Mere Delayed e-way bill generation Not Tax Evasion Intent: Allahabad HC

The Facts of the Case

The case involved the transport of four multi-product dispensing fuel machines from one location of BPCL to another at its petrol pump. At the time of interception on January 28, 2021, the e-way bill had not been generated due to a technical glitch. Crucially, no physical discrepancies were found in the goods. Despite the petitioner generating and submitting the e-way bill and a stock transfer note before the final detention order was passed, the authorities rejected these documents as an “after-thought” and proceeded to impose tax and penalty. An appeal against this decision was also rejected.

The petitioner argued that this was a case of stock transfer, not a sale, a fact certified by BPCL and not disputed by the authorities. They also cited a 2018 UP Circular which calls for the acknowledgment of legitimate explanations and corrected documents before taking action.

The High Court’s Ruling

The Allahabad High Court made several key observations:

• No Intent to Evade Tax: The Court found that there was no allegation or finding by the department of any intent to evade tax, which is a prerequisite for invoking the harsh penal provisions of Section 129.
• Documentation Submitted Before Final Order: The Court highlighted that the necessary documents were submitted after interception but before the final detention order was issued. It stated that such “post-interception but pre-detention compliance neutralizes Section 129 triggers.”
• Procedural Lapses vs. Tax Evasion: The judgment distinguished between a procedural lapse (delayed e-way bill generation) and actual tax evasion, holding that the two cannot be equated.
• Stock Transfer: The Court noted that it was an undisputed stock transfer between two locations of the same entity and not a taxable supply.

Relying on previous judgments, including Vacmet India Ltd. (2023) and Goverdhan Oil Mill (2024), the Court held that the absence of documents at the moment of interception does not establish evasion if they are submitted before the final order.

Consequently, the Court quashed the initial detention order of January 29, 2021, and the appellate order of July 10, 2023. It also directed the refund of any amount deposited by the petitioner.

Key Takeaway for Businesses: This ruling serves as a crucial reminder for businesses and tax authorities. It underscores that the objective of GST law is to penalize actual tax evasion, not to punish taxpayers for minor procedural or technical errors, especially when there is no evidence of an intent to defraud the exchequer. Submitting the required documents before a final adjudication can be a critical factor in demonstrating bona fides and avoiding hefty penalties.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1.Heard Mr. Aditya Pandey, learned counsel for the petitioner and Mr.Ravi Shanker Pandey, learned ACSC for the respondent.

2. By means of present petition, the petitioner is assailing the orders dated 10.7.2023 and 29.1.2021 passed in the proceedings under Section 129 (3) of UP GST /CGST Act, 2017.

3. Learned counsel for the petitioner submits that the petitioner is an authorized vendor of Bharat Petroleum Corporation Ltd. (BPCL) having GSTIN No. 09AWSPS5747A1Z0. He submits that in the normal course of business, the petitioner was directed by the BPCL to transport 4 MPD machines (Petrol and Diesel delivery machines), which were going to be installed at the petrol pump of BPCL at Atarra, Distt. Banda and in pursuance thereof, the goods in question were loaded on the Vehicle No. UP78DT 5969, however due to some technical glitch at the office of BPCL, e-way bill could not be generated at that time. The vehicle in question was on its onward journey from Kanpur to Banda, was intercepted on 28.1.2021 and statement of the driver was recorded in Form GST MOV-1. Thereafter, on physical verification, no discrepancy was found in relation to the consignment, but the goods were detained on 29.1.2021 on the ground that the documents produced by the petitioner were an after thought. Thereafter notice was issued in Form GST MOV -07 to which the petitioner has submitted reply along with the e-way bill but the same has been rejected and order dated 4.2.2021 has been passed in Form GST MOV-09 by which tax as well as penalty has been imposed. Being aggrieved to the said order, the petitioner has filed an appeal, which has also been dismissed without considering the material on record.

4. Learned counsel for the petitioner further submits that entire proceeding initiated against the petitioner is in violation of circular dated 9.5.2018 issued by the State Government. He submits that the goods in question cannot be sold in open market as per the direction of Ministry of Petroleum and Natural Gas. He submits the goods in question were going to be installed at the Petrol Pump of BPCL at Atarra, Banda. He submits that the E-way bill was generated at 12:44 PM while the detention order was passed at about 6:56 PM on 29.1.2021, therefore, it is clear that the e-way bill was generated prior to passing of the detention order and same was produced before passing the order of detention. He further submits that before passing of the detention order along with the reply to the notice, stock transfer note as well as e-way bill was submitted but the same was not acknowledged by the respondent authority. He submits that once it is admitted that the goods in question cannot be sold in open market, then there is no intention to evade the payment of tax, therefore, the entire proceedings is bad and is liable to be set aside.

5. He further submits that the goods in question was on stock transfer from Kanpur to Banda, therefore, proceeding initiated against the petitioner is bad. In support of his submission, he relied upon the judgement of this Court in the case of M/s Vacmet India Ltd. Vs. Additional Commissioner Grade -2 and another (Neutral Citation No. -2023:AHC:200160) and M/s Goverdhan Oil Mill Vs. Additional Commissioner and another (Neutral Citation No. 2024:AHC:63409). He further submits that none of the authorities below have disputed the fact that the goods were not as stock transfer and there is no question of evade of payment of tax. He prays for allowing the present petition.

6. Per contra, learned ACSC supports the impugned order.

7. After hearing learned counsel for the parties, the Court has perused the records.

8. Admittedly, at the time of detention, the goods in question was 4 MPD machines (Petrol and Diesel delivery machines) and same were to be used for installation at the petrol pump of BPCL at Atarra, district Banda. A certificate has been brought on record showing that the said goods were not for trade, therefore, price of the same cannot be determined.

9. Further none of the authorities have disputed the fact that goods in question were stock transfer, in other words, the goods were coming from BPCL Kanpur for installation at the petrol pump of BPCL at Atarra, Distt. Banda.

10. The goods in question were seized on the ground that e-way bill and delivery challan were not accompanying the goods at the time of interception but the same was generated and produced before passing the order of detention.

11. Further none of the authorities below have recorded any finding with regard to evasion of tax.

12. The issue in hand is squarely covered by the judgement of this Court in the case of M/s Vacment India Limited (supra) and M/s Goverdhan Oil Mill (supra).

13. In view of the facts and circumstances of the case as well as law laid down as referred herein above, the impugned orders dated 10.7.2023 and 29.1.2021 cannot be sustained in the eyes of law and same are hereby quashed.

14. Accordingly, the writ petition is allowed.

15. Any amount deposited by the petitioner shall be refunded to him in accordance with law.