The Allahabad High Court ruled that once an e-way bill is generated by the taxpayer and not cancelled within the time specified in the Goods and Service Tax Act, 2017, the movement of goods and legitimacy of the transaction cannot be contested by the Department.
Justice Piyush Agrawal, while nullifying the penalty order issued under Section 129(3) of the GST Act, stated
“The purpose of an e-way bill is that the department should know the movement of goods. Once the e-way bill has been generated and same has not been cancelled by the petitioner within the time prescribed under the Act, the movement of goods as well as genuineness of the transaction in question cannot be disputed.”
Factual Background
Petitioner had dispatched goods to M/s Hi-Tech Gears Limited, Bhiwadi, Rajasthan, with a tax invoice and GST e-way bill via a vehicle owned by Supersonic Carrier Private Limited. During the journey from Maharashtra to Rajasthan, the vehicle encountered a setback when it got stuck in mud due to the heavy load of the consignment. After being extricated, the vehicle suffered a breakdown. Following repairs, it resumed its journey.
Despite these circumstances, the vehicle was stopped, and the petitioner was served a show-cause notice, citing an expired e-way bill. Subsequently, a penalty of Rs. 8,43,456/- was levied on the petitioner, which was upheld upon appeal dismissal, leading to the current writ petition.
The petitioner’s counsel argued that the delivery delay resulted in the vehicle getting stuck and the time taken to source necessary spare parts from different locations for repairs. They contended that the penalty was imposed without due consideration of the petitioner’s explanation. Furthermore, they argued that the initial appellate authority erred in dismissing the appeal based on the grounds not raised before them.
High Court Verdict
The Court noted that the authority was not denied by the incident of the vehicle breaking down while stuck in the mud.
“Under the G.S.T. regime, all the details are available on the G.S.T. portal and it is admitted that an e-tax invoice was raised the e-way bill was generated and the same was not cancelled within 24 hours as provided under the Act. Once the said fact is not disputed and the petitioner has not exercised its right either to withdraw the tax invoice or e-way bill in question, it was well within the knowledge of the department that the movement of the goods in question has been undertaken by the petitioner.”
Additionally, the Court emphasized that the expiration of the e-way bill alone doesn’t warrant questioning the movement of goods. It reaffirmed that according to the GST Act, once an e-way bill is generated and remains uncancelled within the specified timeframe, the Department cannot dispute the legitimacy of the transaction or the goods movement.
Furthermore, the Court noted that the penalty order did not record any indication of the petitioner’s intention to evade tax.
Reference was made to the case of M/s Shyam Sel & Power Limited Vs. State of U.P. & 2 Others, where the Allahabad High Court stipulated that under Section 129(3), it’s imperative to establish an intention to evade tax for proceedings. If there’s no intent to evade tax, actions should be initiated under Section 122 of the GST Act, not Section 129.
The Court determined that circumstances beyond the petitioner’s control prevented the vehicle from reaching its destination within the stipulated time. Notably, there was no indication of an intention to evade tax.
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Consequently, the Court nullified both the penalty order issued by the Department and the decision of the first appellate authority.
| Case Title | M/S Sun Flag Iron And Steel Company Limited |
| Citation | WRIT TAX No. – 837 of 2023 |
| Date | 09.11.2023 |
| Counsel For Petitioner | Shubham Agarwal |
| Counsel For Respondent | C.S.C. |
| Allahabad HC | Read Order |
