THE OFFICER IS DUTY BOUND TO HEAR EXPLANATION FOR THE EXPIRY OF E-WAY BILL

[Mr. M. GOVINDARAJAN]

E-way Bill

E-way bill is a mechanism to ensure that goods being transported comply with the GST Law and is an effective tool to track movement of goods and check tax evasion.

E-way bill is an electronic document generated on the GST portal evidencing movement of goods. It has two components-Part A comprising of details of GSTIN of recipient, place of delivery (PIN Code), invoice or challan number and date, value of goods, HSN code, transport document number (Goods Receipt Number or Railway Receipt Number or Airway Bill Number or Bill of Lading Number) and reasons for transportation; and Part B comprising of transporter details (Vehicle number).

As per Rule 138 of the CGST Rules, 2017, every registered person who causes movement of goods (which may not necessarily be on account of supply) of consignment value more than Rs. 50000/- is required to furnish above mentioned information in part A of e-way bill. The part B containing transport details helps in generation of e-way bill.

Generation of E-way Bill

E-way bill is to be generated by the consignor or consignee himself if the transportation is being done in own/hired conveyance or by railways by air or by vessel. If the goods are handed over to a transporter for transportation by road, E-way bill is to be generated by the transporter. Where neither the consignor nor consignee generates the e-way bill and the value of goods is more than Rs.50,000/- it shall be the responsibility of the transporter to generate it.

Validity of E-way bill

The validity of e-way bill depends on the distance to be travelled by the goods. For a distance of less than 200 Km the e-way bill will be valid for a day from the relevant date. For every 200 Km thereafter, the validity will be additional one day from the relevant date. The ‘relevant date’ shall mean the date on which the e-way bill has been generated and the period of validity shall be counted from the time at which the e-way bill has been generated and each day shall be counted as 24 hours. In general, the validity of the e-way bill cannot be extended. However, Commissioner may extend the validity period only by way of issue of notification for certain categories of goods which shall be specified later. The validity of the e-way bill may be extended within eight hours from the time of its expiry.

Intercepting conveyance

The Commissioner or an officer empowered by him in this behalf may authorize the proper officer to intercept any conveyance to verify the e-way bill or the e-way bill number in physical form for all inter-State and intra-State movement of goods. The physical verification of conveyances may also be carried out by the proper officer as authorized by the Commissioner or an officer empowered by him in this behalf. Physical verification of a specific conveyance can also be carried out by any officer, on receipt of specific information on evasion of tax, after obtaining necessary approval of the Commissioner or an officer authorized by him in this behalf.

Expiry of validity period of E-way bill

There is an option under e-way bill to extend the validity period. This option is available for extension of e-way bill before 4 hours and after 4 hours of expiry of the validity. Here, transporter will enter the e-way bill number and enter the reason for the requesting the extension, from place (current place), approximate distance to travel and Part-B details. It may be noted that he cannot change the details of Part-A. He will get the extended validity based on the remaining distance to travel.  The transporter, who is carrying the consignment as per the e-way bill system at the time of expiry of validity period, can extend the validity period.

Once the vehicle is intercepted and the Authority finds that the E-way bill expires and not extended the reasons for the same shall be explained to the Authorities.  Otherwise penalty may be imposed on the transporter and the registered person.  In such cases the Authority is obliged to hear the explanation offered and action may be taken considering the explanation offered. 

Case laws

In M/S SATYAM SHIVAM PAPERS PVT. LTD. VERSUS ASST. COMMISSIONER ST AND 4 OTHERS - 2021 (6) TMI 378 - TELANGANA HIGH COURT the validity of the e-way bill had expired just before the detention and that on a consideration of the provisions of Section 129 of the CGST/SGST Acts, the Court held that when there was a valid explanation for the expiry of the e-way bill and there were no materials to suggest evasion of tax, the power of detention under Section 129 was wrongly invoked and was a blatant abuse of power by the authorities concerned. The Court had even proceeded to impose costs on the officer concerned.  The State had challenged the judgment of the Telangana High Court before the Supreme Court and the same was dismissed by the Supreme Court. The Supreme Court held that the High Court has meticulously examined and correctly found that no fault or intent to evade tax could have been inferred against the writ petitioner. However the Supreme Court considered that  the amount of costs as awarded by the High Court in this matter is rather on the lower side. Considering the overall conduct of the petitioner No.2 and the corresponding harassment faced by the writ petitioner we find it rather necessary to enhance the amount of costs.

In SANSKRUTHI MOTORS VERSUS THE JOINT COMMISSIONER (APPEALS) II STATE GOODS & SERVICE TAX DEPARTMENT, ERANHIPALAM, KOZHIKODE, THE STATE TAX OFFICER (INT) SQUAD NO. I WAYANAD - 2022 (9) TMI 92 - KERALA HIGH COURT  the petitioner, transported a new tipper lorry (the goods) from Tamil Nadu to Kozhikode, Kerala on the request of Tata Motors Limited.  The said vehicle was intercepted and detained by Kerala Assistant Tax Officer. A show cause notice was issued on 9.7.2019 at 12.20 p.m. to the petitioner as the e-way bill had expired on 8.7.2019.  Since the vehicle was detained the petitioner filed the writ petition before the High Court.  The High Court directed the Department to release the vehicles on production of bank guarantee. 

The show cause notice was adjudicated and order was issued on 16.08.2019 imposing a penalty of Rs.5,24,017/- along with IGST to the tune of Rs.10,48,034/-. The Adjudicating Authority did not consider the explanation offered by the petitioner for expiry of E-way bill because of the repair of the vehicle and unable to rectify the same immediately.  Against this order the petitioner filed an appeal.  The appeal was returned since the petitioner had not paid any admitted tax, and there is no pre-deposit of 10% of the disputed tax and also non remittance of stamp paper equivalent to 1% of the disputed tax.  Against this the petitioner filed the present writ petition before Kerala High Court.

The petitioner submitted the following before the High Court-

• There was no warrant for imposing any penalty on the petitioner.
•  There is no suppression or evasion of tax.
• The e-way bill was valid up to 11.59 p.m. on 8.7.2019, and the vehicle was intercepted the next day.
• The vehicle had failed to cross the check post on 8.7.2019 itself because it developed some mechanical problems on its way to Kozhikode and had to be taken to a workshop and also since the Bandipur Highway was closed during night hours.
• For minor discrepancies, a major penalty cannot be imposed.

The Department submitted the following before the High Court-

•  The detention is within 20 minutes of the expiry of the e-way bill is absolutely incorrect.
• The petitioner could not have been allowed to continue the transport without extending the validity of the e-way bill as provided under Rule 138 (10) of the CGST Rules
• Since the e-way bill had expired when the detention was effected, there is absolutely no jurisdictional error or infirmity warranting interference.
• The petitioner has an effective remedy by way of an appeal.

The High Court considered the submissions made by both the parties.  The High Court was of the opinion that the petitioner is entitled to succeed in this case.  The availability of the alternate remedy does not dissuade the High Court from granting relief as the Court was clearly of the view that the demand for tax and the imposition of a major penalty, in the facts of this case, was clearly without jurisdiction.  The reason for invoking Section 129 of the CGST laws in this case, is only one - that the e-way bill has expired.

The High Court observed that transport could continue only after e-way bill had been extended in the manner provided for in Rule 138(10) of the CGST Rules.  In the present case the High Court observed that the vehicle (the goods) was accompanied by an invoice which showed the value of the vehicle to be Rs.23,96,505.64 including IGST at Rs.5,24,016.86. It was also accompanied by an e-way bill that was valid up to 8.7.2019. The only discrepancy noted was that the e-way bill had expired on 8.7.2019. The officer who issued show cause notice has not found that there was any attempt to evade any tax.

The High Court relied on the circular issued by the Department.  Based on representations received pointing out the imposition of penalty even in cases of minor discrepancies in the invoice/e-way bill etc. and despite the absence of major irregularities in those documents, the Central Board of Direct Taxes and Customs, by virtue of the powers conferred under section 168 of the Act issued a Circular No.64/38/2018 dated 14- 09-2018, providing as follows:

4. Whereas, section 129 of the CGST Act provides for detention and seizure of goods and conveyances and their release on the payment of requisite tax and penalty in cases where such goods are transported in contravention of the provisions of the CGST Act or the rules made there under. It has been informed that proceedings under section 129 of the CGST Act are being initiated for every mistake in the documents mentioned in para 3 above. It is clarified that in case a consignment of goods is accompanied by an invoice or any other specified document and not an e-way bill, proceedings under section 129 of the CGST Act may be initiated.
5. Further, in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated, inter alia, in the following situations-

1. Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is correct;
2. Error in the pin code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill;
3. Error in the address of the consignee to the extent that the locality and other details of the consignee are correct;
4. Error in one or two digits of the document number mentioned in the e-way bill;
5. Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned is correct;
6. Error in one or two digits/characters of the vehicle number.

 The circular is statutory in nature and is binding on the Tax Officers. Thus minor discrepancies cannot be penalized contrary to the mode and procedure contemplated under the Circular.  The Circular refers to only six instances of minor discrepancies. Strictly speaking, the present situation is not covered by the six instances mentioned in the Circular. However, the analysis of the six instances reveals those discrepancies which have no bearing on tax liability and are caused on account of bona fide mistakes like typographical errors, or otherwise are regarded as minor discrepancies.  The present case can be even brought under the broader umbrage of clause (d) of para 5 of the Circular.

In the instant case, the discrepancy pointed out is only on the date of invoice which is shown as 03.02.2021 while that shown in the e-way bill was 02.03.2021. All other details in the invoice and the e-way bill including the nature of goods transported, the details of consignor and consignee, the GSTIN of supplier and recipient, place of delivery, invoice number, value of goods, HSN code, vehicle number etc. tallied and had no discrepancy. Thus the error noticed is insignificant and not of any consequence for invoking the power conferred under section 129 of the Act to impose tax and penalty.

The High Court held that as noticed by the Division Bench of the Telangana High Court in Satyam Shivam's case (supra), the officer was duty bound to consider the explanation offered by the petitioner for the expiry of the e-way bill. The explanation offered by the petitioner has been rejected, stating that no evidence of repair being carried out has been produced.  The further justification for imposing a penalty/tax is that the petitioner had ample time to revalidate the E-way bill.  There is no finding in the order  that there was any attempt to evade tax.

The High Court allowed the writ petition and quashed impugned order.  The High Court remanded the matter back to the Authority concerned to consider the amount of penalty imposed on the petitioner taking note of this judgment and the judgment in ‘Satyam Shivam’s’ case (supra)  after affording an opportunity of hearing to the petitioner.