2025 (11) TMI 934 - HC - GST

Petition allowed; seizure and penalty under s.129(3) GST quashed as e-way bill shown before detention

M/s. Om Enterprises Versus Additional Commissioner, Grade - 2 (Appeal) And Another

HC allowed the petition and quashed the seizure and penalty orders under s.129(3) of the GST Act. The court held the e-way bill was generated well before ... Seizure of goods - penalty order u/s 129(3) of the GST Act - e-way bill was generated much prior to detention of goods - HELD THAT:- Once the document has been produced, which was generated prior to the detention and physical verification, no adverse view can be drawn against the petitioner. This Court in the case of M/s OSR Creation [2025 (1) TMI 1311 - ALLAHABAD HIGH COURT] has held that 'However in the present case, the required document i.e. e-way bill was produced along with the reply to the show cause notice before the seizure order was passed, therefore, the judgement relied upon by learned counsel for the State is of no aid to him.' In the case in hand, the e-way bill was generated much prior to the detention order, i.e., at 10.59 a.m. on 21.12.2021 and therefore, there is no intention to evade payment of tax. The impugned orders cannot be sustained in the eyes of law. The same are hereby quashed - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether seizure of goods and levy of penalty under Section 129(3) of the GST Act is justified where an e-way bill, generated prior to physical interception, was not physically accompanying the consignment but was produced before passing the seizure order. 2. Whether the production of an e-way bill after detention but before issuance of a seizure order cures the defect of non-production at the time of interception and negates any inference of intention to evade tax. 3. Whether judicial precedents which uphold seizure and penalty where no document was produced before the order are distinguishable where the e-way bill was generated prior to detention and produced before the seizure order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legality of seizure and penalty where e-way bill was generated prior to interception but not physically accompanying the goods Legal framework: The GST regime mandates that consignments in transit be accompanied by prescribed documents, including an e-way bill; non-production at the time of inspection may warrant detention and initiation of proceedings under Section 129 of the GST Act. Precedent treatment: The Court relied on earlier decisions holding that seizure and penalty have been sustained where no requisite documents were forthcoming either at interception or before the seizure order (distinguishing those facts); conversely, authorities have declined to sustain penalty where documents were produced before the seizure order and no intention to evade tax was found. Interpretation and reasoning: Where the e-way bill was generated at 10:59 a.m. and the consignment was intercepted at 11:29 a.m., the document existed prior to detention. The petitioner produced that e-way bill in response to the show cause notice and before any seizure order was passed. The record contains no finding of discrepancy in the e-way bill nor any finding of intent to avoid tax. Given these facts, the absence of the physical document at the moment of interception did not furnish a legally sustainable basis for seizure and penalty. Ratio vs. Obiter: Ratio - production of a valid e-way bill generated prior to detention and produced before the seizure order cures the defect of non-production at interception and precludes levy of penalty under Section 129 in absence of intent to evade tax. Obiter - general observations on administrative convenience and policy against evasion. Conclusion: Seizure and penalty could not be sustained on the facts where the e-way bill pre-dated interception and was produced before the seizure order; adverse measures were quashed. Issue 2 - Effect of production of e-way bill after detention but before seizure order (curative effect) Legal framework: Procedural fairness and statutory scheme require that authorities consider documents produced by a taxpayer before taking final coercive action; Section 129 proceedings are directed to enforcement but must be based on contemporaneous findings and material. Precedent treatment: The Court followed authorities where post-detention but pre-seizure production of the requisite document led to the conclusion that the defect was cured and penalty was unjustified. Authorities upholding seizure/penalty were distinguished on the ground that no documents were produced prior to the seizure order. Interpretation and reasoning: The decisive inquiry is chronological and substantive - whether the e-way bill existed prior to interception and whether it was brought to the authority's notice before the seizure order was passed. If so, and if no discrepancy or intent to evade is demonstrable, the curative effect operates to negate justification for seizure/penalty. The Court rejected the notion that production is an afterthought where the timestamp shows generation prior to detention and where the authorities identify no defect in the produced document. Ratio vs. Obiter: Ratio - production of a valid e-way bill before the seizure order (even if not physically present at interception) cures the defect and prohibits imposition of penalty in absence of intent to evade. Obiter - comments distinguishing cases where the e-way bill was generated only after detention/seizure. Conclusion: The document produced before the seizure order cured the initial non-production; therefore, penalty and seizure were unjustified and orders were set aside with direction for refund of any amounts deposited. Issue 3 - Treatment of conflicting precedents and distinguishing principles Legal framework: Judicial decisions are to be applied to fact patterns; distinguishing is appropriate where material chronological differences exist regarding generation and production of mandated documents. Precedent treatment: Decisions affirming seizure/penalty where no document was produced either at interception or before seizure were held inapplicable. Decisions where courts relieved taxpayers because requisite documents were produced before seizure were followed. A decision where the e-way bill was generated only after detention/seizure was distinguished as factually different. Interpretation and reasoning: The Court applied the settled principle that the presence or absence of culpable intent and the timing of production of documents are determinative. Where the e-way bill was generated prior to interception and produced before completion of the adverse order, prior authorities supporting relief were followed; authorities upholding penalty were distinguished where their facts showed no pre-order production. Ratio vs. Obiter: Ratio - temporal fact (generation of e-way bill prior to detention and production before seizure) is a controlling distinguishing principle; precedents to the contrary do not govern in such circumstances. Obiter - policy considerations about potential for evasion where e-way bills are not required to be followed physically in all cases. Conclusion: Conflicting precedents were resolved on factual distinctions; where a valid e-way bill exists prior to detention and is produced before seizure without discrepancy, precedents supporting penalty do not apply and relief is warranted. Ancillary conclusion and remedial direction Where the impugned coercive orders were based on non-production at a moment of interception but the e-way bill was generated prior thereto and produced before the seizure order with no adverse findings of discrepancy or intent, the impugned orders were quashed and any amounts deposited pursuant to those orders were directed to be refunded in accordance with law.