State GST Officers can also search, seizure and levy penalty for violation of Central Act as provisions of the Central and State Statutes are pari materia.
After 01.02.2018, seizure / Penalty orders for alleged non-accompanying of E-Way Bill by Transporters referring to Government’s old Notification and Commissioner’s Circular quashed as not sustainable in law
ABCAUS Case Law Citation:
ABCAUS 2530 (2018) 09 HC
Various writ petitions were filed against the seizure orders and notices issued under sections 129 (1) and (3), by the State GST authorities, for transporters not accompanying E-Way Bill-01 under U P Goods and Service Tax Act 2017 (UPGST Act) read with Integrated Goods and Services Tax Act 2017 (IGST Act) and Rules framed thereunder when goods were intercepted within State of UP during Intra State or Inter State transportation.
The main ground taken was that there is no requirement of accompanying said E-Way Bill; provisions of State Act, i.e. UPGST Act and it cannot override provisions of Central Statue and, in any case, omission is only indeliberate and unintentional.
Broadly the grounds taken were as under:
(i) There was no requirement of e-way-bill under UPGST Act 2017 and Rules framed thereunder to be accompanied by the Transporters, hence, authority concerned has no jurisdiction to pass orders under Section 129 and orders impugned in this writ petition are patently without jurisdiction.
(ii) Provisions of U.P.G.S.T Act 2017 will have to sub-serve to the provision of I.G.S.T Act 2017 when goods are transported in an Inter-State transaction, which is governed by I.G.S.T Act 2017.
(iii) Fault in any case was unintentional and therefore, there could have been no seizure or imposition of penalty in the exercise of powers under Section 129.
(iv) Tax having already been paid and shown in tax invoices, there is no occasion to levy tax again on aforesaid goods and it is wholly without jurisdiction and illegal.
(v) Demand of penalty is illegal since applicable tax had already been paid prior to transportation of goods in the matters where the allegation is that e-way-bill has expired.
(vi) That the vehicle transporting the goods broke down hence, goods were transferred to another vehicle or after repair transportation resumed therefore delay was neither intentional nor deliberate and hence penalty was not attracted.
(vii) Notification no. 1014 dated 21.07.2017 prescribed e-way-bill-02 for Intra-State movement of goods and Circular no. 1102 dated 9th August 2017 prescribed 48 hours time period in respect of e-way-bill-02. On account of substitution of Rule 138 by UPGST (13th Amendment) Rules 2018 which came into force on 01.02.2018, earlier Notification dated 21 July 2017, and Circular dated 9th August 2017 became unenforceable and seizure thereafter for violation of circular dated 09 August 2017 was without jurisdiction.
(viii) Under Rule 138, power has been conferred upon State Government to specify documents which in charge of conveyance shall carry, when goods are in movement. The State Government not only prescribed e-way-bill-02 as document for intra-State movement, but also sub-delegated procedure to be prescribed by Commissioner for downloading e-way-bill-02. In the garb of prescription of procedure for downloading e-way-bill-02, Commissioner vide circular dated 9 August, 2017 also prescribed 48 hours time period during which e-way-bill-02 shall remain valid and this prescription by Commissioner is ultra-vires and beyond the power conferred upon him as it is not contemplated either under the Act or the Rules or even Notification dated 21 July, 2017 issued by State Government. Prescription of time period of validity of e-way-bill-02 could have been done only by the State Government and not the Commissioner and this power exercised by Commissioner vide circular dated 09th August, 2017 is wholly ultra-vires.
(ix) Rule 138 confers no power upon State Government to sub-delegate power to Commissioner.
(x) Commissioner in its circular dated 09th August 2017 has prescribed time period of validity for e-way-bill-01 for Inter-State movement and also for e-way-bill-02 for Intra-State movement. However, for the same distance, time period for e-way-bill-02 is only 48 hours while for e-way-bill-01 it is ten days. This distinction/different period of time is clearly discriminatory and arbitrary having no rationale and nexus with the object sought to be achieved. In any case in the substituted Rule 138 made effective from 01.02.2018, time period specified for validity of e-way-bill-01 is one day for 100 km, and, therefore, reliance on Commissioner’s Circular applying different time period is clearly illegal.
(xi) In the matter of inter-state transactions State Government cannot prescribe e-way-bill-01 and this prescription is wholly without jurisdiction. Where the transaction is inter-state, it is governed by IGST Act 2017. In the tax invoices IGST was charged and transaction is not covered under UPGST Act 2017, hence, it cannot be said that there is any contravention of provisions of UPGST Act 2017 and Rules framed thereunder.
(xii) UPGST Act 2017 is applicable to transactions within the State of U.P. i.e. Intra-state and not to the Inter-State transactions. It would be covered by the provisions of IGST Act 2017 and CGST Act 2017, hence, respondent-authorities had no jurisdiction to impose any conditions on Intra-State transactions and seizure orders and notices issued are wholly without jurisdiction.
The Hon’ble High Court observed that provisions of section 129 of CGST Act 2017 and UPGST Act 2017 which provides for detention seizure and release of goods and conveyance in-transit are similar. Further, in CGST Act 2017 as well as in UPGST Act 2017, Section 68 provides for “Inspections of goods in movement” and the provisions are pari-materia.
The Hon’ble High Court also observed that in both CGST Rules 2017 and UPGST Rules 2017 Chapter VI deals with “Tax invoices, Credit and Debit Notes.” Similarly, Chapter XVI deals with “E-Way-Bill Rules”. Rule 138 was pari-materia in both the sets of Rules as initially enacted. However vide UPGST (Fourth Amendment) Rules 2017.
The Hon’ble High Court observed that legislative changes were made in such a quick succession that field authorities could not track themselves with such changes and, hence, adhered to compliance of provisions which stood already substituted by new provisions and earlier ones had become otiose. Insistence upon petitioners, at the time of issue of seizure memos and show cause notices to have downloaded E-way-bill 01 and/or 02 and its non compliance by referring to Government’s Notification dated 21.07.2017 read with Commissioner’s Circulars dated 22.07.2017 and 09.08.2017 and also Rule 138 as substituted vide Government Notification dated 20.09.2017, though it was never imposed and made operative, was/is clearly erroneous and illegal.
The Hon’ble High Court observed that since Rule 138 which came into force on 01.02.2018 vide Notification dated 31.01.2018 provided a complete procedure itself including the Forms, Rule 138 read with all subordinate legislation namely, Government’s Notification dated 21.07.2017 and various Commissioner’s Circulars insofar as not consistent with Rule 138 (made effective from 01.02.2018), ceased to be operative on and after 01.02.2018. After 01.02.2018, Form Numbers required under Rule 138 were different than what was alleged to be non-possessed or obtained by Petitioners or Transporters, carrying goods in dispute by making reference to Government’s Notification dated 21.07.2017 and Commissioner’s Circular dated 09.08.2017.
The Hon’ble High Court opined that the Notification dated 31.01.2018 whereby Rule 138 was completely changed by substitution and made effective from 01.02.2018, escaped attention of authorities concerned, though it is this provision which had to be complied by petitioners. Unfortunately, authorities concerned have completely failed to observe the same. Among the field authorities there was a gross chaos on account of quick changes in relevant provisions, hence, authorities concerned could not appreciate, what provision is supposed to be followed by concerned person and what is actual default, if any, which has been committed by such person. This is how impugned orders had been passed under a clear misconception of non-downloading of e-way bill 01 or 02, as the case may be, though under Rule 138, which had come into force on 01.02.2018, the Form(s) required to be downloaded by Dealers or Transporters are different.
The Hon’ble High Court opined that for almost all the petitioners, when goods in transit were intercepted and impugned orders were issued, met an unauthorized act and suffered illegal order. Infact Rule 138 again stood substituted by Notification dated 26.03.2018 which has come into force on 01.04.2018 but here also sub rule (7) had not been made effective.
In the above facts and circumstances of the case, the Hon’ble High Court held that neither it could be said that Petitioners deliberately committed any fault or disobeyed law intentionally or fraudulently, particularly when respondent-authorities themselves were not very clear. It also cannot be said that there is/was any intention of evasion of tax on the part of these petitioners. In almost all the writ petitions (except one) the seizure orders, show-cause notices issued under section 129 (3) and final orders, if any, were not sustainable in law.
The Petitions were allowed to the extent that seizure orders, show-cause notices and the impugned final orders were set aside.
Regarding the one Petition, it was argued that goods were transported from Maharashtra to G N Nagar and transaction being inter-State, provisions could not have been made by State Government of UPGST Act, 2017, hence Rule 138 of UPGST Rules, 2017 read with Notification dated 21.07.2017 and Commissioner’s Circulars dated 22.07.2017 and 09.08.2017 were ultra vires.
The Hon’ble High Court opined that it is evident that the provisions of the Central and State Statutes are pari materia. Officers of State are also competent for search, seizure and imposition of penalty in respect of violation of Central Enactments. Moreover, provisions relating to search and seizure are not for the purpose of imposition of a new liability but to regulate fiscal statutory provisions in order to avoid evasion of tax.
The Hon’ble High Court noted that there was nothing to show that similar requirement of relevant documents was not provided by Central Government also in respect of inter-state transactions. His Lordship stated that there is a principle that mere mention of a wrong provision will not make an order bad, if otherwise, power exists in the Statute. Accordingly, the Hon’ble High Court rejected the contention.
The concerned Petition was dismissed.