One of the major objectives of GST implementation in India was to ensure the seamless movement of goods and no-check posts in between the states. Further, it was expected that it would put an end to the prolonged road permit system and inspector raj in India. In order to facilitate the same E-way bill mechanism was introduced.
However, the E-way bill mechanism has proved to be a continuous source of pain for businessmen and transporters where they are subjected to hefty penalties for minor slip-ups in compliances which is further leading to increasing litigations. The taxpayers are facing numerous issues daily in relation to compliances and further have disputes and questions in mind regarding the legal validity of the actions taken by GST authorities in cases of non-compliance and how to move forward.
Considering the above, the author has compiled some common issues which have cropped up in E-way compliances along with solutions based on recent judicial decisions. The objective of the author is to enlighten the taxpayers of the legal validity of the actions taken by the authorities at the time of the interception of the vehicle and legal way-forward.
A. Clerical errors in E-way bill
Note: In the cases listed below for clerical errors, decisions were made in favor of assessee in view of Circular 64/38/2018-GST dated 14.09.2018.
1. Imposition of penalty for error in mentioning vehicle number in E-way bill
Held: The minor mistakes in Part-B of the e-way bill, inter-alia “error in one or two digits/characters of the vehicle number” will not invite detention order and only penalty of ₹ 1000/- (CGST- ₹ 500/- & SGST-₹ 500/-) will become due to payable. [M/s K.B Enterprises Vs Asst. Commissioner State Taxes & Excise-2019(12) TMI 1089-GSTAA-HP]
2. Incorrect distance mentioned in the E-way bill due to typographic error resulting in expiry of the validity period
Held: Typographic error may be treated as a minor one and in such case, if the demand and penalty have been levied by the proper officer u/s 129, the same need to be refunded to the supplier. [Godrej Consumer Products Ltd. Vs ACST&E-Cum- GIB/HP/ Godrej Consumer/11-02-2020/HC-67]
3. Incorrectly mentioning the number of tax invoices as tax invoice number on E-way Bill.
Held: Prima facie, there seems no discrepancy in E-way Bill attracting seizure of goods. Goods directed to be released without insisting for a deposit of any amount and furnishing security as GST already paid on goods [Hindon Machinery Tools Vs State of U.P.- 2019 (22) G.S.T.L. 4 (All.)]
B. Detention of goods
4. Detention of goods on the ground of under- valuation of goods
Held: The under valuation of goods in the invoice could not be a ground for the detention of the goods and vehicle u/s129 of the CGST Act. r/w Rule 138 of CGST Rules. Accordingly, the order is quashed, and Authorities were directed to release the goods. [K.P. Sugandh Limited v. Commissioner, SGST, 2020-VIL-142- CHG]
5. Detention of goods on the ground of wrong classification of goods
Held: The High Court quashed detention order on the ground that this was a bona-fide case of dispute in the classification of goods and directed release of goods. [Daily Fresh Fruits India Private Limited v. Commissioner, SGST, 2020-VIL-115- KER; and Hindustan Coca Cola Private Limited v. Assistant State Tax Officer, SGST, 2020-VIL-144-KER]
6. Detention of goods on the ground that the vehicle took a different route or reached wrong destination.
Held: The High Court observed that allegation of ‘wrong destination’ or that the driver has taken a different route is not a ground to detain the vehicle carrying the goods or levy tax or penalty. It was held that the fact that the vehicle was found at another place does not automatically lead to any presumption that there was an intention of evasion of tax. The amount collected was directed to be refunded with interest @ 6%. [Commercial Steel Company v. Assistant Commissioner of State Tax, 2020-VIL- 116-TEL]
7. Detention of goods on the ground that tax on invoice shown as CGST: SGST as against IGST but e-way bill declared correct tax as IGST
Held: The High Court observed that a clerical error on the invoice will not prejudice the Revenue. Since there is no question of evasion of tax; goods to be released on executing a simple bond instead of issuing bank guarantee for the demand raised. [Umiya Enterprise Vs Assistant State Tax Officer, 2020-VIL-50-KER]
8. Interception of vehicle within a few hours of expiry of E-way bill and Adjudicating authority passed an order of detention of vehicle
Held: Rule 138(10) of the CGST Rules allow extension of E-way bill within 8 hours of expiry. The Authority noted that the petitioner was not given reasonable time for renewal of the e-way bill and held that penalty under Section 129 of the CGST Act should not be imposed. Since the petitioner has made minor procedural as per Rule 138(10) of CGST Rules, thus the Authority imposed a general penalty of Rs. 1,000/- u/s 125 of the CGST Act. [ Bhushan Power & Steel Limited v ACSTE, 2020(2) TMI 858-GSTAA (HP)]
C. Seizure of Goods
9. Goods were seized for goods being transported without invoice and e-way bill. Further, the confiscation order was passed without giving an opportunity of being heard to the petitioner.
Held: The High court quashed the confiscation order considering that principles of natural justice were violated and no opportunity of being heard was provided to the petitioner. It was also observed that the confiscation order was not a speaking order and did not reflect the reasons required to be mentioned as per Section 130 of the CGST Act. [Sitaram Roadways v State of Gujarat,2019-VIL-510-GUJ]
10. Goods seized as they were not offloaded at designated place but taken further to another delivery point.
Held: The High court observed that the order was passed by the Adjudicating authority was grossly unreasonable and disproportionate. In such circumstances, the respondent ought to have taken a lenient and sympathetic view. The court ordered the release of goods and vehicle on payment of a sum of 5,000 towards fine to respondent [TVL. R.K. Motors Vs State Tax Officer, Virudhunagar- 2019 (23) G.S.T.L. 178 (Mad.)].
11. Confiscation of goods before seizure on mere suspicion of evasion of tax
Held: The High Court observed that provisions of both Section 129 and Section 130 of the CGST Act mutually exclusive and independent of each other. Further, it was held that authorities can invoke confiscation u/s 130 of the Act only when a definite intent to evade payment of tax is established and not on mere suspicion. Accordingly, it was held that even at the stage of detention and seizure itself or after the tax and penalty is paid by the owner of the goods in terms of Section 129, if there exists incriminating evidence of tax evasion, action under Section 130 of the CGST Act can also be initiated.[Synergy Fertichem Pvt. Ltd v. State of Gujarat-2019(12) TMI 1213- HC-GUJ]
D. Other issues
12. Single e-way bill generated for multiple invoices
Held: As per the current e-way bill system, multiple invoices/delivery challan cannot be clubbed to generate one e-way bill. Failure to generate separate E-Way Bill for each invoice and mentioning multiple invoices in a single E-Way Bill may cause practical difficulty for the Department in tracking such invoices. However, goods and vehicle directed to be released on petitioner’s executing simple bond [Stove Kraft Pvt. Ltd. Vs Assistant State Tax Officer, SGST Dept., Muthanga- 2019 (22) G.S.T.L. 512 (Ker.)]
13. Failure of driver to carry tax invoices and E-way Bill along with the goods by mistake.
Held: As driver merely left behind documents by mistake and there being no allegation against transporter whose business would be affected adversely on account of seizure, vehicle directed to be released to him unconditionally if the owner of goods does not come forward to comply with conditions of release [MKC Traders Vs State of U.P.- 2019 (22) G.S.T.L. 348 (All.)].
14. Machine sent for repair without E-way bill. Authority raised demand of taxes and penalty u/s 129 of the CGST Act.
Held: The Authority held that there it is very clear that goods are only sent for repair and it is not a sale transaction. Thus, provisions of section 129 of the Act are not attracted and the order is set aside. The tax and penalty deposited by the appellant under section 129(1) may be refunded and a penalty of Rs 10,000/- is imposed on the taxpayer under section 122(1) of the Act. [Neva Plantation Private Limited, 2020- VIL-08-GSTAA (HP)]
15. No E-way bill issued for transportation of new car purchased and driven for delivery to the customer who uses it for personal use
Held: Supply of new vehicle by dealer terminated on its purchase and its subsequent movement was not the transaction of supply. The car had come into possession of purchaser and used for some distance which indicated that it was “used personal effect”. There was no taxable transaction for movement of the car, detention of car was illegal. The provisions of Section 129 of the SGST Act were not attracted [Kun Motor Co. Pvt. Ltd. Versus Assistant State Tax Officer, Kerala State GST Department, Thiruvananthapuram- 2019 (21) G.S.T.L. 3 (Ker.)].
On a perusal of the aforesaid issues and related judgments, it is very interesting to note that minor errors or procedural lapses that do not involve intent of fraud or evasion of tax have led to the detention of goods or seizure of goods which ultimately increased litigations. Thus, the author wishes for the introduction of a speedy and efficient dispute resolution mechanism for matters involving detention, seizure, and confiscation of goods in transit under GST.
Hope the above could bring some awareness, clarity, and caution for the assesses and other stakeholders in order to tackle day to day problems faced due to E-way bill compliances.
The author could be reached at firstname.lastname@example.org for any feedback/suggestions.
(Acknowledgement of special efforts by Anand Sharma in compiling the issues related to E-Way bill)