UP Govt has no power to require TDF for inter state goods movement, seizure for want of TDF declared illegal

UP Govt has no power to require TDF for inter state goods movement. Seizure of vehicle for want of TDF was illegal as E-way Bill System was not notified by Central Govt.-Allahabad High Court

UP Govt had no power to require TDF for inter state goods movement. Seizure of vehicle for want of TDF was illegal as e-way Bill System was not notified by Union Govt.

ABCAUS Case Law Citation:
ABCAUS 2290 (2018) (04) HC

The instant writ petition was filed by the petitioner assessee under Article 226 of the Constitution of India seeking a writ of certiorari quashing the orders of seizure under section 129(1) as well as imposition of tax and penalty under section 129(3) of the U.P. Goods and Services Tax Act 2017 (UPGST Act).

The Petitioner was a transporter carrying Coolers from the State of Uttarakhand to to a company located in Calcutta, West Bengal under a Tax Invoice. Integrated Goods and Services Tax (IGST) at the rate of 28% was duly paid on the said inter-state supply of goods.

power to require TDF for inter state goods movement

During the course of movement of these goods through the State of U.P. the consignment was intercepted at Lucknow on 17.12.2017 and the goods as well as documents were checked, whereupon, a Tranzit Declaration Form (TDF Form) was presented, which, on examination, was found to be related to another vehicle and another transportation pertaining to different goods. Accordingly, the truck alongwith the goods was seized on the same date, as, it was not carrying genuine and original TDF Form.

Proceedings under section 129 of the UPGST Act 2017 were undertaken against the truck-driver. After issuance of notice of seizure on 17.12.2017 a show-cause notice under section 129(3) of the UPGST Act 2017 was issued to the truck-driver on the same date. A reply to the said notice was submitted by the Transporter on 3.1.2018, thereafter, an order under section 129(3) for payment of tax and penalty under clause (b) of section 129(1) was passed by the proper officer.

The contention of the petitioners was that the driver was retained by the Transporter for transporting the goods in question, when the aforesaid incident occurred. The contention was that the transaction was one of inter-State supply of goods, therefore, it was covered by the Integrated Goods and Services Tax Act 2017 (IGST Act 2017) and as per section 20 (xv) thereof, in matters of inspection, search, seizure and arrest, provisions of the Central Goods and Services Tax Act 2017 (‘CGST Act 2017) were applicable.

As per section 68 of the CGST Act 2017, inter alia, Government may require, the person in charge of a conveyance carrying any consignment of goods of value exceeding such amount as may be specified, to carry with him such documents and such devices as may be prescribed. This prescription is contained in Rule 138 of the Central Goods and Services Tax Rules 2017 (CGST Rules 2017), but, no notification had been issued by the Central Government under the said rule specifying the documents that a person in charge of a conveyance carrying any consignment of goods shall carry while the goods are in movement or in transit storage, therefore, the rule was practically inoperative and there was no requirement of carrying any such document on the relevant date i.e. 17.12.2017. The invoice and other documents which were being carried were sufficient for the purpose of transportation, especially as, they revealed that it was an inter-State supply of goods and the IGST. at the rate of 28% had already been paid. 

As regards the allegation of a fabricated TDF Form being carried by the driver it was submitted that the driver was an uneducated person and at the time of entry of the vehicle in the State of U.P. under a misconception he got a TDF Form downloaded from a cyber-cafe, which contained some incorrect details on account of lapse on the part of Cyber Cafe Owner, but there was no mala fide at all in this regard. In fact, the TDF Form was not required to be carried as it was an inter-state supply of goods.

On the other hand, the Department contended that under section 6 of the CGST Act 2017 there was a provision for cross empowerment of the State Authorities under the State Goods and Services Tax Act to function as ”proper officers’ for the purposes of the CGST Act also. Likewise a similar provision existed in the UPGST Act 2017. Furthermore it was contended that both the Acts being applicable and there being a notification dated 21.7.2017 under Rule 138 of the UPGST Act 2017 prescribing a TDF Form in case of transportation of taxable goods valuing Rs. 5000.00 or more from a place outside Uttar Pradesh to a place outside the State i.e. in the event of inter-State trade and the same not having been complied, action of seizure and imposition of penalty under section 129 of UPGST Act 2017 was clearly in accordance with law and did not suffer from any error and it did not warrant any interference by the Hon’ble High Court. 

The Hon’ble High Court observed that while section 67 of CGST Act 2017 deals with the power of inspection, search and seizure, section 68 deals with inspection of goods in movement. It was noted that in terms of the section 68, the Government under Rule 138 of CGST Rules 2017 has specified “e-way bill’ as the document to be kept by the person in charge of a conveyance carrying consignment of goods of specified value.

The Hon’ble High Court observed that the relevant rules refer to an E-way bill System which was to be developed by the GST. Council and it provided for an interim arrangement by the Government till an E-way Bill System is so developed and approved. The words “Government” used therein is defined in section 2(53) of C.G.S.T. Act 2017 to mean the “Central Government”.

It was also observed that on the date of interception of the vehicle in question E-way Bill System had not been developed, therefore, the documents which were required to be carried during movement of any consignment of goods were those which may have been notified by the Central Government under Rule 138 of the CGST Rules 2017, as, by virtue of section 20(xv) thereof, it was this rule which was applicable to matters pertaining to IGST Act 2017. Neither the State of U.P. nor the Government of India has brought on record any such notification which may have been issued prescribing the relevant documents to be carried in the course of such movement as is referred in section 68 of the CGST Act 2017 and Rule 138 of the CGST Rules 2017. In fact, the counsel for the Government of India made a categorical statement on the basis of instructions that TDF Form was not required to be carried for movement of inter-State goods to which the IGST Act 2017 applies. In fact, E-way Bill system was to come into force from 1.2.2018, but, the notification dated 29th December 2017 was rescinded by a subsequent notification dated 2.2.2018. Thereafter the notification dated 7th March 2018 has been issued regarding E-way Bill System. 

Thus, the Hon’ble High Court observed that the E-way bill system has been prescribed only recently by a notification of the Government of India dated 7th March 2018 whereby Rule 138 of the CGST Rules 2017 has been amended and other Rules have been incorporated in this regard. These amendments are to come into force from a date to be specified by the Central Government. 

The Hon’ble High Court opined that on the date of incident i.e. 17.12.2017 neither there was any E-way Bill System nor any notification by the Central Government under Rule 138 of the C.G.S.T. Rules 2017 requiring the carrying of a TDF Form or any other such document in the course of inter-State supply/movement of goods, as such, the very basis for passing the impugned orders and taking action against the petitioner as impugned herein is apparently erroneous and illegal. In view of the above it cannot be said that there was any intent to evade tax. 

As regards the contention that UP Govt. notification dated 21.7.2017 issued under Rule 138 of the UPGST Act 2017 prescribe a TDF Form , the Hon’ble High Court opined that it is only the Government of India which is empowered to issue such a notification in respect of inter-State trade under section 20(xv) of the IGST Act 2017 read with section 68 of the CGST Act 2017 and Rule 138 of the CGST Rules 2017 made thereunder, as, the term ”Government’ used in Rule 138 is defined in section 2(53) of the CGST 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.

The Hon’ble High Court opined that in view of the above, on the relevant date i.e. 17.12.2017 there was no requirement of carrying TDF Form-1 in the case of an inter-State supply of goods. In fact on the relevant date there was no prescription of the documents to be carried in this regard under Rule 138 of the CGST Act 2017, accordingly, the seizure and penalty imposed upon the petitioners based on the notification dated 21.7.2017 issued under Rule 138 of the UPGST Act 2017, which was not applicable, was clearly illegal. 

The Hon’ble High Court observed that the fact that the authorities under the State Act were empowered to exercise the powers under the CGST Act 2017 is inconsequential, as, it is not their jurisdiction to exercise power of seizure which is under question, but, the manner in which they have exercised it on the basis of an inapplicable provision of law, as, they have proceeded on the presumption that TDF Form-1 prescribed under a notification issued by the State Government under Rule 138 of the Rules made under the UPGST Act 2017, was required to be carried, which is not the requirement in law.

Also, As regards the provisions of section 129 UPGST Act 2017 under which the impugned action had been taken, the Hon’ble High Court opined that the same was not applicable to an inter-State trade or commerce.

Further, the Hon’ble High Court observed that alongwith the consignment of goods the driver was carrying an invoice which mentioned that the goods were being taken from the State of Uttarakhand to the State of West Bengal, therefore, it was an inter-State trade and there was nothing on record to show otherwise. The assertion that IGST had already been paid, had also not been denied by the opposite parties nor that both the consignor and consignee are registered dealers. Moreover, the requisite details having been mentioned in the invoice etc. the same would be verified at the point of destination and accordingly the matter would be scrutinized as regards the liability of Tax. The notification dated 21.7.2017 issued by the State Government under Rule 138 of the UPGST Rules 2017 made under section 164 of the UPGST Act 2017 was clearly inapplicable for the reasons already mentioned earlier. There was no intent to evade tax. 

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