The Allahabad High Court has ruled that a seller must generate and carry an e-way bill when goods are put in transit, and any subsequent downloading after interception will not absolve the seller from liability under the State Goods and Services Tax (SGST) Act, 2017.
The ruling came in response to a writ petition filed by M/s Gurunanak Arecanut Traders, challenging a tax and penalty demand of ₹90,62,400 imposed by the Commercial Tax Officer, Sector-3 (Mobile Squad), Etah under Section 129 of the SGST Act.
M/s Gurunanak Arecanut Traders, a registered dealer under the SGST Act, sold 400 bags of arecanut to M/s Jagdamba Enterprises, Nagpur, via tax invoice dated June 9, 2022. The goods were being transported from Delhi to Nagpur by M/s Ravi Goods Transport and were intercepted at Mathura on June 10, 2022, at 4:28 a.m. during transit.
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During interception, the consignment did not have a valid e-way bill, which was only generated later at 7:36 a.m. on the same day, nearly three hours after detention.
Consequently, the authorities conducted a physical verification and issued a detention order on June 16, 2022, under Section 129(1) of the SGST Act, determining that the goods in transit were “Chikni Bhuni Supari” (processed arecanut) and were taxable at 18% GST, in contrast to the 5% rate declared by the petitioner.
Following the Petitioner’s failure to respond to a show-cause notice issued by the Revenue, an order under Section 129(3) of the Act was passed on June 24, 2022, imposing the tax and penalty of ₹90,62,400.
A preliminary Writ Tax filed before a Division Bench of the Allahabad High Court was dismissed on the grounds that the petitioner’s had to remedy to file an appeal under Section 107 of the Act, which led to an unsuccessful appeal before the Additional Commissioner, Grade-II (Appeal), Aligarh.
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Pooja Talwar representing the Petitioner contended that the detention and penalty orders were issued without affording an opportunity for a hearing and that the first appellate authority had failed to apply its mind, dismissing the appeal in a non-speaking order on August 18, 2022. It was argued that the e-way bill was downloaded as soon as the transporter realized the oversight, and the subsequent production of the document should have been accepted as compliance.
A further challenge was directed towards the classification of goods, with the Counsel asserting that misclassification cannot be a basis for detention and that the authorities should have referred the issue to the judicial assessing officers rather than imposing an outright penalty.
State Counsel Arvind Kumar Mishra submitted that the petitioner had intentionally evaded tax by failing to carry a valid e-way bill during transit and misdeclaring the goods to benefit from a lower tax rate. It was also pointed out that an inquiry on the GST portal revealed discrepancies in the petitioner’s business registration, including mismatched signatures on rent agreements and tax invoices, and that a field investigation found no business activity at the declared place of registration, leading to its suo moto cancellation.
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A Single-Judge Bench of Justice Rohit Ranjan Agarwal observed that carrying an e-way bill is mandatory once goods are in transit, as per the 14th Amendment of the Uttar Pradesh GST Rules, 2017, which came into effect on April 1, 2018.
The court noted that post-2018, there were no technical difficulties in generating an e-way bill, and therefore, failure to do so indicates an attempt to evade tax.
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The Bench referenced the decision in M/S Akhilesh Traders vs State Of U.P (2024 TAXSCAN (HC) 1223) wherein it was clarified that the subsequent downloading of an e-way bill after interception does not absolve the seller from liability under the Act, as it would otherwise defeat the purpose of the law and create opportunities for tax evasion.
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The Allahabad High Court proceeded to dismiss the writ petition, making out no case for interference of the Court.
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