2025 (4) TMI 1058 - HC - GST

Violation of provisions of Rule 138 of the U.P. Goods and Service Tax Rules 2017 - transporting goods accompanied by a tax invoice and e-way bill issued by a supplier whose registration had been cancelled prior to the date of invoice and e-way bill generation - HELD THAT - From perusal of Rule 138 of the U.P. Goods and Service Tax Rules 2017 it is clear that the goods in transit has to be accompanied by the tax invoice along with e-way bills. In the instant case though e-way bill and tax invoice was there but registration of the supplier firm had already seized on 07.11.2020 as it was cancelled by the Taxing Authorities. Once the supplier firm was not in existence it could not have issued the tax invoice dated 01.12.2020 and the transaction is sham. The tax invoice as produced by the petitioner firm issued by the supplier firm is against the provisions of Rule 138 of the Rules of 2017. The order passed by the appellate authority needs no interference of this Court - Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

(a) Whether the petitioner firm violated the provisions of Rule 138 of the U.P. Goods and Service Tax Rules, 2017, by transporting goods accompanied by a tax invoice and e-way bill issued by a supplier whose registration had been cancelled prior to the date of invoice and e-way bill generation.

(b) Whether the tax invoice dated after the cancellation of the supplier's registration could be considered valid and lawful under the GST framework.

(c) Whether the detention and penalty imposed under Section 129(1) of the Central Goods and Services Tax Act, 2017, on the petitioner firm for transporting such goods, was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Validity of Tax Invoice and E-way Bill Issued Post Cancellation of Supplier's Registration

Relevant legal framework and precedents: The Court primarily examined Rule 138 of the U.P. Goods and Service Tax Rules, 2017, which mandates that every registered person causing movement of goods exceeding Rs. 50,000 in value must furnish information electronically on the GST common portal and generate an e-way bill prior to the commencement of movement. The rule requires that goods in transit be accompanied by a tax invoice and a valid e-way bill. Section 129(1) of the Central Goods and Services Tax Act, 2017, empowers authorities to detain goods if transported in contravention of GST provisions.

Court's interpretation and reasoning: The Court held that although the petitioner possessed a tax invoice and e-way bill dated 01.12.2020, these documents were issued by a supplier firm whose GST registration had been cancelled on 07.11.2020, prior to the date of the invoice and e-way bill. The Court reasoned that once the supplier's registration was cancelled, it ceased to exist as a registered taxable person under GST law, and therefore, it could not legally issue tax invoices or generate e-way bills thereafter.

Key evidence and findings: The critical fact was the cancellation date of the supplier's registration (07.11.2020) preceding the date of issuance of the tax invoice and e-way bill (01.12.2020). The physical verification and interception of the goods in transit with accompanying documents were also undisputed.

Application of law to facts: The Court applied Rule 138 strictly, emphasizing that compliance requires the supplier to be a registered person at the time of issuance of tax invoice and generation of e-way bill. Since the supplier's registration was cancelled before the documents were issued, the transaction was deemed invalid and "sham." This non-compliance justified the detention of goods and penalty under Section 129(1) CGST Act.

Treatment of competing arguments: The petitioner argued that the generation of the e-way bill by the supplier firm implied its existence at that time, and thus the documents should be presumed valid. The Court rejected this, holding that the mere generation of an e-way bill does not override the fact of cancellation of registration, which is determinative of the supplier's legal status.

Conclusions: The Court concluded that the tax invoice and e-way bill issued by a cancelled supplier registration were invalid and that the petitioner's transportation of goods under such documents violated Rule 138 and the CGST Act.

Issue (c): Justification of Detention and Penalty under Section 129(1) CGST Act

Relevant legal framework and precedents: Section 129(1) of the CGST Act provides for detention, seizure, and release of goods in cases of non-compliance with GST provisions, including transportation of goods without proper documentation.

Court's interpretation and reasoning: Given the invalidity of the tax invoice and e-way bill, the Court found that the detention order and penalty imposed on the petitioner were in accordance with law. The appellate authority's order upholding the penalty was affirmed.

Key evidence and findings: The physical interception of goods, the invalid documents, and the cancellation of supplier registration formed the factual matrix justifying the penalty.

Application of law to facts: The Court applied Section 129(1) to uphold the penalty, finding no error in the appellate authority's order.

Treatment of competing arguments: The petitioner's challenge to the penalty was dismissed as the Court found no merit in the contention that the documents were valid.

Conclusions: The Court dismissed the writ petition and upheld the penalty and detention order.

3. SIGNIFICANT HOLDINGS

The Court held:

"Once, the supplier firm was not in existence, it could not have issued the tax invoice dated 01.12.2020 and the transaction is sham. The tax invoice as produced by the petitioner firm issued by the supplier firm is against the provisions of Rule 138 of the Rules of 2017."

Core principles established include:

- The validity of a tax invoice and e-way bill is contingent upon the supplier's valid registration under GST at the time of issuance.

- Goods transported with invoices or e-way bills issued by a supplier whose registration has been cancelled are liable to detention and penalty under Section 129(1) CGST Act.

- The generation of an e-way bill alone does not create a presumption of validity if the supplier's registration has been cancelled prior to such generation.

Final determinations:

- The order of detention and penalty imposed on the petitioner firm was lawful and justified.

- The writ petition challenging the appellate authority's order was dismissed.