Inter-State supply and e-way bill compliance: demand and penalty under U.P. GST were held unsustainable.

Inter-State movement of goods from Telangana to Uttar Pradesh under IGST could not sustain a demand and penalty under the U.P. GST regime merely because a State e-way bill was not carried. The goods were invoiced as an inter-State supply and IGST had already been charged and paid; detention was founded only on the alleged absence of a State e-way bill. The Court noted the GST framework was in an initial phase and that strict enforcement of the e-way bill requirement had been recommended for postponement till 31 March 2018. On those facts, the demand and penalty were held unsustainable, with refund of the deposited amount and release of the bank guarantee.

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Issues: Whether the demand of tax and penalty under the U.P. GST regime for movement of goods accompanied by a Central GST e-way bill, in a case of inter-State supply, was sustainable.

Analysis: The goods were invoiced and transported as an inter-State supply from Telangana to Uttar Pradesh, with IGST already charged and paid. The detention and consequential demand were based on the absence of a State e-way bill. The Court noted that the GST regime was still in its initial phase and that the GST Council had recommended postponement of strict enforcement of the e-way bill requirement till 31 March 2018. In these circumstances, the premise that the petitioner was liable to tax under the U.P. GST Act and that penalty could be levied for non-carrying of a State e-way bill did not survive.

Conclusion: The demand and penalty were held unsustainable and were set aside. The petitioner was entitled to refund of the deposited amount and release of the bank guarantee.

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