Seizure orders for goods transported without e-way bills before February 1 2018 set aside due to unclear regulatory framework

The HC set aside seizure orders for goods transported without e-way bills prior to 1.2.2018, finding no deliberate tax evasion by petitioners given unclear regulatory framework during transition period. Multiple rule amendments and notifications created confusion, with Rule 138 being replaced by notification dated 31.01.2018 effective 01.02.2018. Court held state authorities possess jurisdiction under IGST Act to detain and seize goods in inter-state movement, rejecting ultra vires challenge. However, seizure orders, show-cause notices under section 129(3) and final orders were deemed unsustainable in law for pre-February 2018 period, except in one petition where jurisdictional challenge was dismissed.

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Issues Involved:
1. Requirement of E-Way Bill under UPGST Act 2017.
2. Jurisdiction of UPGST Act 2017 over IGST Act 2017 in inter-state transactions.
3. Unintentional fault and its impact on seizure and penalty.
4. Validity of tax and penalty imposition when tax is already paid.
5. Validity of penalty for expired E-Way Bill.
6. Impact of vehicle breakdown on transportation compliance.
7. Validity of Commissioner’s Circular prescribing time period for E-Way Bill.
8. Discrimination in validity periods for E-Way Bill-01 and E-Way Bill-02.
9. Applicability of UPGST Act 2017 to inter-state transactions.
10. Validity of seizure orders and show-cause notices based on outdated provisions.

Detailed Analysis:

1. Requirement of E-Way Bill under UPGST Act 2017:
The petitioners challenged the seizure orders and notices issued under sections 129 (1) and (3) of UPGST Act 2017, arguing that there was no requirement to accompany the E-Way Bill. The court found that the legislative changes were made in quick succession, causing confusion among authorities regarding the applicable provisions. The court noted that the Rule 138, as substituted by Notification dated 31.01.2018, was effective from 01.02.2018, and the forms required under this rule were different from those mentioned in the earlier notifications and circulars. The authorities erroneously insisted on compliance with outdated provisions, making the seizure orders and show-cause notices unsustainable.

2. Jurisdiction of UPGST Act 2017 over IGST Act 2017 in inter-state transactions:
Petitioners argued that UPGST Act 2017 provisions could not override IGST Act 2017 in inter-state transactions. The court acknowledged that inter-state transactions are governed by IGST Act 2017, and the UPGST Act 2017 cannot impose conditions on such transactions. The court found that the impugned orders were based on a misunderstanding of the applicable laws and were therefore invalid.

3. Unintentional fault and its impact on seizure and penalty:
The petitioners contended that any faults were unintentional and should not attract seizure or penalty. The court observed that the authorities themselves were unclear about the applicable provisions, indicating that the petitioners did not intentionally disobey the law. The court concluded that the seizure orders and penalties were unjustified in these circumstances.

4. Validity of tax and penalty imposition when tax is already paid:
The court noted that the petitioners had already paid the applicable taxes as shown in the tax invoices. Therefore, there was no basis for levying additional tax or penalty. The court found the imposition of tax and penalty to be without jurisdiction and illegal.

5. Validity of penalty for expired E-Way Bill:
The court found that the validity periods for E-Way Bills were different under the substituted Rule 138 effective from 01.02.2018 compared to the earlier provisions. The authorities’ reliance on outdated circulars for determining the validity period was erroneous. Consequently, the penalties imposed for expired E-Way Bills were invalid.

6. Impact of vehicle breakdown on transportation compliance:
In cases where the vehicle transporting goods broke down and the goods were transferred to another vehicle, the court found that the delay was neither intentional nor deliberate. Therefore, penalties for such delays were not justified.

7. Validity of Commissioner’s Circular prescribing time period for E-Way Bill:
The court held that the Commissioner’s Circular prescribing a 48-hour validity period for E-Way Bill-02 was beyond the Commissioner’s authority and ultra vires. The power to prescribe such a period rested with the State Government, not the Commissioner.

8. Discrimination in validity periods for E-Way Bill-01 and E-Way Bill-02:
The court found that the different validity periods for E-Way Bill-01 (ten days) and E-Way Bill-02 (48 hours) were discriminatory and arbitrary. The court noted that the substituted Rule 138 effective from 01.02.2018 provided a uniform validity period, making the earlier provisions inapplicable.

9. Applicability of UPGST Act 2017 to inter-state transactions:
The court reiterated that UPGST Act 2017 applies to intra-state transactions, while inter-state transactions are governed by IGST Act 2017. The court found that the impugned orders were issued without proper jurisdiction over inter-state transactions.

10. Validity of seizure orders and show-cause notices based on outdated provisions:
The court concluded that the seizure orders, show-cause notices, and final orders were based on outdated provisions and were therefore invalid. The court set aside these orders in all writ petitions except Writ Petition No. 87 of 2018, where the petitioner was directed to submit a reply to the show-cause notice and avail the statutory remedy of appeal if necessary.

Conclusion:
The court allowed the writ petitions (except Writ Petition No. 87 of 2018), setting aside the seizure orders, show-cause notices, and final orders. The court dismissed Writ Petition No. 87 of 2018 with liberty to the petitioner to reply to the show-cause notice and pursue statutory remedies.

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