Reactive Compliance Does Not Cure Initial Default: Allahabad
High Court Upholds GST Penalty for Post-Detention E-Way Bill Generation
Introduction
The compliance framework
under the Goods and Services Tax (GST) regime hinges significantly on the
procedural mechanism laid down for the movement of goods, particularly the e-way
bill system. This case—M/s Aysha Builders and Suppliers vs State of U.P.
and Another—addresses a crucial aspect of e-way bill compliance: whether
the generation of an e-way bill after detention but before final
penalty order protects the consignor from penalty under GST law.
Case
Overview
- Case Title:
M/s Aysha Builders and Suppliers vs State of U.P. and Another
- Case Number:
Writ Tax No. 2415 of 2024
- Neutral Citation No.:
2025:AHC:13020-DB
- Court:
Chief Justice’s Court, High Court of Judicature at Allahabad
- Date of Judgment:
24 January 2025
Background
and Facts of the Case
M/s Aysha Builders and
Suppliers (hereinafter referred to as "the petitioner") challenged
the imposition of a penalty amounting to ₹75,600 under Section 129 of the Uttar
Pradesh Goods and Services Tax Act, 2017. The penalty arose due to alleged
non-compliance with the e-way bill requirements.
The Factual
Matrix
- The petitioner transported goods
under Tax Invoice Nos. 76 and 77, moving them in Truck No. UP 78
DN 5211 from Harjinder Nagar, Kanpur to Panki, Kanpur.
- On 04 July 2023 at 10:16 PM,
the truck was intercepted by GST enforcement authorities (respondent no.
2) for not carrying a valid e-way bill.
- The petitioner subsequently generated
the e-way bill at 10:20 PM on the same date, i.e., after the
detention.
- Despite this, a penalty order was
passed on 05 July 2023 under Section 129(3), imposing the penalty
amount.
- The petitioner filed the writ
petition after a delay of over 1.5 years, seeking relief against
this penalty.
Arguments
of the Petitioner
The petitioner contested
the penalty on the following grounds:
1. Server
Downtime Claim:
o At
the time the vehicle commenced its journey, the GST portal server was allegedly
down, preventing the generation of the e-way bill.
2. Timely
Compliance Before Final Order:
o The
petitioner emphasized that the e-way bill was generated before the penalty
order was passed, arguing that the subsequent compliance should suffice to
avoid penal consequences.
3. Reliance
on Precedent:
o Heavy
reliance was placed on the decision in Axpress Logistics India Pvt. Ltd vs
Union of India and Others (Writ Tax No. 602 of 2018), where the Allahabad
High Court had held in favor of the assessee when the e-way bill was downloaded
prior to detention.
Arguments
of the Respondents (State of U.P.)
Represented by the State
Counsel, the respondent authorities made the following key submissions:
1. Timing
of E-Way Bill Generation is Crucial:
o The
vehicle was intercepted at 10:16 PM, whereas the e-way bill was
generated only at 10:20 PM, i.e., after detention.
2. Post-Detention
Compliance is Not Enough:
o The
generation of an e-way bill post-detention defeats the purpose of the
compliance mechanism under the GST framework and cannot be used to avoid
penalty.
3. Delay
in Filing the Writ:
o The
writ petition was filed after a long delay (over 1.5 years), which casts doubt
on the petitioner’s intent and indicates the petition is an afterthought.
4. Penalty
Already Paid:
o The
penalty amount was already deposited, indicating acceptance of fault by the
petitioner at that time.
Issues for
Determination
The Hon’ble High Court
considered the following central issue:
Whether the generation of
an e-way bill after interception of the vehicle, but before passing of the
penalty order, can absolve the consignor from liability under Section 129 of
the GST Act?
Findings
and Observations of the Court
The Court analyzed the
matter meticulously and offered the following insights:
1. E-Way Bill Generation
is a Pre-Condition for Movement of Goods
- The Court highlighted that the e-way
bill regime exists to track the movement of goods in real-time and prevent
tax evasion.
- Any vehicle carrying taxable goods
must possess a valid e-way bill at the time of commencement and during
movement.
2. Post-Detention
Generation is Not a Valid Defense
- The Court found that the e-way bill
in the instant case was generated only after the vehicle was detained,
not before or during its journey.
- Thus, the e-way bill generation was reactive
to detention, not a proactive compliance step.
“Apparently, once the
vehicle without the requisite e-way bill was detained, immediately, the e-way
bill has been generated by the petitioner,” noted the Court.
3. Reliance on Axpress
Logistics is Misplaced
- The Court distinguished the Axpress
Logistics case cited by the petitioner.
- In Axpress, the e-way bill had
been generated before detention; whereas here, it was after
detention.
- Therefore, the precedent cited had no
application to the present facts.
4. Purpose of the Law
Would Be Defeated
- Accepting the petitioner’s argument
would defeat the purpose of the e-way bill regime.
- It would provide a loophole for
assessees to generate e-way bills only when intercepted and escape
penal consequences.
“Such an interpretation
would provide a handle to the assessees to generate e-way bills only in cases
where the vehicles are detained,” the Bench opined.
Judgment
and Decision
Based on the above
findings, the Court delivered its final verdict:
- The writ petition was found to be without
merit.
- The Court dismissed the writ
petition, upholding the penalty imposed by the authorities.
Conclusion:
Compliance Must Be Proactive, Not Reactive
This judgment reinforces
the importance of timely and proactive compliance under the GST regime.
The e-way bill is not a procedural nicety but a statutory requirement,
and non-compliance attracts strict consequences under Section 129 of the Act.
The Court has drawn a
clear line: once a vehicle is found in violation (i.e., without an e-way bill),
subsequent compliance cannot nullify the default. The law does not allow
rectification post-detection as a basis for exoneration.
Moreover, the case also
serves as a cautionary tale against delayed litigation and emphasizes
the principle that delay without justification dilutes the credibility of
claims.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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