Mere expiry of E-way Bill does not create any scope for evasion

The Hon’ble Madras High Court in Tvl. Thiruvannamalaiyar Transport v. the Deputy State Tax Officer &Anr. [W.P. No. 32960 of 2022 and WMP. No. 32361 of 2022 in W.P. No. 32960 of 2022 dated December 13, 2022] has set aside the detention order passed against the assessee on the grounds of expiry of E-way bill. Held that, mere expiry of E-way bill does not create any scope for evasion, hence, in absence of evasion, there cannot be any loss to the Revenue Department. Further directed the Revenue Department to release the truck with the consignment on payment of penalty of INR 5,000/- by the assessee.

Facts

Tvl. Thiruvannamalaiyar Transport ("the Petitioner") was carrying a consignment of ‘Angles’ ("the goods") in a truck from Gummidipoondi to Ranipet which was intercepted during transit around 4.00 A.M. on December 2, 2022 and was subsequently detained vide notice dated December 2, 2022 ("the Impugned Notice") under Section 129(3) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") on the ground that the E-way bill was expired and thereafter, an order dated December 8, 2022 ("the Impugned Order") was passed imposing a payment of penalty of INR 6,76,764/- on the Petitioner.

The Petitioner submitted that Rule 138 of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules") provides extension of validity of period of E-way bill, within 8 hours from the time of expiry. Further, the consignment was delayed due to break down and repair of the truck carrying consignment and the E-way bill elapsed at 23:59 hours on December 1, 2022 and at the time of interception, 8 hours therefrom had not elapsed. Furthermore, the E-way Bill portal was blocked and therefore, the extension of E-way bill could not be done, though the Petitioner had time left to do the same.

However, the Revenue Department ("the Respondent") contended that, the driver of the truck carrying the consignment did not mention about breakdown and repair and further no steps were taken for extending the E-way bill.

Being aggrieved this writ petition has been filed.

Issue

Whether the truck carrying consignment with expired E-way bill is liable to be detained under Section 129(3) of the CGST Act?

Held

The Hon’ble Madras High Court in W.P. No. 32960 of 2022 and WMP. No. 32361 of 2022 in W.P. No. 32960 of 2022 held as under:

• Stated that, that there would have been no revenue loss to the Respondent if the truck had reached the destination without being intercepted.
• Opined that, the expiry of E-way bill does not create any scope for evasion and thus, in absence of evasion there can be no revenue loss. 
• Further stated that, assuming that there was no breakdown and assuming the portal was active, the maximum penalty of INR 5000/- could be imposed as per Circular No. 10/2019, Q1/17253/2019 dated May 31, 2019 ("the Circular").
• Set aside the Impugned Order and the Impugned Notice 
• Directed the Petitioner to pay a penalty of INR 5,000/- as per the Circular.
• Directed the Respondent to release the truck with the consignment on payment of penalty by the Petitioner. 

Relevant Provisions

Para 10 of the Circular

"10. CIRCUMSTANCES WHERE PENALTY UPTO Rs. 5000/- PER ACT SHALL BE LEVIED:

Where the movement of goods is accompanied by any one of the basic documents such as invoice or bill of supply or delivery challan or E-way bill as prescribed in Rule 55 A and 138 A of the TNGST Rules 2018, and in such cases where at least one of the basic documents, manifestly showing sufferance of tax in the particular transaction is available, a penalty of upto Rs.5000/- per act shall be levied so as to deter the recurrence of offence. The following are examples in this context:

Example 1: Vehicles meant for a vehicle distributor are delivered at the stock yard / godown / branch; the transporter possesses the necessary tax invoice, but the E-way bill was generated for principal place of business/different place of business. In this case the CGST / SGST / IGST (if interstate supply) would have been suffered at the hands of manufacturer or distributor. Mere delivery of the goods at a place other than those mentioned in the documents would not render the transaction as an evasion or abetment of evasion. Being a B 2 B transaction, trail of transaction would now be available in GSTR1 for the department.

Example 2: A conveyance carrying the goods from a factory of fertilizers is delivering the same at various locations as directed by the department of Agriculture. The goods are accompanied by invoice or invoice with delivery challan and E-way bill. The E-way bill has expired due to delay in making delivery at various locations. The expiry of E-way bill does not create any scope for evasion.

In cases as in the examples, penalty of upto Rs.5000/- per act shall be levied."

Section 129(3) of the CGST Act

"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.

(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."