise to the present petition.
4. Learned counsel for the petitioner submits that there is no intention for evasion of tax as the goods were acceompained with all the requisite documents but owing to a bona fide vehicle breakdown during the nationwide Covid-19 lockdown, the validity period of the e-way bill had lapsed. He submits that mere expiry of the e-way bill, unaccompanied by any other material pointing to an intention to evade tax, cannot found an order of detention, seizure or penalty under Section 129 of the Act, the touchstone for invoking that provision being “reason to believe” of tax evasion, which must rest on cogent material and not surmise.
5. In support of his submission, learned counsel for the petitioner has relied upon the judgements of this court in the cases of Agrim Wholesale (P.) Ltd. v. State of U.P. [Writ Tax No. 2375 of 2024, dated 19-12-2024], Deepam Packaging and Food (P) Ltd. v. Additional Commissioner Grade -2 112 GST 725/[2026] 104 GSTL 180 (Allahabad)/Writ Tax No. 885 of 2023 andCJ Darcl Logistics Ltd. v. State of U.P. 102 GSTL 229 (Allahabad)/Writ Tax No. 193 of 2021.
6. Per Contra, learned Standing Counsel submits that when the vehicle (Tanker) No. UP80CT9421 was intercepted during road inspection, the e-way bill produced by the driver had already lost its validity, rendering it invalid for transit of the goods and in contravention of Rule 138 of the Rules; consequently, the order dated 24.6.2021 affirming the order dated 2.6.2020 warrants no interference by this Court.
7. After hearing learned counsel for the parties, the court has perused the records.
8. It is not in dispute that the goods in question were accompanied by a valid tax invoice and builty correctly reflecting the description, quantity, value and tax charged, that the e-way bill particulars tallied with the tax invoice, and that no discrepancy was found on physical verification save the expired validity of the e-way bill. It is equally not in dispute that the transporter, upon encountering a mechanical breakdown of the vehicle during transit, failed to intimate the petitioner of the delay, and that this default of the transporter, occurring during the period of the Covid-19 lockdown, is what occasioned the lapse in extending the validity of the e-way bill. This explanation finds support from the record and has not been controverted by any finding recorded by respondent no. 3 or respondent no. 2. Where the assessee’s explanation for expiry of the eway bill remains unrebutted, and no independent enquiry is conducted to test its veracity, the authorities cannot, merely on the strength of the expired document, draw an adverse inference of intention to evade tax.
9.This court in the cases of Agrim Wholesale (P.) Ltd. (supra) and CJ Darcl Logistics Ltd. (supra) have held that absence of any material to establish the intent to evade payment of tax does not attract the rigours under section 129(3) of the Act.
10. In view of the above, this Court is of the considered opinion that the order dated 2.6.2020 passed by respondent no. 3 and order dated 24.6.2021 passed in Appeal No. 0064/2020, cannot be sustained in the eyes of law and the same are hereby quashed.
11. The writ petition is allowed.
12. Any amount deposited by the petitioner shall be refunded to him in accordance with the law.
