Confirming penalty for expiry of e-way bill without dealing with contention raised is bad in law

Rivigo Services Private Limited Vs The State of Jharkhand and Others (Jharkhand High Court)13/06/

Jharkhand High Court held that impugned order passed, confirming penalty for expiry of e-way bill, without proper application of mind and without dealing with the contention raised by the petitioner is against the violation of principles of natural justice and hence bad in law.

Facts- Joint Commissioner of State (Appeal), Jamshedpur Division, Jamshedpur by the impugned order dated 26th July, 2019 passed in Appeal Case No. IB-GST-A-02/2018-19 has confirmed the order of penalty dated 12th July, 2018 passed by the State Tax Officer, Intelligence Bureau, Jamshedpur Division, Jamshedpur (Annexure-10), also impugned herein, wherein a penalty of Rs. 8,25,828/- has been imposed under Section 129(1)(b) of CGST Act. Petitioner has also sought refund of the Original Bank Guarantee bearing no. 00GM03181990001 dated 18th July, 2018, as amended, for an amount of Rs. 8,25,828/- deposited by him in terms of penalty order. Petitioner has also sought a declaration that entire exercise of seizure and detention undertaken by the respondent no. 3 is wholly illegal and without jurisdiction.

The main issue involved in the present case is relating to expiry of validity period of e-way bill.

Conclusion- It is true that neither the State Tax Officer nor Appellate Authority has examined the plea raised by the petitioner based on GPS tracking report of the vehicle. The impugned orders have been passed without taking into consideration the explanation and defence taken by the petitioner in their reply before the Tax Officer in response to the show-cause notice under GST MOV 07. The State Tax Officer has only taken into consideration one of the plea that the driver was illiterate/semi-literate and did not realize the consequences of expiry of e-way bill. The impugned order also does not reflect due consideration of plea taken by the petitioner based on GPS tracking report of the vehicle. The impugned orders therefore have been passed without proper application of mind and without dealing with the contention raised by the petitioner. It suffers from violation of principles of natural justice.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

Heard learned counsel for the parties.

2. Joint Commissioner of State (Appeal), Jamshedpur Division, Jamshedpur by the impugned order dated 26^th July, 2019 (Annexure-14) passed in Appeal Case No. IB-GST-A-02/2018-19 has confirmed the order of penalty dated 12^th July, 2018 passed by the State Tax Officer, Intelligence Bureau, Jamshedpur Division, Jamshedpur (Annexure-10), also impugned herein, wherein a penalty of Rs. 8,25,828/- has been imposed under Section 129(1)(b) of CGST Act. Petitioner has also sought refund of the Original Bank Guarantee bearing no. 00GM03181990001 dated 18^th July, 2018, as amended, for an amount of Rs. 8,25,828/- deposited by him in terms of penalty order. Petitioner has also sought a declaration that entire exercise of seizure and detention undertaken by the respondent no. 3 is wholly illegal and without jurisdiction.

3. Petitioner is engaged in the business of transportation of goods and logistic services across India and is registered taxpayer in the State of Jharkhand under GST Act. The impugned order has been passed in connection with show-cause notice in Form GST MOV-07 (Annexure-8) on the allegation of goods being transported without E-Way bill. The E-Way bill no. 831009277766 was issued for transportation of goods from warehouse of ITC Limited at Howrah, West Bengal to their warehouse at Jamshedpur by vehicle bearing registration no. HR 55 AC 8504 on 27^th June, 2018 and valid upto 30^th June, 2018. The vehicle was intercepted on 6^th July, 2018 at 08:25 a.m. at NH-33 under Section 68(3) of CGST Act, 2017 and finding discrepancy of goods being transported without E-Way bill, the impugned notice was issued on 7th July, 2018 asking the driver to show-cause within seven days as to why the proposed tax and penalty of Rs. 8,25,828/- be not imposed. The driver, Sukhdeo Gope was directed to appear on 10^th July, 2018 at 02:00 p.m. Notice is at Annexure-8. A reply was filed by the petitioner-company on 12^th July, 2018 (Annexure-9) before the State Tax Officer, IB, GST Department, Jamshedpur Division.

4. Petitioner contended that during validity period of E.Way bill i.e., on 28^th June, 2018, the vehicle had reached ITC, Limited warehouse at Asanbani Jamshedpur but due to temporary shortage of space, it was advised not to unload the consignment. For the safe custody of the consignment, the impugned consignment was taken back to their premises at Bhilaipahari which is only about 15 Kms away from the warehouse of ITC Limited at Asanbani, Jamshedpur. Further, upon availability of space at the warehouse on 5^th July, 2018, the driver was informed to park the vehicle. While vehicle was in transit from their facility to the warehouse of ITC Limited, it was intercepted and detained on the allegation of expiry of e-way bill. Petitioner contended that apart from the allegation of expiry of e-way bill in the physical verification report (Annexure-7) dated 7^th July, 2018, there was no allegation of any tax evasion or the vehicle carrying the goods had any illegal documents to doubt the genuineness of the bills in respect of which tax was already paid. Petitioner also took a plea that expiry of e-way bill was caused due to ignorance on the part of the illiterate/semi-literate driver who was yet to get familiarize with the requirements under the GST Laws. Petitioner also annexed GPS Report for the period 28^th June, 2018 till 5^th July, 2018 in support of its case that the vehicle was standing at their premises.

5. Impugned order was passed on 12^th July, 2018 vide Annexure-10. The entire order-sheet of Proceeding Case no. 03/2018-19 is enclosed as Annexure-10. The State Tax Officer has, in the order dated 12^th July, 2018, stated that in response to the notice for penalty, the driver/transporter has submitted reply that expiry of the validity of E-way bill is caused due to ignorance on the part of illiterate/semi-literate driver, which is not satisfactory. The State Tax Officer after discussing the facts of the case that e-way bill had expired on 30^th June, 2018 and that during interception on 6^th July, 2018, the vehicle was found transporting the goods in question in contravention of the provisions of Section 68(2) of JGST Act and Rule 138(2) thereof, penalty to the tune of Rs 8,25,828/- in terms of Section 129(1)(b) of JGST Act, 2017 was being imposed upon him. Thereafter, the order of demand of tax and penalty in Form GST MOV-09 was also issued and served on the driver on 12^th July, 2018.

6. Being aggrieved, petitioner/driver submitted a Bank Guarantee dated 18^th June, 2018 bearing no. 002GM03181990001 from YES Bank for release of vehicle under Section 68(3) of JGST Act, 2017 read with Section 20 of IGST Act, 2017 (Annexure-11). The Bank Guarantee was to the tune of Rs. 8,25,828/- valid upto 31^st July, 2019. The validity period of Bank Guarantee was extended from 31^st July, 2019 to 31^st October, 2020.

7. Petitioner–company preferred an appeal in Form GST APL-01 under Section 107 of Jharkhand Goods and Services Tax Act, 2017 read with Rule 108(1) (Annexure-13). He contended that the consignment was supported by all requisite documents i.e., Tax Invoice, E-Way bill and Lorry Receipt. The E-Way bill was valid till 30^th June, 2018. The transaction was reported by ITC Limited in GSTR-1 return for the month of June, 2018 filed on 7^th June, 2018 which evidences the bonafide of the consignor of goods. Since the transaction was reported in GSTR-1 of the consignor, it automatically got translated into GSTR-2A of the consignee. There was no intention to evade tax. Petitioner also reiterated the plea taken before the State Tax Officer that the vehicle had reached ITC Limited warehouse at Asanbani Jamshedpur on 28^th June, 2018 well within the validity period of E-Way bill, but due to temporary shortage of space, it could not be unloaded. For the safe custody of the consignment, the impugned consignment was taken back to their premises at Bhilaipahari which is only about 15 Kms away from the warehouse of ITC Limited at Asanbani, Jamshedpur. Upon availability of space at the ITC warehouse, on 15^th July, 2018, the driver was informed to park the vehicle. While vehicle was in transit from their facility to the warehouse of ITC Limited, it was intercepted and detained on the allegation that E-way bill has expired. Petitioner also enclosed GPS report to this appeal petition in support of the plea that from 28^th June, 2018 till 5^th July, 2018 the vehicle was standing at their premises. Based on this plea and relying upon Section 122 (3) (c) and Section 125 of CGST Act, it was contended that there was no intention to evade any taxes.

8. Learned counsel for the petitioner submits that State Tax Officer and appellate authority both have failed to examine the case of the petitioner on facts after due verification of GPS report which conclusively show that the vehicle had reached the consignor’s destination at ITC warehouse, Asanbani, Jamshedpur on 28^th June, 2018 before expiry of E-Way bill on 30^th June, 2018 and since 28^th June, 2018 it was standing at the petitioner’s warehouse at 15 Kms. away at Bhilaipahari. There is no mention of GPS report in the order of State Tax Officer and the appellate authority has wrongly recorded that the GPS report was not placed before it. Besides that, it is submitted that though, there was no allegation of any mismatch in the quantity of goods in relation to the invoices issued, but a wrong statement has been made at para-11 of the counter affidavit of the State that on being intercepted on 6t^h July, 2018 by the State Tax Department, Investigation Bureau, it was found that there was mismatch between the quantity mentioned in the tax invoice and quantity loaded in the conveyance. Annexure-7, the physical verification report has been relied upon to disprove this contention. Learned counsel for the petitioner has also relied upon the amendment to Rule 138(3) of JGST Rule, 2017 carried out by notification dated 30^th March, 2018 with effect from 7^th March, 2018, where under it has been provided that where the goods are transported for a distance of less than 50 Kms. within the State or Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the transporter may not furnish the details of conveyance in Part-B of FORM GST EWB-01. Annexure-R.A.-I is the notification no. 12/2018 dated 30^th March, 2018. Based on this amendment, which was carried out before impugned proceedings were initiated, it is contended that generation of e-way bill was not required in respect of goods being transported within the State of Jharkhand for a distance of 50 Kms. from the place of business of transporter to the place of business of consignee. None of the issues of facts or law have been properly discussed and appreciated by the State Tax Officer or the Appellate Authority while imposing the impugned penalty. Lastly, it is submitted that since the GST regime is electronic based and it took time for all the stakeholders including vehicle owner and the drivers to get themselves to familiarize with the working of the provisions of GST Act and Rules, imposition of penalty without any intention to evade tax is not proper in the eye of law. Learned counsel for the petitioner has also relied upon certain decisions in support of her contention that there was no intention to evade tax while applying provisions of Section 129 of JGST Act.

9. Learned counsel for the respondent has opposed the contention. He has relied upon the physical verification report in Form GST MOV-04 (Annexure-7) dated 7^th July, 2018, the notice issued in Form GST MOV-07 (Annexure-8) upon the driver and also the impugned order dated 12^th July, 2018 passed by the State Tax Officer (Annexure-10). He has also referred to the findings of the Appellate Authority at Annexure-14 dated 26^th July, 2019. Learned counsel for the respondent has also referred to the contents of the counter affidavit. However, he has not been able to show any mismatch in the physical verification report (Annexure-7) as contended at Para-11 of the counter affidavit in the quantity of goods vis-à-vis the invoices. Learned counsel for the respondent has also not been able to show from the impugned order of State Tax Officer (Annexure-10) and also the appellate order (Annexure-14) that the contention of the petitioner relying upon GPS Reports have been dealt with upon due verification. However, he submits that since the transportation of goods of consigner from ITC Limited, Howrah in the State of West Bengal to its warehouse at Asanbani, Jamshedpur was being undertaken, the same was to be delivered within the validity of e-way bill i.e., 30^th June, 2018. When the vehicle was intercepted on 5^th July, 2018, it was in the process of transporting the same goods after expiry of e-way bill. Therefore, in terms of Section 129 of JGST Act read with Section 68(2) and Rule 138(2) of JGST Rule, 2017 the proceedings were initiated after service of notice in the proper form GST MOV-07. The State Tax Officer after taking into account the plea raised by the driver/transporter that the driver was illiterate/semi-literate, has rejected the contention and rightly imposed the penalty. The Appellate Authority has also rightly confirmed it as no infirmity was pointed out.

10. We have considered the submission of learned counsel for the parties
and taken note of material facts and documents borne out from the records. For proper appreciation of the issue at hand the provisions of Section 68 and 129 of JGST Act, 2017 is quoted hereunder:

“Section 68. Inspection of goods in movement

(1) The Government may require the person in charge of a conveyance carrying any consignment of goods of value exceeding such amount as may be specified to carry with him such documents and such devices as may be prescribed.

(2) The details of documents required to be carried under sub­section (1) shall be validated in such manner as may be prescribed.

(3) Where any conveyance referred to in sub-section (1) is intercepted by the proper officer at any place, he may require the person in charge of the said conveyance to produce the documents prescribed under the said sub-section and devices for verification, and the said person shall be liable to produce the documents and devices and also allow the inspection of goods.”

“Section 129. Detention, seizure and release of goods and conveyances in transit

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,-

(a) on payment of penalty equal to two hundred per cent of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent of the value of the goods or two hundred per cent of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;]

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

[(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.]

[(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).]

(4) [No penalty] shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

[(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):

Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:

Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.]”

Rule 138 of JGST Rule, 2017 which has bearing upon the case of the parties is also extracted herein below:

“CHAPTER XVI

E-WAY RULES

[138. Information to be furnished prior to commencement of movement of goods and generation of e-way bill.-

(1) Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees—

(i) in relation to a supply; or

(ii) for reasons other than supply; or

(iii) due to inward supply from an unregistered person,

shall, before commencement of such movement, furnish information relating to the said goods as specified in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique number will be generated on the said portal:

Provided that the transporter, on an authorization received from the registered person, may furnish information in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique number will be generated on the said portal:

Provided further that where the goods to be transported are supplied through an ecommerce operator or a courier agency, on an authorization received from the consignor, the information in Part A of FORM GST EWB-01 may be furnished by such ecommerce operator or courier agency and a unique number will be generated on the said portal:

Provided also that where goods are sent by a principal located in one State or Union territory to a job worker located in any other State or Union territory, the e-way bill shall be generated either by the principal or the job worker, if registered, irrespective of the value of the consignment:

Provided also that where handicraft goods are transported from one State or Union territory to another State or Union territory by a person who has been exempted from the requirement of obtaining registration under clauses (i) and (ii) of section 24, the e-way bill shall be generated by the said person irrespective of the value of the consignment.

[Explanation 1. – For the purposes of this rule, the expression―handicraft goods has the meaning as assigned to it in the Government of India, Ministry of Finance, notification No. 56/2018-Central Tax, dated the 23rd October, 2018, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1056 (E), dated the 23rd October, 2018 as amended from time to time.]

Explanation 2.- For the purposes of this rule, the consignment value of goods shall be the value, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said consignment and also includes the central tax, State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods.

(2) Where the goods are transported by the registered person as a consignor or the recipient of supply as the consignee, whether in his own conveyance or a hired one or a public conveyance, by road, the said person shall generate the e-way bill in FORM GSTEWB-01 electronically on the common portal after furnishing information in Part B of FORM GST EWB-01.

(2A) Where the goods are transported by railways or by air or vessel, the e-way bill shall be generated by the registered person, being the supplier or the recipient, who shall, either before or after the commencement of movement, furnish, on the common portal, the information in Part B of FORM GST EWB-01:

Provided that where the goods are transported by railways, the railways shall not deliver the goods unless the e-way bill required under these rules is produced at the time of delivery.

(3) Where the e-way bill is not generated under sub-rule (2) and the goods are handed over to a transporter for transportation by road, the registered person shall furnish the information relating to the transporter on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A of FORM GST EWB-01:

Provided that the registered person or, the transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is less than fifty thousand rupees:

Provided further that where the movement is caused by an unregistered person either in his own conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the e-way bill in FORM GST EWB-01 on the common portal in the manner specified in this rule:

Provided also that where the goods are transported for a distance of upto fifty kilometers within the State or Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the recipient, or as the case may be, the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01.

Explanation 1.–For the purposes of this sub-rule, where the goods are supplied by an unregistered supplier to a recipient who is registered, the movement shall be said to be caused by such recipient if the recipient is known at the time of commencement of the movement of goods.

Explanation 2.- The e-way bill shall not be valid for movement of goods by road unless the information in Part-B of FORM GST EWB-01 has been furnished except in the case of movements covered under the third proviso to sub-rule (3) and the proviso to sub-rule(5).

(4) Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN) shall be made available to the supplier, the recipient and the transporter on the common portal.

(5) Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has provided information in Part A of the FORM GST EWB-01, or the transporter shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part B of FORM GST EWB-01:

Provided that where the goods are transported for a distance of upto fifty kilometers within the State or Union territory from the place of business of the transporter finally to the place of business of the consignee, the details of the conveyance may not be updated in the e-way bill.

(5A) The consignor or the recipient, who has furnished the information in Part A of FORMGST EWB-01, or the transporter, may assign the e-way bill number to another registered or enrolled transporter for updating the information in Part B of FORM GST EWB-01 for further movement of the consignment:

Provided that after the details of the conveyance have been updated by the transporter in Part B of FORM GST EWB-01, the consignor or recipient, as the case may be, who has furnished the information in Part A of FORM GST EWB-01 shall not be allowed to assign the e-way bill number to another transporter. ”

11. Perusal of the impugned order dated 12^th July, 2018 passed by the State Tax Officer (Annexure-10) indicates that it has only taken into consideration one out of the several plea taken by the driver/petitioner transporter of illiteracy or semi-literacy on the part of the driver in transporting the goods after expiry of validity of e-way bill. Learned counsel for the petitioner has referred to GPS tracking report for the vehicle no. HR 55 AC 8504 enclosed to their reply dated 12^th July, 2018 and the columns relatable to 28^th July, 2018 as to the location of the vehicle. She has pointed out that the location of the vehicle on 28^th June, 2018 was varying from about 10.02 kilometres from check post border Jagarnathpur, Dalbhum, Singhbhum, Jamshedpur and about 1.6 k.m. approximately from Tinplate, Jamshedpur. The vehicle has remained at a distance of about 1.6 km from Tinplate Jamshedpur from 28^th June till 6^th July, 2018. These tracking reports confirm the plea raised by the petitioner that the consignment had reached ITC warehouse at Asanbani, Jamshedpur before expiry of e-way bill and on account of paucity of space for the next seven days, it was standing at one location i.e, the warehouse of the petitioner /transporter at Bhilaipahari. This fact has not been verified by the State Tax Officer or by the Appellate Authority, which has vitiated the impugned orders on facts.

12. It is true that neither the State Tax Officer nor Appellate Authority has examined the plea raised by the petitioner based on GPS tracking report of the vehicle. The impugned orders have been passed without taking into consideration the explanation and defence taken by the petitioner in their reply before the Tax Officer in response to the show-cause notice under GST MOV 07. The State Tax Officer has only taken into consideration one of the plea that the driver was illiterate/semi-literate and did not realize the consequences of expiry of e-way bill. The impugned order also does not reflect due consideration of plea taken by the petitioner based on GPS tracking report of the vehicle. The impugned orders therefore have been passed without proper application of mind and without dealing with the contention raised by the petitioner. It suffers from violation of principles of natural justice. The statements made at para-11 of the counter affidavit by the respondent regarding the mismatch in the quantity of goods with the Invoices are not substantiated by the physical verification report issued by the department in Form GST MOV-04 (Annexure-7). The impugned action has entailed penalty without due consideration of the plea raised by the petitioner and without proper application of mind. As such, both the orders passed by the State Tax Officer (Annexure-10) dated 12^th July, 2018 and the appellate order dated 26^th July, 2018 (Annexure-14) are set aside. The matter is remanded to the State Tax Officer to consider the plea raised by the petitioner in its reply and the plea based upon the amended Rule 138(3) of JGST Rules, 2017 brought into force with effect from 7^th March, 2018 by notification dated 30^th March, 2018, in accordance with law. The Bank Guarantee furnished by the petitioner if not encashed, be also returned to the petitioner in the aforesaid circumstances.

13. Writ petition is allowed in the manner and to the extent indicated hereinabove.

Let it be made clear that the observation made hereinabove shall not prejudice the State Tax Officer in taking fresh decision in accordance with law.