2021 (11) TMI 720 - HC - GST

Seizure of goods during inter-state transportation quashed as UP e-way bill requirement legally unfounded

The Allahabad HC allowed the petition challenging seizure of goods during inter-state transportation. The court held that for inter-state transportation, ... Inter-state transportation of goods - application of IGST Act vis-a -vis State GST Act - e-way bill system and interim prescription under Rule 138 - inspection, search and seizure powers under CGST/IGST - invalidity of State notification under Rule 138 for inter-state movement - quashing of tax and penalty and direction for refundInter-state transportation of goods - application of IGST Act vis-a -vis State GST Act - e-way bill system and interim prescription under Rule 138 - U.P. e-way bill requirement did not apply to the petitioner's inter state movement of goods and the U.P.G.S.T. Act 2017 was not the applicable law for inspection of that movement. - HELD THAT: - The goods were transported from Raipur (Chhattisgarh) to Sitapur (U.P.), constituting inter state movement; therefore the I.G.S.T. Act 2017 governed the matter. By operation of section 20(xv) of the I.G.S.T. Act 2017, the provisions of the C.G.S.T. Act 2017 apply to inspection, search and seizure in matters covered by the I.G.S.T. Act. Rule 138 contemplates an e way bill system to be developed and notifications by the Central Government for interim documentary requirements; it does not authorise a State to prescribe documents for inter state movement. In the absence of a Central Government notification under Rule 138 prescribing documents for inter state movement at the relevant time, there was no legal basis to insist on a U.P. state e way bill. Prior decisions of this Court holding similarly were applied to the facts of this case. The court therefore held that the insistence on a U.P. e way bill was without factual or legal basis.The petitioner's vehicle was engaged in inter state transportation and was not required to carry a U.P. e way bill; U.P.G.S.T. provisions in that regard did not apply.Inspection, search and seizure powers under CGST/IGST - invalidity of State notification under Rule 138 for inter-state movement - quashing of tax and penalty and direction for refund - The seizure, tax demand and penalty imposed under section 129(3) of the U.P.G.S.T. Act 2017 were quashed and the amounts deposited were directed to be refunded. - HELD THAT: - The authorities proceeded on the ground that the petitioner lacked a U.P. e way bill and applied provisions of the U.P.G.S.T. Act 2017 to justify seizure and levy of tax and penalty. Having found that the U.P. requirement was inapplicable to inter state movement and that no Central notification under Rule 138 prescribed such documents for inter state transport at the relevant time, the proceedings under the State provision were invalid. The court also noted that IGST had been paid (as not denied by respondents) and that requisite invoices and transport documents were produced, indicating bona fide transport. Reliance was placed on earlier Division Bench and Single Judge decisions holding state level e way requirements inapplicable to inter state movement in similar circumstances. For these reasons both the appellate order and the order under section 129(3) were quashed and the deposit of tax and penalty under the U.P. Act was ordered to be refunded to the petitioner within two months.Impugned orders under the U.P. Act quashed; amount deposited as tax and penalty under the U.P.G.S.T. Act 2017 to be refunded to the petitioner within two months.Final Conclusion: Writ petition allowed; impugned order of detention/seizure and the appellate order under the U.P.G.S.T. Act 2017 quashed on the ground that U.P. e way bill requirements did not apply to the inter state movement in question and no Central notification under Rule 138 prescribed such a requirement; amounts deposited under the U.P. Act directed to be refunded within two months. Issues Involved:1. Challenge to the orders passed under Section 129(3) of the U.P.G.S.T. Act 2017.2. Applicability of U.P.G.S.T. Act 2017 versus I.G.S.T. Act 2017 for inter-state transportation.3. Requirement of carrying U.P. State e-way bill.4. Validity of the impugned action based on the absence of a notification by the Central Government under Rule 138 of C.G.S.T. Rules 2017.5. Refund of the amount deposited as tax and penalty.Detailed Analysis:1. Challenge to the orders passed under Section 129(3) of the U.P.G.S.T. Act 2017:The petitioner challenged the orders dated 30.3.2019 and the order passed by the Asstt. Commissioner (Mobile Squad III), Commercial Tax, Lucknow, under Section 129(3) of the U.P.G.S.T. Act 2017. The court entertained the petition due to the non-constitution of the G.S.T. Tribunal, which otherwise would have been the appellate authority under Section 112 of the U.P.G.S.T. Act 2017.2. Applicability of U.P.G.S.T. Act 2017 versus I.G.S.T. Act 2017 for inter-state transportation:The court noted that the goods were being transported from Raipur, Chhattisgarh to Sitapur, U.P., which constituted inter-state transportation. Therefore, the applicable law was the I.G.S.T. Act 2017, not the U.P.G.S.T. Act 2017. Section 20(xv) of the I.G.S.T. Act 2017 incorporates the provisions of the C.G.S.T. Act 2017 for inspection, search, seizure, and arrest.3. Requirement of carrying U.P. State e-way bill:The authorities below held that the petitioner was not carrying the U.P. e-way bill at the time of interception. However, the court found that the national e-way bill and other relevant documents were being carried, and the state e-way bill was generated and handed over shortly after the interception. The court concluded that there was no requirement for the U.P. State e-way bill for inter-state transportation as per the applicable laws.4. Validity of the impugned action based on the absence of a notification by the Central Government under Rule 138 of C.G.S.T. Rules 2017:The court observed that Rule 138 of the C.G.S.T. Rules 2017, which prescribes the documents to be carried during the movement of goods, was not applicable until the e-way bill system was developed and approved by the G.S.T. Council. The court invalidated the impugned action on the grounds that the State authorities incorrectly applied the U.P.G.S.T. Rules, which were not applicable to inter-state transportation.5. Refund of the amount deposited as tax and penalty:The court noted that the I.G.S.T. at the rate of 18% had already been paid by the petitioner, and there was no intent to evade tax. Consequently, the court quashed the orders dated 30.3.2019 and 26.2.2018, directing the authorities to refund the amount deposited by the petitioner as tax and penalty under the U.P.G.S.T. Act 2017 within two months.Conclusion:The writ petition was allowed, and the court directed the refund of the amount deposited as tax and penalty, emphasizing that the U.P.G.S.T. Act 2017 did not apply to inter-state transportation, and the insistence on carrying the U.P. State e-way bill was without legal basis. The court relied on precedents, including the Division Bench judgment in Satyendra Goods Transport Corp. v. State of U.P., which held that the U.P.G.S.T. Act 2017 is not applicable to inter-state trade.