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August 31, 2020

Forget to generate E-Way Bill in GST? know Penalty and Consequences

by Rubina Dsouza in GST

Forget to generate E-Way Bill in GST? know Penalty and Consequences

What is an E-way Bill?

An E-way bill is an electronic generated bill for movement of goods. This bill is generated on the E-way Bill portal and a unique E-way bill Number (EBN) is generated and the same is made available to supplier, transporter and the recipient.

This bill enables to track movement of goods from one state to another and also monitor tax evasion if any. The limit to generate e-way bill is for movement of goods from one place to another of more than Rs. 50000/- . The E-way bill can be raised by either the consignor or consignee as a registered person or even a transporter of goods can generate the E-way bill.

Is generation of E-way bill mandatory?

The generation of E-way bill is mandatory for movement of goods in a vehicle that exceeds Rs. 50000/-, in other words a GST registered person cannot transport goods in a vehicle whose value exceeds Rs. 50000/- by either a single invoice/delivery challan without an e-way bill.

Know E way bill limit state wise for GST

Documents or Information required for generation of E-way bill?

  1. Invoice/ Delivery challan details regarding the consignment to be transported.
  2. Transport ID/ Date on which transport will be taking place should be mentioned on the document/ Transport Document No- For Transport by Railways, Ship or Air.
  3. Vehicle No/ Transport ID- For Transport by roadways.

Is non- generating an e-way bill an offence?

Yes, where the value of goods exceeds Rs. 50000 and the E-way bill has not been generated the same is punishable under Section 122-(1) (xiv)  which states, transports any taxable goods without the cover of documents as may be specified in this behalf- shall be liable to pay a penalty of Rs. 10000/- or an amount equivalent to the tax evaded. We will understand this with a very interesting case law of Synergy Fertichem Pvt Ltd vs State of Gujarat and M/s Hanuman Trading Co. Through vs State of Gujarat.

Can Section 129 and section 130 be applied for non-generation of e-way bill?

Section 129 covers detention, seizure and release of goods and conveyances in transit whereas, section 130 states about confiscation of goods or conveyances and levy of penalty. Let us see the application of these provisions in the case of Synergy Fertichem Pvt Ltd vs State of Gujarat.

Facts of the Case

  1. The Petitioners are inter-alia engaged in import and sale of ceramic pigment ink which is used as colouring substance in the tiles manufacturing industry. The Petitioners had ordered for a consignment of ceramic pigment ink from its principal in Spain. Petitioners duly filed bill of entry for home consumption and paid the applicable customs duty as well as IGST which is payable on imports by importers.
  2. Ceramic pigment ink has a limited shelf life and it has to be preserved at temperatures which are preferably not to exceed 25 degrees centigrade. Long exposures to high temperatures and humidity are required to be avoided.
  3. General instructions had been given to the clearing and forwarding agents explaining to them urgency of transporting ceramic pigment ink immediately on import. Since a transport vehicle was immediately available, the clearing and forwarding agent initiated transport of the ceramic ink to the warehouse in Vadodara without even waiting for the e-way bill in respect of the goods. This was particularly considering the fact that the proof of payment of GST on the transaction itself was accompanying the goods in the form of bill of entry for home consumption. The transporter had duly prepared transport receipt in respect of the vehicle for transport of goods from Ahmedabad Airport to the warehouse in Vadodara
  4. The truck with the goods were stopped for verification on the Ahmedabad-Vadodara for verification. The transporter duly produced all documents relating to goods including bill of entry for home consumption evidencing payment of IGST on the transaction. The truck with the goods were however detained by the learned officer on the ground of absence of e-way bill in respect of the goods. Notices in Form GST MOV-1 and GST MOV-6 were served to the transporter of the goods.
  5. The e-way bill was generated immediately after the information of detention and approached authorities stating that IGST had been paid on the transaction even before commencement of movement of goods and there was no question of the goods being unaccounted or there being any intention of evading payment of tax.
  6. The authorities however refused to release the goods on the ground of absence of e-way bill. in fact the authority insisted for payment of not only tax and 100% penalty under Section 129 of the GST Acts but also fine in lieu of confiscation equal to the value of goods under Section 130 of the GST Acts.

Issue Involved:

Can the authority detain and confiscate goods  under section 129 and section 130 of CGST Act 2017, only due to the absence of E-way bill?

Application for Writ Petition

  1. Writ application under Article 226 of the Constitution of India- a writ of mandamus or a writ in nature of mandamus  setting aside notice under Section 129 and 130 of the GST Acts as the same is arbitrarily and without any application of mind. It is therefore in the absence of natural justice.
  2. Further, the writ is also initiated to receive interim relief  by realising the goods and vehicle under detention the nature of goods being perishable.

(Note- A writ of mandamus is a court order compelling someone to execute a duty that they are legally obligated to complete)

Observations and Explanation:

  1. At the time of detention and seizure of goods or conveyance, the first thing the authorities need to look into closely is the nature of the contravention of the provisions of the Act or the Rules.
  2. The authorities to examine closely is whether such contravention of the provisions of the Act or the Rules was with an intent to eva de the payment of tax.
  3. Without any application of mind and without any justifiable grounds or reasons to believe, the authorities may not be justified to straightway issue a notice of confiscation under Section 130 of the Act.
  4. For the purpose of issuing a notice of confiscation under Section 130 of the Act at the threshold, at the stage of Section 129 of the Act itself, the case has to be of such a nature that on the face of the entire transaction, the authority concerned is convinced that the contravention was with a definite intent to evade payment of tax.
  5. In the present case, the driver of the vehicle is in a position to produce all the relevant documents to the satisfaction of the authority concerned as regards payment of tax etc, except to produce the e-way bill , which is also one of the important documents so far as the Act, 2017 is concerned. The authenticity of the delivery challan is also not doubted. In such a situation, it would be too much for the authorities to straightway jump to the conclusion that the case is one of confiscation, or believing the case is of intent to evade payment of tax.
  6. Section 130 of the Act is altogether an independent provision which provides for confiscation in cases where it is found that the intention was to evade payment of tax. For the purpose of invoking Section 130 of the Act at the very threshold, the authorities need to make out a very strong case. Merely on suspicion, the authorities may not be justified in invoking Section 130 of the Act straightway. The notice for the purpose of confiscation must disclose the materials, upon which, the belief is formed.
  7. The show cause notice under section 130 should be issued after complying with the requirements of section 129 of the CGST Act and giving an opportunity to be heard.

Ruling and Order:

Since the goods were of perishable nature and that all the other compliance were done and intention to evade tax was not seen or proved prima facie interim relief was granted and release of goods detained and seized under exercise of powers under 129 and 130 of CGST Act was directed by this order.

In the case of M/S Hanuman Trading Co. Through … vs State Of Gujarat

Facts of the Case:

  1. Goods and vehicle was detained under Section 129(1) of the GST Act as well as the notice issued for confiscation of goods or conveyances and levy of penalty under Section 130 of the GST Act.
  2. Writ Application under Article 226 of the Constitution of India was filed for Writ of Mandamus stating that the detention and confiscation under section are absolutely illegal, unlawful contrary to the facts and evidence on record, violative of principles of natural justice and against the provisions of the Act and Rules.
  3. Further the grant of interim relief directing release of the goods and conveyance in question was also put forth.

Submission:

  1. The notice for confiscation of goods or conveyance and levy of penalty under section 130 of the Central Goods and Services Act, 2017 issued in FORM GST MOV-10 is to be served after serving a notice under section 129 of the Central Goods and Services Tax Act, 2017,  and affording an opportunity of hearing to the person concerned, pass an order thereunder.
  2. It was submitted that it is only if there is no compliance of the order passed under section 129 of the Act, that the provisions of section 130 of the IGST Act can be resorted to.
  3. Referring to the impugned notice, it was pointed out that the same seeks to impose penalty, redemption fine and confiscation under section 130 of the Act without initiating any proceedings under section 129 of the Act, which is not permissible in law. Therefore the procedure as required under the provisions of the Act have not been followed by the competent authority prior to issuance of the said notice.

Observation:

  1. The goods are of perishable nature.
  2. The goods were detained and confiscated without following the procedure and giving and opportunity to be heard.
  3.  The vehicle as well as the goods should be released, upon payment of the tax, in terms of the impugned notice.

Ruling and Order:

The benefit of the interim-order was passed and vehicle, along with the goods were released on payment of the tax amount. Further the case is still on going and proceedings, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017.

Conclusion

E-way bill is an important and mandatory document and is essential once the value of goods in movement in vehicle exceeds Rs. 50000/-. However, in absence of an E-way bill, the penalty and punishment shall be applicable depending about the contravention of the provision which means this depends on the intention for non-generation of e-way bill.

If the authority is convinced and has material reason to believe that the reason for non-generation of E-way bill was intention to evade tax than provision of Section 130 which states, Confiscation of goods or conveyances and levy of penalty can be applicable even at the threshold or initial stage.

 Further, the authority is also required to follow the procedure under section 129 and serve notice initially under section 129 and also provide and opportunity of being heard,  if the authority does not have sufficient and material reason to believe that the intention was to invade tax.  

The authority cannot jump straightway to impose section 130 merely on opinion but should have material fact and record the reason to believe. Non- generation of E-way bill attracts penalty under Section 122 -(1) (xiv)  which states, transports any taxable goods without the cover of documents as may be specified in this behalf- shall be liable to pay a penalty of Rs. 10000/- or an amount equivalent to the tax evaded.

If there was no intention to evade tax as in the above case law , just a procedure was not followed and since tax was discharged honestly only a document for transit was not made, the revenue has therefore not suffered, the courts will definitely not take cognizance of matter and unnecessarily not levy penalty.

Hence non- generation of E-way bill technically remains a breach. the onus will be shifting as per the situation , both recipient and supplier are free to shift the burden that the liability to raise was of other party in absence of valid documents

Relevant Sections for reference:

Section 129 of CSGT Act 2017- Detention, seizure and release of goods and conveyances in transit

1.Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,–

a. on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

b. on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

c. upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

2. The provisions of sub-section (6) of section 67  shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.

(Note: mutatis mutandis is a legal maxim which means,  “with the necessary changes having been made”)

3. The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).

4. No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

5. On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

6. Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130;

Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer.

Section 130- Confiscation of goods or conveyances and levy of penalty

1.Notwithstanding anything contained in this Act, if any person-

i. supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or

ii. does not account for any goods on which he is liable to pay tax under this Act; or

iii. supplies any goods liable to tax under this Act without having applied for registration; or

iv. contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or

v. uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.

2. Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit: Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon:

Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129, Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon.

3. Where any fine in lieu of confiscation of goods or conveyance is imposed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance.

4. No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard.

5. Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government.

6. The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession.

7. The proper officer may, after satisfying himself that the confiscated goods or conveyance are not required in any other proceedings under this Act and after giving reasonable time not exceeding three months to pay fine in lieu of confiscation, dispose of such goods or conveyance and deposit the sale proceeds thereof with the Government.

Section 122: Penalty for Certain Offences

This section covers 21 types of offenses in its First part and the punishments thereunder

1.Where a taxable person who–

i. supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

ii. issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

iii. collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

iv. collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

v. fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax;

vi. fails to collect tax in accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section52;

vii. takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

viii. fraudulently obtains refund of tax under this Act;

ix. takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

x. falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act;

xi. is liable to be registered under this Act but fails to obtain registration;

xii. furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently;

xiii. obstructs or prevents any officer in discharge of his duties under this Act;

xiv. transports any taxable goods without the cover of documents as may be specified in this behalf;

xv. suppresses his turnover leading to evasion of tax under this Act;

xvi. fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder;

xvii. fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act;

xviii. supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act;

xix. issues any invoice or document by using the registration number of another registered person;

xx. tampers with, or destroys any material evidence or document;

xxi. disposes off or tampers with any goods that have been detained, seized, or attached under this Act,

Punishment for the above offences under 122 (1)-  shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded.

Further,

The second part of Section- 122 is,

(1A)- Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted

Punishment for the offence under 122 (1)(A)- Shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on.

The third part of Section- 122 is as under,

(2)- Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised

a. for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax,

Punishment for the offence under 122 (2)(a)- shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher

b. for reason of fraud or any wilful misstatement or suppression of facts to evade tax,

Punishment for the offence under 122 (2)(b)- shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher.

The fourth part of Section-122 is stated below,

(3) Any person who–

a. aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1);

b. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;

c. receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;

d. fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry;

e. fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account;

Punishment for the offence under 122 (3)- shall be liable to a penalty which may extend to twenty-five thousand rupees.

Section 67 – Power of Inspection, search and seizure

Relevant clauses

Section 67 clause (1)- Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that–

a. a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

b. any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

Section 67 clause (2)- Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things:

Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:

Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.

Section 67 clause (6)-The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.

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