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September 19, 2020

Goods cannot be detained for the sole reason that the invoices do not bear continuous serial numbers – Kerala HC

by CA Shivam Jaiswal in GST, Legal Court Judgement

Goods cannot be detained for the sole reason that the invoices do not bear continuous serial numbers – Kerala HC

What do you mean by an invoice?

An invoice is basically a bill of the list of goods sent or services provided, along with the amount due for payment. It is a commercial instrument issued by the supplier to the recipient.

What is the importance of an invoice?

  • Evidences of supply of goods or services
  • A registered person cannot avail input tax credit unless he is in possession of a tax invoice or a debit note.
  • Invoice is an important indicator of the time of supply.

What do you mean by an e-way bill?

An E-Way bill is basically short for Electronic Way Bill. It is a document which is generated electronically for movement of goods from one place to another. This movement may be inter-state or intra-state. E-Way bill is mandatory to be issued where the consignment value exceeds Rs 50,000 every registered person who causes movement of goods.

Can there be any detention under GST?

Section 129 of CGST Act, 2017 explains Detention, seizure and release of goods and conveyances in transit.

  • According to Section 129, 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, 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
  • These goods or documents shall be released:
  • on payment of the applicable tax and penalty equal to 100% of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to 2% of the value of goods or Rs 25,000, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty
  • on payment of the applicable tax and penalty equal to the 50% 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 5% of the value of goods or Rs 25,000, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty
  • upon furnishing a security equivalent to the amount payable under points (a) & (b) as above
  • No such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
  • The provisions of section 67(6) shall apply for detention and seizure of goods and conveyances.
  • 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
  • No tax, interest or penalty shall be determined without giving the person concerned an opportunity of being heard.
  • Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided within 7 days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130
  • If the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the period of 7 days may be reduced by the proper officer.

Let us refer to the case of Devices Distributors Vs Assistant State Tax Officer (Kerala High Court) where the petitioner was had aggrieved before the High Court being aggrieved with the detention notice served on them.

Facts of the Case:

  • The petitioner, who was a distributor of home appliances of various brands, had approached the Court aggrieved by the detention notice under the GST Act that was served on him while goods were being transported from Kottayam to Thiruvananthapuram at his instance.
  • A perusal of detention notice indicated that the objection of the respondent was essentially with regard to the invoices that accompanied the transportation of the goods.
  • It was found that the tax invoices furnished, although carried serial numbers, they were not consecutive for the three invoices.
  • It was noticed that while one invoice carried the serial number as 46000152. The other two invoices carried the serial numbers 53000029 and 53000030.
  • The detaining authority, therefore, suspected that the invoices carrying the serial numbers in between the two sets of invoices might have been used for transportation of other goods that were not brought to the notice of the Department.
  • Reference was also made in the detention notice to the ‘Revised Invoice Rules, 2017, which, according to the Senior Counsel for the petitioner, had no relevance to the facts in the instant case.

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Submissions by the Government Pleader

  • Government Pleader referred to Rule 46(1)(b) of the GST Rules that specified the requirement of a tax invoice containing a consecutive serial number not exceeding 16 characters in one or multiple series, containing alphabets or numerals or specific characters respectively, and any combination thereof, to point out that in the instant case, the tax invoices did not contain a combination of alphabets, numerals, and specific characters.
  • It was contended, therefore, that as the tax invoices that accompanied the goods did not conform to the requirement of Rule 46, the detention could not be seen as unjustified.

Observations of the High Court

  • High Court found that the power to detain a vehicle in the course of transit was specified in Section 129 of the GST Act.
  • Rule 129 applied to cases where any person transported goods in contravention of provisions of the Act or Rules.
  • As per the Act and Rules, a person transporting goods was obliged to carry the documents that are mentioned in Section 68 of the GST Act, read with Rule 138 of the GST Rules.
  • Accordingly, such a person was required to carry a copy of the tax invoice, together with a copy of the e-way bill, while transporting the goods either interstate or intrastate.
  • The form of the invoice was specified in Section 31 of the CGST Act read with Rule 46 of the GST Rules.
  • In the instant case, it was not in dispute that e-way bills did accompany the goods.
  • It was also not in dispute that the transportation was covered by tax invoices.
  • The objection of the respondents was only that the invoices did not bear continuous numbers and hence they suspected that the invoices bearing serial numbers that fell between the numbers on the invoices produced at the time of transportation, could have been used for transportation of other goods that had not been brought to the notice of the Department.
  • In the view of the High Court, the entertainment of such a doubt by the authority cannot be a justification for detaining the goods in question, especially when they were admittedly accompanied by tax invoices as also e-way bills that clearly indicated the particulars that were required by Rule 46 of the GST Rules.
  • It was also relevant to note that the doubt entertained by the respondents were in respect of goods that may have been transported under cover of the invoices that numerically fell between the numbers shown in the invoices that were carried along with the goods and pertained to goods other than those that were actually detained.
  • Therefore, the detention in the instant case cannot be justified under Section 129 of the GST Act.
  • The High Court therefore allowed the writ petition and directed the respondents to release the goods detained by them.

In conclusion, there can be no detention of goods for the sole reason that the invoices do not bear continuous serial numbers.

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