It is common knowledge that there are sometimes inadvertent mistakes in E-way Bills accompanying the Tax Invoices leading to detention of the goods and imposition of heavy penalties. The common mistakes could be mistake in Vehicle number, mistake in delivery address or discrepancy in the date of invoice & E-way Bill etc. In such cases of mismatch/discrepancy/inadvertent mistake, the Department treats the same as a device for GST evasion. Accordingly, the GST Department not only detains/seizes the goods under transportation but also imposes heavy penalties. Numerous such cases have gone up to the High Courts which have unequivocally held that neither detention of goods nor penalties are sustainable in case of inadvertent/clerical/ typographical errors in E-way Bills.
Recently, in the case of Tirthamoyee Aluminum Products vs. State of Tripura & Ors. in Writ Petition (Civil) no. 1108 of 2018, the Tripura High Court had an occasion to deal with the issue of inadvertent error in E-way Bill in the judgment dated March 9, 2021. The brief facts of the case are that the petitioner, an aluminum utensils manufacturer at Agartala, purchased certain aluminum products from Hindalco Industries Ltd., a Government of India company, to be supplied from Kolkata by transport to Agartala by road. An Invoice was generated by the Hindalco for goods to be transported from Kolkata and for being delivered at the petitioner’s unit at Agartala. The consignor generated E-way bill from the official portal of the GST Department. By an inadvertent clerical error, the distance from Howrah to Agartala, was shown as 470 Kms. instead of actual distance of 1470 Kms. Due to the said mistake, the validity of the E-way Bill was shown as 5 days as per sub-rule (10) of Rule 138 of the Central Goods and Services Tax Rules, 2017. The inspecting agency intercepted the goods and issued a memo of detention on the ground that the transporter had not produced valid E-way bill as the validity of the E-way Bill had expired. The Inspector of State Tax imposed GST & Penalty on the ground that validity of the E-way bill had expired. It was contended by the Petitioner that it was an inadvertent clerical error and the demand of GST & penalty is illegal & unwarranted and deserved to be set aside. The Court perused the documents and categorically held thus:
“…. having perused documents on record, it emerges indisputably that the defect of the goods in transporting without valid E-way bill was as a result of a minor oversight and a clerical error.”
The Court referred to the circular dated 14th September, 2018 issued by the Central Board of Indirect Taxes which abundantly clarifies the manner in which such clerical errors would be dealt with. The relevant portion of this circular reads as under:
“Various representations have been received regarding imposition of penalty in case of minor discrepancies in the details mentioned in the e-way bill although there are no major lapses in the invoices accompanying the goods in movement. The matter has been examined. In order to clarify this issue and to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under Section 168 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act‟) hereby clarifies the said issue hereunder. ****** ****** ******* *******
5. Further, in case a consignment of goods is accompanied with an invoice or any other specified document and also an e- way bill, proceedings under Section 129 of the CGST Act may not be initiated, inter alia, in the following situations: a) ***** b) ***** c) ***** d) Error in one or two digits of the document number mentioned in the e-way bill; e) ***** f) ***** 6) In case of the above situations, penalty to the tune of Rs.500/- each under section 125 of the CGST Act and the respective State GST Act should be imposed (Rs.1000/- under the IGST Act) in FORM GST DRC-07 for every consignment.”
The Court set aside the said illegal order imposing GST & Penalty and also dismissed the plea of the Department that the writ should not be entertained on the ground of alternative remedy and held thus:
“In view of such facts, we do not find that it is a fit case where we should relegate the petitioner to appeal remedy, more importantly when the order passed by the Inspector of State Tax suffered from gross irregularity of no hearing been granted to the petitioner.”
It would be trite to refer to another case in the case of M.R. Traders vs. Assistant State Tax Officer State of Kerala (Int) in WP(C).No.2713 OF 2020(L) decided on 31 January, 2020 wherein the Court held that difference in address shown in Invoice and E-way Bill is just a clerical mistake & not a serious mistake which can justify the detention and penalty proceedings. The petitioner namely M.R. Traders generated a Tax Invoice & E-way Bill pertaining to the supply of timber from Karnataka to Kerala. The petitioner opened a new branch, which was in the process to be updated, and the site was showing that it was ‘processing’. While the e-way bill was generated, the petitioner was under the assumption that the address would automatically appear in the e-way bill, and on the basis of assumption, the bill was handed to the driver of the vehicle. When the authority noted that there was a difference in the address shown in the Invoice and E-way bill, they seized the vehicle.
The generation of E-way Bills is complex for the less educated, non-computer savvy businessmen who make inadvertent mistakes. Sometimes there is error in mentioning vehicle number in E-way bill. In this context, GST Council vide circular No 64/38/2018 dated 14th September, 2018 provides that in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated in case of minor mistakes like error in one or two digits/characters of the vehicle number. Similarly, incorrect distance mentioned in the E-way bill due to typographic error resulting in expiry of the validity period should be treated as a minor mistake duly covered by the said benevolent circular and no penalty/tax should be imposed. There are also cases where the number of the Invoice is wrongly mentioned inadvertently. No penalty/ Tax ought to be imposed unless there is evidence that the same has been done deliberately with a view to evade payment of Tax.
It is trite to refer to the case of M/S Commercial Steel Company vs. The Assistant Commissioner of State Tax decided on 4 March, 2020 in Writ Petition No.2161 of 2020 wherein the Telangana High Court held that Detention of goods on the ground that the vehicle took a different route or reached wrong destination is not sustainable. The Court at Para 24 & 27 of the order observed thus:
” 24.In our considered opinion, there were no good and sufficient reasons for detention by the 1st respondent of the vehicle and the goods which it was carrying when the transaction causing movement of the goods was inter-State in nature and the provisions of the SGST were not shown to have been violated. Also, there is no warrant to levy any penalty since it cannot be said that there is any willfulness in the conduct of the dealer.
27. Therefore, in our considered opinion, the impugned action of the respondents in collecting the amount of Rs.4,16,447/- from the petitioner towards tax and penalty under the CGST and SGST Act, 2017 under threat of detention of the vehicle carrying the said goods for an absurd reason (‘wrong destination’) when the vehicle in question carried all the proper documents evidencing that it was an inter-State sale transaction is clearly arbitrary, violative of Articles 14, 265 and 300-A of the Constitution of India.”
It is relevant to refer to the case of Madras High Court in Tvl.R K Motors vs State Tax Officer in W.P.(MD)No.1287 of 2019 and W.M.P.(MD)No.1098 of 2019 decided on 24 January, 2019 the Court dealt with the detention of Goods seized as they were not offloaded at designated place but taken further to another delivery point. The Court held that it was an inadvertent mistake on the part of the driver and detention of goods is a gross abuse of the powers conferred by the Act and observed thus:
“10. It is also not in dispute that the bill is addressed only to the writ petitioner’s principal office at Sivakasi; delivery alone is to be made at Virudhunagar. I am of the view that even if by mistake; a wrong instruction had been given to the driver of the vehicle to head towards Sivakasi. Still it would not really matter. The only question that the respondent ought to have posed is whether there is any attempt at evasion. It is not as if the goods had already been offloaded. The vehicle was intercepted when it was in transit. The respondent ought to have directed the driver of the vehicle to move back towards Virudhunagar. Instead adopting such a procedure, the respondent had chosen to be harsh and vindictive. When the writ petitioner is a registered dealer, when the tax in respect of the goods have already been remitted and when the transportation of goods is duly covered by proper documentation, the respondent ought to have taken a sympathetic and indulgent view of the lapse committed by the driver of the vehicle. The detention order dated 28.12.2018 and the order dated 11.01.2019 suffer from vice of gross unreasonableness and disproportionality. When a power is conferred on a statutory authority, it should be exercised in a reasonable manner.”
In the cases where for any reason, detention of goods have been ordered, the department imposes Penalty mechanically without ascertaining that whether it is a case of willful evasion of tax or just an inadvertent mistake or technical breach. It would be apposite to refer to the landmark case of Hindustan Steel Ltd. vs. State of Orissa 1970 SCR (1) 753 wherein the Apex Court elucidated the circumstances when imposition of penalty is justified & held thus:
“An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.”
Thus detention of goods due to inadvertent errors and imposition of Penalty should not be resorted to by the GST Officials merely on inadvertent errors in accordance with the GST Circular & plethora of binding cases, referred to above.