Penalty Set Aside: Allahabad HC Says No Action When E-Way Bill Is Issued Before Detention [Read Order]
The Court quashed the seizure and penalty orders and directed refund of the deposited amount.
The Allahabad High Court held that when an e-way bill is shown to have been generated prior to the detention and physical verification of goods, no adverse inference can be drawn against the dealer. Consequently, the Court quashed the seizure and penalty orders passed under Section 129(3) of the GST Act, observing that the authorities failed to establish any intention on the part of the petitioner to evade tax.
The petitioner, M/s Om Enterprises, is engaged in trading TMT iron bars. On 21.12.2021, goods were dispatched from Bulandshahr under a proper tax invoice. The petitioner stated that due to a technical glitch, the e-way bill could not be generated immediately, but was successfully generated at 10:59 AM on the same day.
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Later, at 11:29 AM, the goods were intercepted by the Mobile Squad. During physical verification, the tax invoice was available but the e-way bill was not present at the spot. A show-cause notice was issued, to which the petitioner submitted a detailed reply enclosing the e-way bill that had been generated before interception.
Despite this, the authorities seized the goods and imposed a penalty under Section 129(3) of the GST Act. The petitioner preferred an appeal, but the Additional Commissioner dismissed the appeal affirming the penalty. Aggrieved, the petitioner approached the High Court challenging the original order and the appellate order.
Represented by Rahul Krishna Agrawal and Mohit Kumar Shukla, the petitioner argued that the e-way bill had been generated much before the vehicle was intercepted, which clearly negated any intention to evade tax. Counsel submitted that the authorities had not pointed out any defect in the e-way bill and had mechanically imposed a penalty despite the document being furnished before the seizure order.
JusticePiyush Agrawal noted that it was undisputed that the e-way bill had been generated at 10:59 AM, well before the goods were detained at 11:29 AM. The petitioner had produced this e-way bill along with its reply to the show-cause notice before the seizure order was passed, and no discrepancy was ever pointed out by the authorities.
The Court reiterated that if the required document is produced before the seizure order and there is no evidence of intent to evade tax, the penalty is not sustainable. Finding no basis for the penalty, the Court held that the authorities acted illegally in disregarding a valid, pre-existing e-way bill and drawing an adverse inference.
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