2025 (11) TMI 1181 - HC - GST

Seizure set aside where valid uncancelled e-way bill proves goods' genuineness; missing delivery signature, address not tax evasion

M/s Prostar M Info Systems Limited Versus State of UP and 3 others

HC held that seizure was unwarranted where goods were accompanied by a valid, uncancelled e-way bill demonstrating genuineness and movement; absence of ... Seizure of goods on the ground that shipping address given in the document was not shown as an additional place of business of the petitioner - delivery challan/e-way bill did not contain signature of an official of the consignor - intent to evade tax present or not - HELD THAT:- Once the goods in question is duly accompanying by e-way bill, which clearly demonstrates the genuineness of the documents and during validity of the said e-way bill, which has not been cancelled, the Department is well aware of the movement of the said goods in question and therefore, no intention to evade payment of tax can be attributed to the petitioner. In the case in hand, once the valid document, i.e., e-way bill, was also accompanying the goods, which has not been disputed, the authority concerned ought not to have dragged the petitioner in an unnecessary litigation. In the case of M/s Sleevco Traders [2022 (5) TMI 845 - ALLAHABAD HIGH COURT], it was held that 'the Court finds that there is neither any intention to evade the payment of tax nor any fault nor any contravention of the Act as all valid documents were accompanying with the goods as required under the Act, therefore, the proceedings initiated against the petitioner cannot sustain and are hereby quashed.' The impugned orders cannot be sustained in the eyes of law. The same are hereby quashed - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether goods in transit accompanied by a delivery challan/e-way bill can be lawfully seized under the GST Act (section 129) solely because the delivery challan lacks the signature of an official of the consignor. 2. Whether nondisclosure of the destination address as an 'additional place of business' in the consignor's GST registration can, by itself, justify detention/seizure and initiation of proceedings under section 129. 3. Legal effect of a valid e-way bill and generated e-invoice on the existence of intent to evade tax and on the authority's power to detain/seize goods under section 129. ISSUE-WISE DETAILED ANALYSIS - 1. Seizure for delivery challan lacking consignor's signature Legal framework: Section 129 of the GST Act provides for detention, seizure and release of goods and conveyances in transit where there is reason to believe tax has not been paid or documents are not in order; Rules (including Rule 138A and related provisions) prescribe documentary requirements (delivery challan, e-way bill) for movement of goods. Precedent Treatment: Followed and applied the principles in prior High Court decisions which were affirmed by the Supreme Court that detention/seizure cannot be justified where there is no material to infer evasion and valid transport documents accompany the goods. Interpretation and reasoning: A mere absence of signature on a manual delivery challan, where the goods were accompanied by valid electronic documentation (e-way bill and e-invoice) and the consignment matched documentary particulars, does not establish mens rea or contravention warranting seizure. The authorities must examine substance over form; technical defects which do not evidence evasion or mismatch cannot be the sole basis for detention under section 129. Ratio vs. Obiter: Ratio - detention under section 129 cannot be sustained solely on the ground of a missing signature on a delivery challan when valid e-way bill and invoice accompany the goods and no evasion is shown. Obiter - observations emphasizing administrative inconvenience and harassment and calling for proportionality in exercise of detention powers. Conclusions: Seizure on the ground of an unsigned delivery challan was unjustified; proceedings based solely on that deficiency cannot be sustained. ISSUE-WISE DETAILED ANALYSIS - 2. Nondisclosure of destination as additional place of business Legal framework: GST registration rules require declaration of additional places of business; however, the Commissioner (State GST) may issue clarificatory instructions/circulars on enforcement practice regarding movement of goods to undeclared locations. Precedent Treatment: The Court applied a binding administrative circular issued by the Commissioner of State GST (dated 17.01.2024) which precludes initiation of section 129 proceedings merely because the destination address was not declared as an additional place of business. The Court relied on case law holding that nondisclosure of destination alone is not a ground for seizure when other documentation is valid. Interpretation and reasoning: Nondisclosure of the destination as an additional place of business is a registration non-compliance of administrative character; where the movement is transparent (via e-way bill) and taxability/identity of goods is not in dispute, such nondisclosure cannot be equated with intent to evade tax or used as a standalone justification for detention/seizure under section 129. The Commissioner's circular is binding on subordinate authorities and curtails seizure on this ground. Ratio vs. Obiter: Ratio - nondisclosure of the destination as an additional place of business, without more, does not justify detention/seizure under section 129 when valid movement documents exist. Obiter - guidance that departmental instructions limiting enforcement on this ground are binding and must be followed. Conclusions: The nondisclosure of the destination address as an additional place of business was not a lawful basis for initiating section 129 proceedings or for seizing the goods. ISSUE-WISE DETAILED ANALYSIS - 3. Effect of valid e-way bill and e-invoice on intent to evade tax and release of goods Legal framework: Rule 138A and related provisions require e-way bills for movement of goods above specified value; e-invoice and e-way bill together serve to evidence the transaction and movement. Section 129 contemplates detention/seizure where there is belief of evasion or invalidity of documents. Precedent Treatment: The Court followed High Court and Supreme Court precedents that have held a valid e-way bill and matching invoices undermine any inference of intent to evade tax, and that authorities must release goods where valid documents accompany the consignment and there is no material discrepancy. Interpretation and reasoning: Presence of a valid e-way bill (not cancelled and valid during the period of movement) and a generated e-invoice uploaded to the departmental portal demonstrates transparency of movement and tax compliance. Such documentation places the burden on the department to show mismatch, fraud or evasion; absent such a showing, detention under section 129 is disproportionate and unsustainable. The department's awareness of movement via e-way bill negates an inference of clandestine transport or tax evasion. Ratio vs. Obiter: Ratio - valid e-way bill and e-invoice accompanying goods preclude imputation of intent to evade tax and require authorities to refrain from detention/seizure under section 129 unless independent material of fraud/mismatch exists. Obiter - remarks on departmental obligations to avoid unnecessary litigation and on costs in comparable cases. Conclusions: Valid e-way bill and e-invoice vitiate the justification for seizure; the authorities ought to have released the vehicle and goods rather than initiate section 129 proceedings in absence of further incriminating material. CONSOLIDATED COURT FINDINGS AND DISPOSITION The Court found no intention to evade tax, no material contravention of the GST Act, and that all valid documents (e-way bill and e-invoice) accompanied the goods. The Commissioner's circular prohibiting initiation of section 129 proceedings solely for nondisclosure of destination as an additional place of business was binding. Precedents establishing that valid transport documentation defeats a seizure under section 129 were followed. Consequently, the impugned orders initiating detention/seizure proceedings were quashed and the writ petition allowed.