GST detention upheld where cancelled supplier issued invoice and e-way bill could not validate a sham transaction.

Detention and penalty under Section 129(1) of the CGST Act were upheld because the underlying invoice transaction was found to be sham. Although the goods were accompanied by an e-way bill and tax invoice, the supplier's registration had already been cancelled before the invoice date and before generation of the e-way bill. The court held that Rule 138 of the U.P. GST Rules requires a prescribed e-way bill supported by a genuine transaction, and a cancelled supplier could not validly issue a lawful tax invoice. The invoice and e-way bill therefore did not cure the defect in the transaction, and the writ petition was dismissed.

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Issues: Whether the detention and penalty under Section 129(1) of the Central Goods and Services Tax Act, 2017 were justified when the goods were accompanied by an e-way bill and tax invoice, but the supplier's registration had already been cancelled, and whether the invoice transaction could be treated as valid under Rule 138 of the U.P. Goods and Services Tax Rules, 2017.

Analysis: Rule 138 requires movement of goods to be accompanied by the prescribed e-way bill, and the supporting invoice must reflect a genuine transaction. The record showed that the supplier's registration had been cancelled before the date of the invoice and the generation of the e-way bill. In those circumstances, the supplier could not be treated as existing for the purpose of issuing a lawful tax invoice, and the purported transaction was held to be sham. The presence of the invoice and e-way bill did not cure the defect in the underlying transaction.

Conclusion: The detention and consequential penalty were upheld, and the writ petition was dismissed.

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