Power of UP Govt to required TDF for inter state goods movement-In view of two contrary judgments, matter referred to Chief Justice for constitution of Larger Bench
The instant petition(s) was filed under Article 226 of the Constitution of India challenging the authority of the State of U.P. for issuing the notification dated 21.07.2017 whereby which E-way bill-01 has been prescribed for the purposes of import of goods for an amount over and above Rs.50,000/- from outside the State of U.P. into the State of U.P. under the newly introduced provisions of Goods and Service Tax (GST) Laws. The aforesaid aforesaid requirement had been prescribed by the State under Rule 138 of the U.P. Goods and Service Tax Rules (herein short ‘GST Rules’).
ABCAUS Case Law Citation:
ABCAUS 2320 (2018) (05) HC
Important Case Laws Cited/relied upon by the parties:
M/s Ascis Trading Company v. The Assistant State Tax Officer 2017 (71) STJ 143
Sri Shaji Gregory G.S. Vs. The State of Kerala 2017 (71) STJ 164.
Satyendra Goods Transport Corporation
Ganpati Udyog Vs. C.C.T. 2012 NTN (vol. 49) 142
Balaji Timber Paints Vs. C.C.T. 2010 NTN (vol. 43) 53
P. S. Sales Pvt. Ltd. Vs. C.C.T. 2015 NTN (vol. 58) 379.
Power of UP Govt to required TDF for inter state goods movement-matter referred to Chief Justice
In the leading case, the petitioner was proprietorship concerned and was registered under the provisions of GST Laws and had been allotted GSTIN number. The petitioner manufacturing unit was situated in Uttar Pradesh (U.P.) An order was placed by the petitioner to a Delhi based company (seller) for purchase of machine. The said machine was to be dispatched by the seller situated at New Delhi to petitioner manufacturing unit at U.P. The seller situated at New Delhi issued an advance receipt evidencing purchase consideration from the petitioner towards the supply of machine.
However, due to some reason, delivery was delayed and after gap of certain period, dealer at Delhi dispatched the machine without intimating the petitioner and had also issued invoice dated 18.11.2017. The goods were being transported by Lorry receipt dated 18.11.2017 issued by the Transporter.
The vehicle was intercepted by the Mobile Squad Officials and interception memo dated 19.11.2017 was issued under Section 129(1) of the U.P. SGST Act, 2017 (the Act). The reason specified/mentioned in the aforesaid interception memo was that the goods were being transported without E-way bill.
Consequential show cause notice dated 20.11.2017 was issued under Section 129(3) of the Act which was served on the driver of the vehicle.
As claimed, the petitioner came to know about the dispatch of the goods only after interception by the Mobile Squad Authorities. Immediately after knowing the said interception and the defect indicated by the Mobile Squad Authorities, the petitioner generated E-way bill on 20.11.2017 itself. The petitioner thereafter filed his reply on 20.11.2017 and provided all supporting documents along with E-way bill which was generated by it in original.
However, on 22.11.2017, the consignment was seized eventually and penalty order was passed by the authority directing the petitioner to pay tax and penalty. The sole ground for passing the order was at the time of interception the goods were not accompanied with E-way bill-01.
Against the seizure order an appeal was preferred by the petitioner before the Additional Commissioner which was dismissed for the same reason as mentioned by the Mobile Squad Authorities.
Aggrieved the petitioner filed the instant writ and contended that the State authority had no jurisdiction to prescribe any documentation in respect of transaction which is covered under IGST Act. This issue had not been dealt with by the appellate authority. It was submitted that in view of the fact that the Tribunal contemplated under the GST Act has not yet been constituted and the fact that challenge is to a notification issued by the State of U.P., the petitioner had filed instant writ petition with a prayer that the notification dated 21.07.2017 which provides that E-way bill-01 for importing goods for more than Rs.50,000/- be quashed along with the order passed by Mobile Squad and confirmed by the appellate authority.
Thus, the contention was that under Section (xx) and Section (xv) of the IGST, provisions of CGST Act, 2017 pertaining to interception, search, imposition of interest and penalty have been made applicable to transaction covered under the IGST Act. That Section 2(9) of IGST Act as also Section 2(53) of CGST Act, defines ‘Government’ to be the ‘Central Government’. Rule 138 of the CGST empowers the Central Government, specify by means of a notification, the documents that a person incharge of conveyance carrying any consignment of goods shall carry till such time as E-way bill system is developed and approved by the council. The Act only authorizes the Central Government to specify the documents in respect of transaction covered under the IGST Act or CGST Act.
It was also submitted that the notification dated 21.07.2017 issued in exercise of power under Rule 138 of the U.P. GST Rules can be apply to transaction and movement of the goods within the State as the U.P. GST Rules are only applicable to such movements of the goods. Inter-State transaction falls within the purview of IGST Act, and it is the Central Government alone which can specify the documents that are required to be carried by transporter or other person during inter-State movements of the goods. The Central Government having not prescribed any documents in this regard, the petitioner was under no obligation to carry any documents apart from tax, invoice, challan, goods receipt etc along with consignment. It was submitted that the consignment, in question, could not be detained, seized and subjected to levy of penalty for not carrying any form/document which the State of U.P. has prescribed as it has no jurisdiction to prescribe, any document for inter-State movement of goods.
Further, it was also the contention of the petitioner that the appellant authority had recorded its reasons that the E-way bill having been downloaded after the interception of the consignment (even though produced along with the reply to the show cause notice) and should therefore be disregarded, runs contrary to several decisions of the Hon’ble Court in which it had specifically opined that the purpose of issuing show cause notice is to provide an opportunity to a dealer to remove the defects and explain its conduct, in case document furnished along with the reply to the show cause notice were not given due credence or not taken into account, the purpose of issuance of show cause notice stand defeated
It is further submitted that under Section 129(1) of the UPGST Act or the CGST Act, where “any person” transports any goods in contravention of the provisions of the Act, they are subject to detention, seizure and penalty. Section 129(4) specifically provides that no tax, interest or penalty shall be determined without giving “the person concerned” an opportunity of being heard.
The Hon’ble High Court observed that similar issue came up for consideration before Kerala, Madras and Telangana and Andhra Pradesh High Courts which have categorically held that the State Legislature or the State Government has no power to make law/rules to govern interstate movement of goods and cannot even detain a consignment for not carrying documents prescribed by them for transporting goods in the course of interstate trade.
It was observed that the petitioner had placed reliance upon a Division Bench decision of this Court wherein goods were transported from Uttarakhand to West Bengal. The consignment was intercepted at Lucknow on the ground that original TDF form was not available. The Division Bench had held that the term ‘Government’ used in Rule 138 is defined in section 2(53) of the C.G.S.T. Act 2017 to mean the ‘Central Government’, just as, under section 2(9) of the I.G.S.T. Act 2017 ‘Government’ means ‘ the Central Government’. Moreover, with respect to Goods and Service Tax in relation to inter-State Trade the Parliament alone has the authority to legislate as would be evident from the 101st Amendment to the Constitution.
However, the Department invited the attention of the Hon’ble High Court to an order passed in a Public Interest Litigation (PIL) by another Division Bench of the Hon’ble High Court which had upheld the validity of the notification dated 21.07.2017.
The Hon’ble High Court observed that prima facie, the petitioner appeared correct in submitting that Section 20 (xx) and Section (xv) of the IGST Act, when read along with the Rule 2(53) of the CGST Rules and Rule 138 of the GST Rules, provide authority to the Central Government to specify, by notification, the documents that the person in-charge of a conveyance carrying any consignment of goods shall carry while the goods are in movement or in transit storage. The temporary arrangement contemplated under Rule 138 of the CGST Rules (till such time as E-Way Bill system is developed and approved by the GST Council) contemplate the Central Government to specify the documents by issuing the notification. These provisions have been appropriately referred to by the judgments of the Madras High Court, the Kerala High Court and the Lucknow Bench. However, the contrary judgment passed by the Coordinate bench of the Hon’ble High Court did not refer to these provisions but upheld the power of the State of U.P. in issuing the notification dated 21.07.2018.
The Hon’ble High Court after perusing the memo and grounds of challenge in the said PIL observed that the submissions raised in the instant appeal(s) to challenge the authority of the State of U.P. in issuing the notification dated 21.07.2017, were not even raised before the Division Bench. The submissions now being urged were never brought to the notice of the Division Bench; the Division Bench had no opportunity to peruse the relevant statutory provisions and adjudicate upon the legality of the notification issued by the State of U.P. in that light. At the same time, the judgment passed by the Division Bench in said PIL had not been considered and discussed by the Lucknow Bench holding otherwise.
Their Lordships further observed that the judgment passed in the PIL is an unreported decision, and but for the fact that the Department had earlier defended the validity of the notification and was aware of the decision, the judgment passed by the Division Bench in the PIL would have escaped their notice too.
The Hon’ble High Court observed that there exist two judgments given by the Coordinate Benches of the Court with diametrically opposite conclusions One has affirmed the notification dated 21.07.2017 issued by the State of U.P. while the other judgment while not invalidating the notification, effectively held that the seizure and penalty imposed upon the petitioner based on the notification dated 21.07.2017 issued under Rules 138 of the U.P. GST Rules was illegal.
In view of the requirement of judicial discipline the Hon’ble High Court directed the Registry to place the papers before the Hon’ble the Chief Justice for nomination of appropriate larger Bench to decide the following questions of law:
(a) Whether the judgment of the Division Bench having not noticed the relevant provisions of the IGST Act and the CGST Act and yet affirmed the notification dated 21.07.2017 issued by the State of U.P., does not lay down the correct law and does not constitute binding precedent?
(b) Whether the judgment delivered by another Division Bench at Lucknow having not noticed the earlier Division Bench judgment can be said to have correctly nullified the impact of the notification dated 21.07.2017 issued by the State of U.P. on the ground that State of U.P. could not have prescribed any E-way bill or TDF in respect of an inter-State transaction under the Goods and Services Tax regime?
(c) Whether the State Government is empowered under Rule 138 of U.P. GST Rules to issue a notification prescribing carrying of any forms or documents along with a consignment during inter-State movement?
It was directed that the goods and the vehicle shall stand released forthwith upon the petitioner furnishing an indemnity bond for the value of the tax and penalty levied by the authorities as confirmed by the order of the first appellate authority/to the satisfaction of the Mobile Squad Officials.
Download Full Judgment Click Here >>
----------- Similar Posts: -----------
