E-simple way’s expiration The proposed legislation leaves no room for avoidance.

Court: Madras High Court Summary: The Hon’ble Madras High Court has overturned the detention order issued against the assessee due to the expiration of the E-way bill in Tvl. Thiruvannamalaiyar Transport v. the Deputy State Tax Officer & Anr. [W.P. No. 32960 of 2022 and WMP. No. 32361 of 2022 in W.P. No. 32960 of 2022 dated December 13, 2022 held that the mere expiration of an E-way bill does not open the door to evasion; hence, the Revenue Department cannot suffer a loss in the absence of avoidance. Furthermore instructed the Tax Department to release the truck and goods in exchange for the assessee paying a penalty of INR 5,000.

Citation: In W.P. No. 32960 of 2022, dated December 13, 2022, and WMP. No. 32361 of 2022

The detention order issued against the assessee due to the expiration of the E-way bill was overturned by the Honourable Madras High Court in Tvl. Thiruvannamalaiyar Transport v. the Deputy State Tax Officer & Anr. [W.P. No. 32960 of 2022 and WMP. No. 32361 of 2022 in W.P. No. 32960 of 2022 dated December 13, 2022]. held that the mere expiration of an E-way bill does not open the door to evasion; hence, the Revenue Department cannot suffer a loss in the absence of avoidance. Furthermore instructed the Tax Department to release the truck and goods in exchange for the assessee paying a penalty of INR 5,000. Facts Tvl. Thiruvannamalaiyar Transport (“the Petitioner”) was transporting a consignment of “Angles” (“the goods”) in a truck from Gummidipoondi to Ranipet when it was stopped in the early morning hours of December 2, 2022

. The truck driver was subsequently detained by notice dated December 2, 2022 (“the Impugned Notice”) under Section 129(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act According to the petitioner, Rule 138 of the Central Goods and Services Tax Regulations, 2017 (referred to as “the CGST Rules”) allows for an extension of the validity of an E-way bill within eight hours of its expiration. Also, the delivery was delayed since the truck transporting the shipment broke down and needed to be repaired. The E-way bill expired at 23:59 on December 1, 2022, however at the time of interception, 8 hours had not passed since that time. The E-way Bill portal was also stopped, making it impossible to extend the E-way bill even if the petitioner still had time to do so. The Revenue Department (“the Respondent”) argued, however, that the truck driver who was transporting the consignment failed to identify any breakdowns or repairs, and therefore no action was taken to extend the E-way bill.

This writ petition has been filed out of aggravation.

Issue Does Section 129(3) of the CGST Act allow for the detention of a vehicle carrying a consignment with an expired E-way bill?

Held In W.P. No. 32960 of 2022 and WMP No. 32361 of 2022, the Hon. Madras High Court made the following rulings:

i) Declared that if the truck had arrived at its destination unhindered, the Respondent would not have suffered a revenue loss.

ii) Argued that since there is no opportunity for avoidance given the expiration of the E-way bill, there can be no revenue loss.

iii)

Furthermore noted that, in accordance with Circular No. 10/2019, Q1/17253/2019, dated May 31, 2019, the maximum penalty of INR 5000 could be applied providing there was no breakdown and assuming the portal was operational (“the Circular”)

iv)Dismiss the contested order and the contested notice, which ordered the petitioner to pay a fine of INR 5,000 in accordance with the circular.

v) Instructed the respondent to release the truck containing the shipment once the petitioner had paid the fine.

Example 1: Cars intended for a distributor of motor vehicles are delivered to the stock yard, godown, or branch; the transporter has the required tax invoice, but the E-way bill was produced for the principal place of business/another location. In this situation, the producer or distributor would have been responsible for paying the CGST, SGST, or IGST (if there was an interstate supply). The transaction would not be considered an evasion or aiding of evasion by the simple act of delivering the goods to a location other than those specified in the paperwork. As a B2B transaction, the department would now have access to the transaction history in GSTR1.

Example 2: As instructed by the department of agriculture, a vehicle transporting fertiliser manufacturing items is dispensing the commodities at various sites. An invoice, or an invoice with a delivery challan and an E-way bill, is included with the items. As a result of delays in delivery in various sites, the E-way bill has expired. The E-way bill’s expiration does not give room for avoidance. Penalties of up to Rs. 5000/- per act must be imposed in situations like those in the examples.

The CGST Act’s Section 129(3) 

(1) Irrespective of other provisions of this Act, if any person transports any goods or stores any goods while they are in transit in violation of this Act’s provisions or 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 subject to detention or seizure and after detention, shall be released.

(2) As long as the individual conveying the items is served with a detention or seizure order, no such goods or conveyance may be detained or seized.

(3) The proper officer who is detaining or seizing goods or a conveyance shall issue a notice within seven days of the detention or seizure specifying the penalty payable, and within seven days of the date of service of such notice, pass an order for the payment of the penalty under clause (a) or clause (b) of subsection (1).

(4) No penalty under paragraph (3) shall be decided without giving the person a chance to be heard.

(5) The actions relating to the notice indicated in subsection (3) shall be deemed to be completed upon payment of the sum referred to in subsection (1).

(6) If the person transporting any goods or the owner of such goods does not pay the amount of the penalty under subsection (1) within fifteen days of the date of receipt of a copy of the order passed under subsection (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such a manner and within such a time as may be prescribed, to recover the penalty payable under subsection (3): With the proviso that the conveyance will only be released after the transporter has paid the fine specified in subsection (3) or one lakh rupees, whichever is less: Nevertheless, the appropriate officer may shorten the fifteen-day timeframe if the goods that have been seized or detained are perishable, harmful, or are likely to lose value over time.”