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#GSTCase-183-Round Up of Cases on Eway Bill- Circular No 41/15/2018 Dated 13th April 2018 goes beyond the provisions of Section 129 of CGST Act, 2017; Transporter cannot have benefit of a segregated liability and procedure prescribed for release of vehicle cannot be avoided

Daiwik Motors v. Assistant Tax Officer [2020] 113 83 (Kerala)

Inter-Branch Stock Transfer of Goods having two separate GSTIN

Facts: Petitioner filed writ petition against order under Section 129 of CGST) Act detaining goods and vehicle belonging to petitioner, on the ground that, verification of documents that accompanied goods showed that consignor and consignee are two different entities with different GISTINs and transaction in question was supposedly a stock transfer. The documentation is, therefore, found to be not in accordance with the prescription under the CGST Act and Rules.

Contention of Petitioner- As per Rule 55 of CGST Rules, an invoice need not be generated wherever there is a transportation of goods for reasons other than by way of supply.

Observation-The learned counsel was however not able to point out as to why the particular transportation had to be viewed as one other than by way of supply. It was contention by the petitioner that transaction between parties was not a sale since there was no transfer of ownership of the goods to the consignee. Hon’ble Court however found that definition of supply under Section 7 is not confined to transactions of sale but includes transfer for other purposes also. Under such circumstances, detention was held to be justified.

Held: The permit was permitted to obtain a release of vehicle and goods on furnishing a bank guarantee for tax and penalty amount. Proper officer was then directed thereafter to refer the matter for adjudication in terms of the SGST Act and Rules.

Bansal Earthmovers (P.) Ltd. v. Assistant Commissioner of State Goods and Service Tax [2020] 114 27 (Calcutta)

Circular No 41/15/2018 Dated 13th April 2018 and nor Form MOV-07 is in consonance with Section 129 since they are not complying with mandatory provision of giving notice to person who is owner of goods and upon whom imposition of penalty is to be made

Facts: Vehicle had left premises of petitioner at 4.15 p.m. and waybill was generated at 5.10 p.m. In the meantime, vehicle had been intercepted at Phool Bari and because of lack of waybill vehicle was detained by relevant authorities. It is to be noted that statement (Form GST MOV – 01) of driver of vehicle was recorded at 5.00 p.m. on March 23, 2019 and vehicle was inspected on same day at 5.00 p.m. (Form GST MOV – 02). Subsequently, an order of detention under Section 129(1) of the WBGST Act, 2017 read with CGST Act, 2017 was passed on March 25, 2019 on the ground that no e-waybill was tendered for goods that were in movement.

Contention of the Petitioner: Following were the contention of Petitioner:

a) That the goods were not detained by the proper officer.

b) The waybill had been generated prior to the date, that is, March 25, 2019, when the order for detention was passed.

c) The fact that the petitioner did not possess the waybill at the time of interception was not entirely its fault but also as a result of the malfunctioning of the server of the respondent department.

e) As all other documents such as the invoice, challan and insurance policy were with the goods, there was no question of any mens rea for evading tax- It was contended that since documents such as invoice, challan and insurance policy were with goods and therefore, there was no mens rea what so ever for evasion of tax. (Dilip N. Shroff v. Jt. CIT [2007] 161 Taxman 218 [Coram: S.B. Sinha and P.K. Balasubramanyan, JJ.] ; Ferring Pharmaceuticals (P.) Ltd. v. Asstt. CTO [2006] 147 STC 252 (Cal.) [Coram: Asok Kumar Ganguly and Maharaj Sinha, JJ.] and Zarghamuddin Ansari (Anwar) v. Commercial Tax Officer [2001] 38 STA 129 (Cal.) (DB)

f) The penalty that has been imposed was done so in contravention of clause (3) and clause (4) of section 129 of the WBGST Act, 2017, that is, proper notice of the imposition of penalty was not provided to the petitioner- It was submitted that notice of hearing of the penalty to be imposed has to be given to the petitioner and not to the driver of the vehicle who was not the employee of the petitioner. He further submitted that compliance of the principles of natural justice is inbuilt in section 129 of the WBGST Act, 2017 and is a sine qua non for any imposition of penalty.


Notice has to be served on the person aggrieved- Section 129(4) specifically states that no tax, interest or penalty shall be determined under Section 129(3) without giving person concerned an opportunity of being heard.

Hon’ble Court clearly held that notice for imposition of penalty requires to be served upon the person on whom the penalty is to be imposed. Furthermore, an opportunity of hearing has to be granted. In the event, such hearing is not granted, the same would definitely amount to violation of principles of natural justice. Audi alterem partem – no person should be judged without a fair hearing – is the minimum necessity that is required to be followed as per the above provision.

Hon’ble Court was of the view that when respondent authorities had in their possession documents such as invoice and challan that showed as to who was the owner of the goods, it was incumbent upon them to serve a copy of the notice upon the owner of the goods. Service simpliciter on the driver of the conveyance who was not even an employee of the owner of the goods cannot be construed to be good service under sub-sections (3) and (4) of section 129.

Issuance of Circular cannot override provisions of Law- With reference to the argument advanced by Mr. Ghosh with regard to the Circular and the FORM GST MOV-07 wherein the service of the imposition of notice is required to be made upon either the driver or the person-in-charge, Hon’ble Court was of the view that neither Circular nor Form is in consonance with Section 129. It is trite law that the Circular issued by the Central Board of Indirect Tax and Customs is only binding upon the authorities and not upon assessee. Therefore, Circular and Form are not complying with mandatory provision of giving notice to the person who is the owner of the goods and upon whom the imposition of penalty is to be made. Referred Case- A.S. Motors (P.) Ltd. v. Union of India [2013] 10 SCC 114

Held: Hon’ble Court held that in present case, there was more than a technical infringement of statutory provision as no hearing whatsoever was granted to the petitioner. Having not been granted an opportunity of hearing, petitioner was unable to put his case before the concerned authority. Surprisingly, notice in FORM GST MOV-07 was served upon the driver but order passed in FORM GST MOV-09 was served upon the driver and the petitioner-company. The authorities did not consider it necessary to put on notice the person upon whom the penalty was being imposed. As pointed out earlier, sub-section (3) and (4) of section 129 of the WBGST Act, 2017 specifically requires order of penalty to be passed after proper service and opportunity of hearing to be given upon the person on whom such penalty is to be imposed. Ergo, the requirement under section 129 (3) and section 129(4) has clearly not been complied with.

Since there has been a clear violation of principles of natural justice, and therefore, the impugned order was quashed and set aside and proper officer was directed to issue a fresh notice upon petitioner, and thereafter, grant an opportunity of hearing and pass a reasoned order. It was further made clear that as matter has been remitted to concerned officer for a reasoned decision, Hon’ble Court did not go into aspect of mens rea. The arguments with relation to requirement of mens rea under section 129 of the WBGST Act, 2017 and the burden of proof and/ or rebuttal of the presumption of guilt were left open to be decided by concerned officer.

U.P. Bone Mills (P.) Ltd. v. Union of India [2020] 114 476 (Allahabad)

Held: The main grievance of the writ petitioners is that the concerned authorities have seized goods along with vehicle/truck illegally on the basis of sole allegation that driver/owner/person In-charge of goods had not tendered any document, e-way bill, etc., even when all the valid documents were actually produced before the officer by the driver. Since writ petitioner, being the company, is ready to pay excess amount after assessment as may be determined by concerned officer, writ petition was disposed off with a direction upon concerned respondent authority to calculate excess amount which is required to be paid by writ petitioner together with penalty, if any, and communicate the same to writ petitioner within a period of three weeks from date. If writ petitioner / company makes full payment in terms of such communication to concerned respondent authority within a week therefrom, goods as well as vehicle may be released in favour of the writ petitioners in accordance with law.

Ashwini jain v. State of U.P [2020] 114 34 (Allahabad)

Since the provisions of Section 129 of UPGST Act are very clear, transporter cannot have benefit of a segregated liability and procedure prescribed for release of vehicle under the Uttar Pradesh Goods and Services Tax Act, 2017, cannot be avoided

Facts: Writ petitioner approached Court essentially seeking release of his vehicle which has been detained by the Assistant Commissioner (Mobile Squad)-3, Kanpur, on 8th November, 2019. Penalty was imposed for the purpose of release of the goods as well as the vehicle in terms of section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017.

Contention of Petitioner- Petitioner is merely a registered owner of vehicle and has nothing to do with goods which were contained in vehicle. As such, he is not liable to pay the amount in terms of section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017.

Held-: Hon’ble Court observed that for purpose of deciding matter, looking merely at the heading of the provision contained under section 129 would suffice which reads as follows:

“[129]. Detention, seizure and release of goods and conveyances in transit.”

It was held that above heading is wide and clear enough to encompass within its fold this vehicle which has been seized along with the goods and as such, the writ petitioner cannot wriggle out of his liability to pay amount as imposed in terms of section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017, for the purpose of release of his vehicle. He cannot have the benefit of a segregated liability in the present context and the procedure prescribed for release of vehicle under the Uttar Pradesh Goods and Services Tax Act, 2017, cannot be avoided by the petitioner. The writ petition stands dismissed in terms of the observations made hereinabove.

Gaurav Agro Kendra v. State of U.P [2020] 114 479 (Allahabad)

Judgement of Jurisdictional High Court needs to be followed by Appellate Authority

Facts- Assessing authority passed the dated 15.02.2018 not only for assessment of G.S.T. but with imposition of penalty. The main contention raised by petitioner was that notification to apply E-Way bill was not made known to the assessee. Mandate to apply mechanism of E-way bill was earlier circulated by the Government in the year 2017 but than it was kept in abeyance. The notification to apply E-way bill mechanism was revised subsequently but was not notified to the assessee. In absence of information of application of E-way bill mechanism, the petitioner made the transaction, as per the procedure then existing with required declaration. The document in that regard were not considered by the Assessing Authority as well as by the Appellate Authority as compliance of E-way bill system was not made by the petitioner though it was not notified by the Government. The order for assessment and penalty was challenged in appeal for the aforesaid reasons.

Held: Impugned orders have been challenged even in reference to the judgment dated 05.04.2018 passed in Harley Foods Products (P.) Ltd. v. State of U.P. [2018] 99 24. It is also in light of subsequent judgment dated 19.11.2018 passed in Writ Tax No. 617 of 2018 (L.G. Electronics India (P.) Ltd. v. State of U.P.). It was held that E-way bill procedure during 1.2.2018 to 31.03.2018 was not applicable. In light of the aforesaid, the impugned orders cannot sustain. The appellate authority was expected to consider the issue in the light of the judgment in the case of Harley Foods Products (P.) Ltd. (supra). Ignorance of the judgment of a superior Court on the similar issue cannot be expected rather the appellate authority needs to be careful in future.

The impugned orders were accordingly set aside with remand to Assessing Authority to examine matter afresh in light of law propounded. It would be without applying E-way bill mechanism.