E-way Bill and Delivery Challan are necessary for Interstate Delivery of Exempted Goods under GST – 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 Mohammed Shereef Vs State of Kerala (Kerala High Court) where the issue under consideration is whether non-registration of the consignor or the alleged mis-classification of the goods under transportation can be a ground for detention under Section 129 of the GST Act or not.

Facts of the Case:

• The petitioner, was a purchaser of fresh turmeric from an agriculturist in Karnataka and was aggrieved by a detention of the consignment, while in transit.
• It was the case of the petitioner that, the consignment in question was being transported under cover of an invoice generated by the petitioner in his capacity as purchaser of the goods, which showed the goods as attracting tax on reverse charge basis.
• An e-way bill was also generated by the petitioner, which showed the consignment as comprising of goods that were exempted from tax in as much as they fell under HSN code 910.
• The vehicle and the goods were detained, and notice in FORM GST MOV-7 was issued to the petitioner wherein the objection was essentially with regard to the non-registration of the person making the interstate supply, as also the fact that the purchase bill issued by the petitioner was not a valid document for the purposes of supporting an interstate taxable supply.

Submissions by both the Parties

• The petitioner contended that, while the consignor agriculturist was not required to take any registration in view of the express provisions of Section 23(1)(b), he was also not required to take a compulsory registration under Section 24, since the non-obstante clause in Section 24 did not apply to agriculturists mentioned under Section 23.
• It was his further case that, while the e-way bill clearly indicated that the goods were exempted goods, being turmeric bulbs and turmeric, even if the respondents had a case that the goods were wrongly classified, the same could not be a reason for detaining the goods under Section 129.
• Alternatively, it was contended that while a delivery challan of the consignor agriculturist did not accompany the consignment, the mere fact that the petitioner had generated an invoice, assuming the goods to be taxable on reverse charge basis, could not be a ground for detention under Section 129.
• The Government Pleader submitted that the goods on verification were found to not answer the description of exempted goods under HSN Code 910.
• Also, the consignment was not accompanied by a delivery challan that was required to accompany any consignment of exempted goods sold by an unregistered person.

Observations of the High Court (HC)

• HC was of the view that in the instant case, the declaration by the petitioner in the e-way bill and before the respondent authorities, had consistently been that the purchase was affected from an agriculturist in Karnataka who, going by the provisions of Section 23 of the GST Act, was not required to get himself registered for the sale of agricultural produce.
• Even assuming that the respondents dispute the said contention of the petitioner, the remedy available to them was to proceed against the agriculturist in question, for not taking the registration as required under the applicable provisions of the Act.
• The non-registration of the consignor, or the alleged miss-classification of the goods under transportation, could not be a ground for detention under Section 129 of the GST Act.
• It was not in dispute that there was a valid e-way bill covering the transportation in question and the said e-way bill clearly described the product as falling under HSN Code 910.
• No doubt, the consignor being an unregistered person, and the goods supplied by him to the petitioner being exempted goods, the transportation had to be covered not only by an e-way bill but also by a delivery challan, and since the transportation was not covered by a delivery challan, the respondents were justified in detaining the consignment.

• The question however arose as to what would be the liability of the petitioner who sought to get a release of the goods that are detained under Section 129.
• In the instant case, if the HC ignored the classification issue as also the non-registration issue which were not relevant for the purposes of Section 129, then the provisions of Section 129(1)(b) would apply for the purposes of determining the deposit that the petitioner would have to make for obtaining a clearance of the goods and the vehicle.
• On applying the said provision, the petitioner would have to pay the lesser of an amount equal to 5% of the value of the goods or Rs.25,000.
• In the instant case, the value of the goods being approximately Rs.10 lakhs, the lesser amount would be Rs.25,000 which the petitioner would necessarily have to pay to obtain a release of the goods and the vehicle.

HC therefore disposed the writ petition by directing the respondents to release the goods and the vehicle to the petitioner on the petitioner paying an amount of Rs.25,000, as required in terms of Section 129(1)(b) read with Section 129(3) of the GST Act. On the petitioner paying the said amount, the respondents were directed to release the goods and the vehicle to the petitioner and complete the proceedings under Section 129(3) on the aforesaid basis.

In conclusion, E-way Bill and Delivery Challan are necessary for Interstate Delivery of Exempted Goods under GST. Non-registration of the consignor or the alleged mis-classification of the goods under transportation can be a ground for detention under Section 129 of the GST Act or not.

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