Goods transported after cancellation of GST registration was sham transaction – HC

Goods transported subsequently to cancellation of GST registration was a sham transaction even though goods were accompanied by tax invoice and e-way bill.

In a recent judgment, the Hon’ble Allahabad High Court has held when the GST registration of the dealer stood cancelled by the Department, goods transported subsequently was a sham transaction though the goods were accompanied by tax invoice and e-way bill.

ABCAUS Case Law Citation:
4530 (2025) (04) abcaus.in HC

In the instant case, the assessee had filed a writ petition challenging the appellate order passed by Additional Commissioner GST.

The petitioner was a registered partnership firm, which deals in the business of subject goods which were being purchased from wholesaler, and then transported by truck/vehicle to the premises of the petitioner.

The Assistant Commissioner of GST Mobile Squad intercepted a Vehicle containing the subject goods. After physical verification, a show cause notice was issued on the ground that the goods which were being transported, though were carrying tax invoice and e-way bill, but the registration of the supplier firm had been cancelled by the Tax Authorities three weeks before in the previous month. The detention order was passed under Section 129 (3) of the Central Goods and Services Tax Act, 2017. A penalty was imposed upon the petitioner firm, against which, an appeal was preferred which has been rejected.

The Petitioner submitted that e-way bill was generated by the supplier firm and it would be presumed that when the e-way bill was generated, the supplier firm was in existence.

On the other hand, the Revenue opposed the writ petition and submitted that the tax invoice and the e-way bill were generated while the registration of the supplier stood cancelled by the Tax Authorities in the previous month. According to him, there was violation of Rule 138 of the U.P. Goods and Service Tax Rules, 2017.

The Hon’ble High Court observed that as per the provisions of Rule 138, it was 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 were there, but registration of the supplier firm had already seized as it was cancelled by the Taxing Authorities.

The Hon’ble High Court opined that once, the supplier firm was not in existence, it could not have issued the tax invoice and the transaction was 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.

Accordingly, Writ petition was dismissed.

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