2019 (12) TMI 511 - HC - GST

Seizure of goods alongwith vehicle - arecanut - inter-state transfer - driver was found in possession of bilty etc. pertaining to the goods, but not the e-way bill - Rule 138 of the C.G.S.T. Rules 2017 - authority of State Government to issue e-way bill - Rule 138 of the C.G.S.T. Rules 2017. HELD THAT - Reading of the rule 138, it refers to an E-way bill System which is to be developed by the G.S.T. Council and it provides for an interim arrangement by the Government till an E-way Bill System is so developed and approved. The words Government used therein is defined in section 2(53) of C.G.S.T. Act 2017 to mean the Central Government - It is not in dispute that on the date of interception of the vehicle in question E-way Bill System had not been developed, therefore, the documents which were required to be carried during movement of any consignment of goods were those which may have been notified by the Central Government under Rule 138 of the C.G.S.T. Rules 2017, as, by virtue of section 20(xv) thereof, it is this rule which is applicable to matters pertaining to I.G.S.T. Act 2017. Neither the State of U.P. nor the Government of India has brought on record any such notification which may have been issued prescribing the relevant documents to be carried in the course of such movement as is referred in section 68 of the C.G.S.T. Act 2017 and Rule 138 of the C.G.S.T. Rules 2017. E-way bill system has been prescribed only recently by a notification of the Government of India dated 7th March 2018 whereby Rule 138 of the C.G.S.T. Rules 2017 has been amended and other Rules have been incorporated in this regard. These amendments are to come into force from a date to be specified by the Central Government. The fact of the matter is that on the date of incident i.e. 17.12.2017 neither there was any E-way Bill System nor any notification by the Central Government under Rule 138 of the C.G.S.T. Rules 2017 requiring the carrying of a T.D.F. Form or any other such document in the course of inter-State supply/movement of goods, as such, the very basis for passing the impugned orders and taking action against the petitioner as impugned herein is apparently erroneous and illegal. In view of the above it cannot be said that there was any intent to evade tax - On the relevant date i.e. 17.12.2017 there was no requirement of carrying T.D.F. Form-1 in the case of an inter-State supply of goods. In fact on the relevant date there was no prescription of the documents to be carried in this regard under Rule 138 of the C.G.S.T. Act 2017, accordingly, the seizure and penalty imposed upon the petitioners based on the notification dated 21.7.2017 issued under Rule 138 of the U.P.G.S.T. Act 2017, which was not applicable, is clearly illegal. As regards the provisions of section 129 U.P.G.S.T. Act 2017 under which the impugned action has been taken, the same is not applicable to an inter-State trade or commerce. By virtue of section 20 of the I.G.S.T. Act 2017 it is section 129 of C.G.S.T. Act 2017 that would apply, but this is not the ground on which we are invalidating the impugned action, as, if it is traceable to the aforesaid provision of C.G.S.T. Act 2017 which is pari materia to the State Act, then mere wrong mentioning of a provision would be too technical a ground for interference. Petition allowed.

Summary

Issues Involved:
1. Legality of seizure and penalty imposed due to the absence of an e-way bill.
2. Authority of the State Government to issue e-way bills for inter-state transactions.
3. Applicability of the Central Goods and Services Tax (C.G.S.T.) Act 2017 and Integrated Goods and Services Tax (I.G.S.T.) Act 2017.
4. Validity of the notifications issued under the U.P.G.S.T. Act 2017.

Detailed Analysis:

1. Legality of Seizure and Penalty Imposed Due to Absence of E-Way Bill:
The case involved the interception of a transport vehicle carrying goods without an e-way bill. The petitioner argued that on the date of interception, the e-way bill system was not yet developed or mandated by the Central Government. The court referenced prior judgments, stating that the e-way bill system was only prescribed by the Government of India through a notification dated 7th March 2018, and it became mandatory from 1st April 2018. Therefore, the seizure and penalty imposed on 10th December 2017 were not sustainable in law as there was no legal requirement for an e-way bill at that time.

2. Authority of the State Government to Issue E-Way Bills for Inter-State Transactions:
The court examined whether the State Government had the authority to issue e-way bills for inter-state transactions. It was determined that the State Government of U.P. was not authorized to develop or mandate an e-way bill system for transactions covered under the C.G.S.T. Act 2017. The court emphasized that only the Central Government had the authority to prescribe such documents under Rule 138 of the C.G.S.T. Rules 2017, and any notification by the State Government in this regard was inapplicable.

3. Applicability of the C.G.S.T. Act 2017 and I.G.S.T. Act 2017:
The judgment clarified the applicability of the C.G.S.T. Act 2017 and I.G.S.T. Act 2017 concerning inter-state trade and commerce. It was noted that the provisions of the C.G.S.T. Act 2017 apply to inter-state transactions through section 20(xv) of the I.G.S.T. Act 2017, particularly concerning inspection, search, seizure, and arrest. The court highlighted that the State Authorities under the U.P.G.S.T. Act 2017 were empowered to enforce the C.G.S.T. Act 2017 but could not apply the provisions of the U.P.G.S.T. Act 2017 to inter-state transactions.

4. Validity of the Notifications Issued Under the U.P.G.S.T. Act 2017:
The court invalidated the notifications issued under the U.P.G.S.T. Act 2017 that required carrying a T.D.F. Form for inter-state supply of goods. It was ruled that such notifications were not applicable to inter-state transactions as only the Central Government had the authority to issue such requirements. The court referenced the Kerala High Court's judgment, which supported the view that the State Government lacked the power to mandate documents for inter-state movement of goods under the I.G.S.T. Act 2017.

Conclusion:
The court quashed the impugned orders dated 10.12.2017 and 30.3.2019, ruling that the seizure and penalty were illegal due to the absence of a valid requirement for an e-way bill at the time of interception. The court ordered the refund of any amount paid by the petitioner within one month from the date a certified copy of the order is submitted, without prejudice to any tax liability otherwise imposable under the relevant statutory provisions. The writ petition was allowed in the stated terms.