E invoice not generated during despatch, Goods and Services Tax - GST

[Mani Ramamurthi]

On 31 july 2023 ( few days back ) we sent the goods without E invocie . But manual invoice and eway bill showing the correct value of goods were sent with vehicle .

vehicle was detained yesterday and the CTO official demanding 200% penalty for it .

as there is no intention of tax evasion we are pleading him not to levy . But he says we have to pay .

kindly give us the opinion and back up for the same pls .

Posts / Replies

[Shilpi Jain]

The biggest disadvantage under GST today is all these vehicle detention issues need to go to the HC to get any relief. Ideally there is no intention to evade taxes, and marginal penalty only should be levied.

However, the CTO may state that merely by not generating e-invoice there could be a possibility of evading taxes.

[Sadanand Bulbule]

Dear Sir

While agreeing with Madam Shilpi, in the circumstances explained by you, there is provision to levy penalty which may extend to Rs. 25000/- under Section 122[3][e] of the CGST Act. But in reality, the officers don't invoke such dealer friendly provision but only maximum revenue friendly under Section 129, irrespective of intent to evade tax or not. Only the proactive officers may take judicious decision, which seldom happens.

[KASTURI SETHI]

Sh.Mani Ramamurthi Ji,

Where e-invoice is mandatory, manual invoice becomes invalid despite it being accompanied by E-way bill.

. Since this lapse is on records now, you will have to defend with all remaining other evidences coupled with case laws pertaining to technical lapses. One lapse (if proved bona fide), cannot overshadow all other evidences in favour of the party.

At present it appears that there is no revenue loss and penalty is being demanded on the basis of 'mala fide intention to evade tax'. in the absence of e-invoice. If tax has not been evaded, it can be proved as technical lapse and lenient view can be taken.

I also agree with the views of experts, namely, Sh.Sadanand Bulbule Sir and Madam Shilpi Jain.

[GUNASEKARAN K]

Penalty for non generation of e-Invoice and incorrect / invalid e-invoice;

Non-issuance or incorrect issuance of e-invoice is an offence under GST and thus attracts e invoice penalty. Below is the penalty for non generation of e invoice along with the penalty for incorrect or invalid e-invoice:

1. Penalty for non generation of e invoice – 100% of the tax due or Rs.10,000, whichever is higher, for every invoice.
2. Penalty for incorrect invoicing – Rs.25,000 per invoice.

[Amit Agrawal]

"Mens Rea" is NOT an essential requirement for imposing penalty u/s 129 in my view.

Of-course, one needs to take into account entire factual aspects for each such case independently and then, arrive at best defence strategy to try to demonstrate how mistake was merely technical in nature and why there was no possibly of tax-evasion because of such mistakes.

But, I also believe that making a self-serving claim that any mistake (which has resulted into contravention of the provisions of GST Act or the rules made thereunder) was due to human lapse / error etc. will not be sufficient defence in many of these cases falling u/s 129 (such as issue under discussion here as there is no requirement of means rea to impose penalty u/s 129, in my view & considering specific requirements of Rule 138A (1)).

Lastly, in the context of your situation, please note the conflict between Rule 55A & 138A(1) of the CGST Rules, 2017. Reading both rules gives all-together different picture.

However & before jumping to any conclusion, please note that one also needs to give tax-invoice details while generating E-way Bill. And Rule 48 (4) requires generation / preparation of tax-invoice after obtaining an Invoice Reference Number (referred as E-invoice)

Considering all above, one can argue that tax-payer had a bonafide belief that disclosure of 'Tax Invoice Details' - while generating E-way Bill - was nothing but generation of e-invoice itself (i.e. obtaining an Invoice Reference Number as required u/r 48(4)) .

And this is more so because GST Portal has indeed allowed you to put said tax-invoice number & date details - while generating E-way Bill - even when there is no e-invoice generated though required u/s 48 (4) & even though portal is aware that you need to follow Rule 48 (4) before generating a tax-invoice.

Here, the conflict between Rule 55A & 138A of the CGST Rules, 2017 - read to method of generating these documents over GST portal - comes into play to substantiate one's bonafide belief.

As said before, one needs to take into account entire factual aspects for each such case independently before arriving at best defence strategy for each of cases u/s 129. Hence, it is better if one seeks an expert help before making any written submissions in such cases as well as for arriving at best defence strategy.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Dear Professional colleagues,

This is just for academic discussion:

Will Section 126 (6) creates hurdle to getting relief by way of lower penalty (i.e. penalty lesser that what is prescribed under Section 129 (1)) using Section 126?

[Amit Agrawal]

In continuation of my last post:

Second question - Does Section 129 (1) (which starts with 'Notwithstanding anything contained in this Act, ...') bars applicability of Section 126 all-together while levying penalty u/s 129?

[Sadanand Bulbule]

Dear Sri. Amit Sir

Your queries at serial number 6 & 7 are quite thought provoking. In this regard, my humble attempt is like this:

1. Section 129 of the GST Act commands to carry the prescribed documents in respect of goods in transit. In terms of Rule 138A, the documents such as tax invoice and e-way bill are required to accompany the movement of consignment of goods worth Rs. 50000/- and above. No one can deny this legal position. Section 129[1] [a] & [b] provides for levy of higher/lower amount of penalty for contravention of law under different situations.

2. Since tax payers are as human as the quasi-judicial authorities, bonafide mistakes do happen while furnishing such documents required under Section 129. Realizing this practical eventuality and to respect the “genuine transactions”, the Government of India in CBIC Circular No. 64/2018 dated 14/09/2018 has clarified certain minor discrepancies in the e-way bill/other issues and has provided remedy to address such minor discrepancies. In case of the illustrated situations in the said Circular, it is directed to levy penalty to the tune of ₹ 500/- each under section 125 of the CGST Act and the respective State GST Act (Rs.1000/- under the IGST Act).

3. It may please be noted here that, the Government of India has consciously used the word “inter alia” meaning “among other things” to indicate what is being discussed in the Circular is just one of a number of such possibilities. It means the examples narrated in the said CBIC Circular are just illustrative and not limited to those mentioned therein it. The spirit behind the Circular is benign, meaningful, purposeful and very wide open. Therefore it can’t be read narrowly for limited purpose of huge penalizing even for the minor discrepancies without there being any attempt for tax evasion. Therefore in the event of failure to issue E-tax invoice, the instructions of the said Circular area relevant. However in terms of Section 122[3][e], as already stated, for failure to issue E-tax invoice or valid tax invoice, penalty upto Rs. 25000/- may be levied.

4. Regarding the non-obstante clause in Section 129[1], umpteen number of judicial judgements are there are in favour of the tax payers. The Hon’ble Supreme Court in its landmark judgement dated 12/01/2022 rendered in the case of Assistant Commissioner of [ST] & Ors Vs. M/s. Satyam Shivam Papers Limited & Anr (2022 (1) TMI 954) has come down heavily on the authority for levying huge penalty despite there being no intent to evade tax.

5. Admittedly in the instant case, manual tax invoice and e-way bill are furnished. So there shall not be any hurdle in invoking the provision of Section 122[3][e], since the penalty is specifically prescribed for such failure.

Further in my limited understanding, the provisions of Section 126 do not come into picture since the penalty amount for such contravention is pre-fixed under the Act. In simple words, the provisions of this section shall not apply in cases where the penalty specified under this Act is either a fixed sum or expressed as a fixed percentage.

Your comments are solicited Sir

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, The querist has got sufficient legal material to defend his case. Now it is up to him/them to decide how to go ahead. Moreover, in this case experts' opinions cannot clout the nature and essence of the SCN to be issued for imposition of penalty for non-issuance of e-invoice.

How the department perceives the whole sequence of events, it is beyond one's control. No lenient bent of mind should be expected.

[Sadanand Bulbule]

True Sir. "The menu is not the meal".

[Padmanathan Kollengode]

Following issues will be a challenge in the case:-

A. While penalty u/s 122/125 are penalties in general circumstances, penalty u/s 129 is during "movement" and hence, section 129 penalty will apply when goods are intercepted and detained during the movement. (as held by Courts in recent cases)

B. Mens rea ie intention to evade tax is not required for imposing penalty under section 129 as held by Division bench of Kerala High court.

C. As per rule 48(5), the physical invoice without e-invoice will not be considered as invoice itself. To my mind, even Circular 64 will not come to rescue, as it requires both invoice and e-way bill.

D. Courts in general do not entertain detention cases unless some gross injustice/ violation by Department. Otherwise, Court would direct the petitioner to seek alternative remedy (views personal).

E. Best course of option would be to take e-invoice immediately and explain the circumstances of failure to take e-invoice to the officer.

F. if officer confirms the demand, pay 25% of penalty as pre-deposit and file an appeal. Balance amount gets stayed. But to release the vehicle and the goods, again bank guarantee would be required.

G. Most likely to get relief in First appeal in my personal experience. (again views personal)

H. One can explore possibilities of using the GSTN advisory issued in this regard giving time limit of 7 days for RP having Turnover above certain limit.

I. Point H above will not exonerate the RP from point C above but still worth trying as ground in my opinion.

[Sadanand Bulbule]

Dear Sri. Padmanathan ji

I welcome your comments. My comments including the ratio of CBIC Circular are not the desired solutions to the querist, as rightly highlighted by Sri. K L Sethi Sir, but for only academic discussion. The ball is in the court of the Proper Officer and it is for the querist to counter it effectively.

Further to add here is, in few genuine cases detained under Section 129, I got the relief of lower penalty under Section 125/122 from the highly knowledgeable Appellate Authorities. Anyway, good churning of thoughts for the general visitors.

[Padmanathan Kollengode]

Sir,

with due respect to highly knowledgeable Appellate authorities,

The Hon'ble Gujarat High Court has examined this very same issue in Synergy Fertichem Pvt Ltd vs State of Gujarat - 2019 (12) TMI 1213 - GUJARAT HIGH COURT and has held as under:-

A Close comparison of these three provisions viz. S. 122, 129 & S. 130 of the Act leave no doubt that S.122 is a general penalty section which covers certain offences enumerated therein. S. 129 talks about the very same contraventions albeit, when committed in transit. Therefore it's a specific section operates only when goods are in transit as against general penalty as provided u/s 122. In other words, provisions of S.129 alone need to be invoked when contraventions of any of the provisions of the Act are caught when goods are in transit. Because these contraventions are caught when the goods are in transit, a fast track mechanism is provided under the Scheme of the Act so as to have faster adjudication of the same in terms of subsection (2) to (5) of S.129 of the Act. So if the person so caught, pays payment of applicable tax and 100% penalty on such tax, goods are released immediately and proceedings for such contravention come to an end. The major distinction between S.129 and S.130 is that the provisions of S.129 can only be invoked when goods are in transit whereas S.130 can be invoked at any stage, much after the goods have reached their destination or even during assessment proceedings subject to of course, fulfilling its conditions. For any violation of the provisions of the Act or rules made thereunder while goods are in transit, straightway, proceedings u/s 130 cannot be initiated as has been done by the Revenue. It is only after exhausting this remedy of S.129 that recourse can be had to S.130. Provisions of S.129(6) leave little doubt about this legislative intent. As per S.129(6) if the amount demanded u/s 129(1) is not paid within 14 days, further proceedings shall be initiated in accordance with the provisions of S.130. Thus Proceedings are to be initiated as per law and in accordance with conditions of S.130.

[Padmanathan Kollengode]

Considering the finding of the Gujarat High Court, the Department might file appeal against orders wherein S.129 has been convertered in to S.122 once the Tribunal is formed.

There is various technical issues since both are two seprate proceedings as well, since it is not the crux of the query.

[Sadanand Bulbule]

Some times stepping back is the solution.

"Mudddy water is best cleared by leaving it alone"

[Amit Agrawal]

Thank you very much to my professional colleagues to adding various perspectives on the issue/s under discussion. I find them deeply engaging.

Please allow me to add my two cents (strictly as part of ongoing academic discussion):

A. Section 129 (1) reads as under:

"Notwithstanding anything contained in this Act, 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 made thereunder, 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 and after detention or seizure, shall be released

.................."

B. As said earlier, "Mens Rea" is NOT an essential requirement for imposing penalty u/s 129 in my view.

C. However, for levying penalty u/s 129 (1), there has to be a transportation of goods (or storage in transit) in contravention of act & rules thereunder.

C1. In other words, the activity of transportation of goods (by itself) should be in contravention of act & rules made thereunder for imposing penalty u/s 129(1). Each & every contravention of act / rules can not result into proceedings u/s 129 unless and until such contravention is inter-linked with the activity of transportation.

(For subsequent part of this post, situation/s about 'storage in transit' are ignored to limit scope of this discussion.)

D. Till the time, goods are duly accompanied by a valid E-way Bill & valid tax-invoice (or other valid documents, at the case may be) (In other words, when Rule 138A is complied with), no penalty can be imposed u/s 129.

D1. But of course, above position is subject to Rule 138B & 138C. If Description of goods & quantity of goods (as declared in accompanying documents u/r 138A) matches with actual goods during 'Inspection and verification of goods' by Dept. officers, same should be sufficient.

D2. Subject to compliance with Rule 138A, If any discrepancy is noticed by Dept. during 'Verification of documents and conveyances u/r 138B' OR during 'Inspection and verification of goods u/r 139C' where tax-payer can give 'logical, bonafide & reasonable explanation' (Please note that what I meant here, is explained below more elaborately), no penalty can be imposed u/s 129.

D3. This position remains even if above-said 'logical, bonafide & reasonable explanation' is found to be contrary to law & rules made thereunder.

D4. This is because such situation, in my view, are NOT falling under 'a transportation of goods in contravention of act & rules thereunder', which is pre-requisite to impose penalty u/s 129.

D5. Kindly note that I am NOT using means rea defence while sharing above views. I am just explaining scope of proceedings u/s 129 to the best of my understanding.

D6. But, What is 'logical, bonafide & reasonable explanation' will vary in each & every case depending upon nature of discrepancy observed. One should NOT generalise the same OR over-extent the principal I am trying to explain here.

D6.1 What is important is to note & understand the scope of proceedings u/s 129 first and then, evaluate whether tax-payer has given 'logical, bonafide & reasonable explanation' or not in a particular scenario.

D6.2. Let me give you some example to explain my thought process:

I) During inspection by Dept., everything is found in order except the fact that against "1,00,000 Nos' of declared goods, only "99,500 Nos' of goods were found. For reasons given above, no proceedings can be initiated u/s 129.

II) During inspection by Dept., everything is found in order except the fact that against "1,00,000 Nos' of declared goods, "1,00,500 Nos' of goods were found. For reasons given above, proceedings can be initiated u/s 129 but only for excess quantity of goods (i.e. 500 Nos.) & not for entire quantity of goods (i.e. 1,00,500 Nos) so found. But explanation like human error / bonafide mistake by loading staff etc. will NOT be 'logical, bonafide & reasonable explanation' to avoid proceedings u/s 129 altogether.

III) During inspection by Dept., everything is found in order except the fact that HSN used was wrong even though there is no dispute raised about accuracy of 'description of goods & tax-payable' as disclosed in accompanied E-way Bill & Tax-Invoice. For reasons given above, no proceedings can be initiated u/s 129.

IV) During inspection by Dept., everything is found in order except the fact that Dept. "suspects" (without any evidence) that subject goods are highly undervalued. For reasons given above, no proceedings can be initiated u/s 129.

V) During inspection by Dept., everything is found in order except the fact that there is difference in taxable value & tax-payable between valid E-way Bill & valid E-Invoice accompanying the goods. For reasons given above, no proceedings can be initiated u/s 129.

VI) During inspection by Dept., goods were found materially different than what is declared in valid E-way Bill & valid invoice accompanying them (For example, actual goods were 'cigarettes' where declared goods as per E-way Bill & Invoice were 'Rice'). This is fit case for proceedings u/s 129 (as there cannot be any 'logical, bonafide & reasonable explanation' for given situation).

VII) During inspection by Dept., everything is found in order except the fact that there is genuine dispute across industry about HSN & rate of taxes applicable to goods in transit. Here, tax-payer can give 'logical, bonafide & reasonable explanation' to support HSN & rate of tax used by him. Hence, no penalty can be imposed u/s 129 even if the dispute about 'HSN & rate of taxes applicable to subject goods' is subsequently settled in favour of Revenue by Court.

D7. For the discrepancy so noticed by Dept. (where penalty u/s 129 cannot be imposed, due to reasons explained above), proceedings under other provisions of Act (For example: Section 73, 74, 122, 125 etc., depending upon facts of each case) can be initiated by Revenue being allowed (& actually required) under the Act.

As said at the start, please treat this post as pure academic discussion and nothing beyond.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Dear Experts,

The lapse was detected on 31.7.23 and the querist posted on 04.8.23. Thereafter, we are actively expressing our views non-stop whereas the querist has been dormant since 4th August, 23. This has made me felt that we are more eager to exchange our views (with an intent to enhance our knowledge) than the querist's appetite for getting a solution.

ACTUAL PRACTICE IN THE DEPARTMENT

Whenever a case is detected in transit by the flying squad, the Officers of the department visit the business premises of the supplier and investigation is commenced. This practice has been in force since the inception of the department. The investigation can impact not only supplier but also the buyer and other parties. Thus we are not aware of the latest position and full facts and circumstances of this case. . Before implementation of E-invoices, Govt. has made all the tax-payers well aware of such provisions in advance.

In the absence of full facts and circumstances of the case/issue, experts' advice will be incomplete and may also end in smoke.

[KASTURI SETHI]

The querist should note the timing of latest views of Sh.Amit Agarwal Sir. Posted at 2.50 a.m. and very lengthy reply. He has worked so hard in the interest of the querist. Really appreciable indeed.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Your outpourings at serial no. 10 and 15 both dated 06.8.2023 is summarized by me as under:-

"You have put ocean in a pot."

Your expression in a few words is equal to one thousand words.

I feel so. It is my outpouring.

[Mani Ramamurthi]

Dear Experts

thanks a lot for all of your valuable inputs .

We met the dept today. Dept wants the submission of reply for not imposing section 129 ( 200% penalty ) with all the supporting sections and relevant judgements .

can any one help in documents preparations / submission pls , preferably from Rajasthan or Kota .

may write to // [email protected]// pls .

thanks n Regards/ Ram

[KASTURI SETHI]

Sh. Mani Ramamurthi Ji,

My humble advice is that the seeker is to take initiative and not the sought-after. You are to select an expert yourself whether located in Rajasthan or outside ; whether from TMI panel or outside. You should be concerned with the quality and not with the location whether near your city or far away.

[Dinesh Kirubhakaran]

Dear All,

First of all, I would like to thank everyone to given their detailed view on the e-invoice, can any one through some light on the “Updated Advisory: Time limit for Reporting Invoices on the IRP Portal dated -13.04.2023”

1. It is to inform you that it has been decided by the Government to impose a time limit on reporting old invoices on the e-invoice IRP portals for taxpayers with AATO greater than or equal to 100 crores.

2. To ensure timely compliance, taxpayers in this category will not be allowed to report invoices older than 7 days on the date of reporting.

3. Please note that this restriction will apply to the all document types for which IRN is to be generated. Thus, once issued, the credit / Debit note will also have to be reported within 7 days of issue.

4. For example, if an invoice has a date of April 1, 2023, it cannot be reported after April 8, 2023. The validation system built into the invoice registration portal will disallow the user from reporting the invoice after the 7-day window. Hence, it is essential for taxpayers to ensure that they report the invoice within the 7-day window provided by the new time limit.

5. It is further to clarify that there will be no such reporting restriction on taxpayers with AATO less than 100 crores, as of now.

6. In order to provide sufficient time for taxpayers to comply with this requirement, which may require changes to your systems, we propose to implement it from 01.05.2023 onwards.

Why department has added confusion by given like kind of above advisory, how we can view above advisory with the CGST Rule 48(4) and 138A(2) ?

Thanks

V.K Dinesh