Though E-way bill system is a good step towards checking tax evasion, it has also resulted in gross harassment of honest assessees. The goods under transportation are stopped, detained even for minor discrepancy in the documents. Further, to release the goods, maximum tax/penalty is imposed indiscriminately. It has resulted in great hardship to the trade and this article is an attempt to explain the law related to E-way bill, detention of cargo, release of goods under Section 129 of the CGST Act.
Various provisions were made so that power to intercept conveyance is not misused by unscrupulous tax officers, however those provisions are blatantly violated. Central Board of Indirect Taxes, vide Circular No. 41/15/2018-GST, dated 13-4-2018; specified that such interception shall be made only by the jurisdictional Commissioner or an officer authorised by him for this purpose by an order. The interception is made by any officer and at no point of time intercepting officers are showing the authorization by the Commissioner. Further, even in the documents issued, to be used in legal proceeding, such violation is blatantly evident.
The board further instructed that where the person in charge of the conveyance fails to produce any prescribed document or where the proper officer intends to undertake an inspection, he shall record a statement of the person in charge of the conveyance in FORM GST MOV-01. In addition, the proper officer shall issue an order for physical verification/inspection of the conveyance, goods and documents in FORM GST MOV-02, requiring the person in charge of the conveyance to station the conveyance at the place mentioned in such order and allow the inspection of the goods. The proper officer shall, within twenty four hours of the aforementioned issuance of FORM GST MOV-02, prepare a report in Part A of FORM GST EWB-03 and upload the same on the common portal. No body knows where such reports are being uploaded on the common portal.
Natural justice is something which runs deeply in our judicial system. Law provides that no order for demand of tax, confiscation of goods or conveyance, or for imposition of penalty, shall be issued without giving the person an opportunity of being heard. In intercepting conveyances, the tax officers pass orders without following principles of natural justice. The Commissioners, before authorizing officers to intercept conveyances must make them aware them about principles of natural justice. A pre-printed order authorizing officers to intercept conveyances do not meet the letter and spirit of law. It is further suggested that such authorisations must be uploaded on the common portal so that the power is not misused.
Due to rampant misuse of power of intercepting conveyances, CBIC was forced to issue another circular, C.B.I. & C. Circular No. 64/38/2018-GST, dated 14-9-2018 [F. No. CBEC/20/16/03/2017-GST], wherein it instructed,
“Whereas, Section 129 of the CGST Act provides for detention and seizure of goods and conveyances and their release on the payment of requisite tax and penalty in cases where such goods are transported in contravention of the provisions of the CGST Act or the rules made thereunder. It has been informed that proceedings under Section 129 of the CGST Act are being initiated for every mistake in the documents mentioned in para 3 above. It is clarified that in case a consignment of goods is accompanied by an invoice or any other specified document and not an e-way bill, proceedings under Section 129 of the CGST Act may be initiated.
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) Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is correct;
(b) Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill;
(c) Error in the address of the consignee to the extent that the locality and other details of the consignee are correct;
(d) Error in one or two digits of the document number mentioned in the e-way bill;
(e) Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned is correct;
(f) Error in one or two digits/characters of the vehicle number.”
To release the goods, Section 129(1)(a) of the CGST Act provides for following penalties;
“On payment of the applicable tax and penalty equal to one 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 tax and penalty;”
It can be seen that penalty can be imposed on either clause (a) of Section 129 of the CGST Act. The clause refers to two situations;
(i) On payment of applicable tax and penalty of 100%.
(ii) In case of exempted goods, penalty equal to 2% of the value of goods.
Exempt supply has been defined under Section 2(47) of the CGST Act means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, 2017 and includes non-taxable supply.
Thus, exempt supply includes various form of non-taxable supply, like goods going for demonstration, job work, goods exempted, movement of goods which does not involve supply etc.
What can be charged under Section 129 is “applicable tax”. Such tax and equal penalty can only be demanded when goods are clearly non-tax paid on which tax payment is applicable. On all other case, penalty prescribed is 2% of the value of goods.
It is preposterous to know that even when goods are clearly duty paid, or the supply is non-taxable; taxes are being imposed and 100% penalty is being demanded. This is nothing but high handedness of tax administration. Unfortunately, when such violations are brought to the notice of senior officers, no action is taken.
Taxpayers are backbone of any society. No society can exist without taxpayers. Constitution of India recognised taxpayers right under Article 265 of the Constitution when it declared that no tax shall be levied save by authority of law. Imposition of such taxes, in the garb of power to intercept vehicles is a clear violation of Article 265 of the Constitution. We need proper recognition of tax-payers rights and a system to enforce tax-payers rights. Though, stern measures against tax-evaders are required, a proper system is also required to stop harassment of tax payers.
[The author is Managing Partner of Rajesh Kumar and Associates. The author can be contacted on firstname.lastname@example.org]