GST Vidhi | GST Case Law

Seizure of Goods Without Proper Understanding of E-Way Bill Requirements During Transition Period Quashed

Summary of the Case

In a critical judgment dated 26 November 2024, the Allahabad High Court protected the rights of taxpayers who were unfairly penalized during the early transitional period of the GST regime. In M/s Manas Enterprises vs. State of U.P. and Others, the Court quashed the seizure and penalty orders imposed merely because a State E-way Bill was not available at the time of goods interception. The Court ruled that during the period February 1, 2018, to March 31, 2018, the requirement of a State E-way Bill under the UP GST Rules was not enforceable, and the goods were correctly accompanied by a valid Central E-way Bill. Referring to precedents like Godrej and Boyce Manufacturing Co. Ltd. and Varun Beverages Ltd., the Court firmly ruled in favor of the taxpayer, ensuring justice where transition confusion could have otherwise led to unfair penalties.

1. Case Overview

• Case Name: M/s Manas Enterprises vs. State of U.P. and Others
• Case Number: Writ Tax No. 415 of 2020
• Neutral Citation: 2024:AHC:185351
• Date of Judgment: 26 November 2024
• Court: High Court of Judicature at Allahabad (Lucknow Bench)

 

2. Background and Facts

M/s Manas Enterprises, a registered GST dealer, engaged in the business of unmanufactured tobacco, faced punitive action while transporting goods.

Transaction Details:

• The petitioner sold goods to M/s Sai Industries, Odisha.
• The transport details were:
• Tax Invoice No.: 001/016 dated 21.03.2018
• Central E-Way Bill No.: 421002598045 dated 17.03.2018
• Transporter: Kaimganj Delhi Transport Company, Vehicle No. UP 64 H 7562.

Sequence of Events:

• During transit on 17.03.2018, the goods were intercepted by GST authorities.
• At the time of interception, the Central E-way Bill was present, but the State E-Way Bill (UP GST EWB-01) was allegedly missing.
• Based on this, the goods were detained, and a seizure order was issued under Section 129(3) on the same date.
• A downloaded copy of the E-way Bill-01 was later produced on 18.03.2018.

Despite this, the authorities passed:

• Penalty Order dated 18.03.2018, and
• Appeal Dismissal Order dated 29.07.2019 (Defective Appeal No. 28/18).

Thus, the petitioner approached the High Court.

3. Legal Issues Raised

The case involved several important legal questions:

1.    Whether, during February–March 2018, a State E-way Bill was mandatorily required under UP GST Rules?

2.    Whether detention and penalty were justified when a valid Central E-way Bill was available?

3.    Whether the appellate authority erred in dismissing the appeal mechanically without addressing the substantive issues?

4.    Whether principles laid down in earlier Division Bench judgments applied to the facts?

4. Submissions by the Petitioner

Mr. Rishi Raj Kapoor, learned counsel for the petitioner, argued:

• At the time of interception, the Central E-way Bill was available, fulfilling the legal requirement.
• The requirement for a separate UP State E-way Bill during that period (February 1, 2018, to March 31, 2018) was not enforceable.
• Confusion existed during the transition from VAT regime to GST regime regarding document requirements.
• The authorities wrongly detained goods and imposed penalty in violation of settled legal principles.
• Strong reliance was placed on:
• M/s Godrej and Boyce Manufacturing Co. Ltd. vs. State of U.P. and others (2018 UPTC Vol 100, p.1206).
• M/s Varun Beverages Limited vs. State of U.P. and others (Neutral Citation No. 2021:AHC:117492-DB).
• Further, he argued that denial of appeal on technical delay grounds compounded the injustice.

5. Submissions by the Respondent

The State, through Additional Chief Standing Counsel Mr. Ravi Shanker Pandey, submitted:

• The goods were not accompanied by all necessary documents, particularly State E-way Bill.
• Hence, authorities were justified in seizing the goods and imposing penalties.
• Cited judgments like:
• M/s Garg Enterprises vs. State of U.P. (2024:AHC:9851), and
• M/s Yadav Steels vs. Additional Commissioner (2024:AHC:26169), arguing that appeals filed beyond limitation could not be entertained.

However, crucially:

• They could not dispute that the Central E-way Bill was available at the time of interception.

6. Relevant Legal Framework

Section 129 of CGST Act, 2017

• Deals with detention, seizure, and release of goods in transit.
• Focuses on absence of documents or intention to evade tax.

Notification and Circulars

• During February 1, 2018, to March 31, 2018, the requirement for UP E-way Bill was not legally enforced.
• Only the Central E-way Bill mechanism was operational during this transition.

Relevant Precedents:

• M/s Godrej and Boyce Manufacturing Co. Ltd.: State-specific E-way bills were not enforceable during transitional GST phase.
• M/s Varun Beverages Limited: Held that possession of Central E-way Bill was sufficient during early GST rollout phase.

7. Court’s Analysis and Findings

Justice Piyush Agrawal systematically examined the facts and law:

Key Observations:

• Central E-way Bill was duly available at the time of interception.
• Requirement of UP E-way Bill during February–March 2018 was not enforceable.
• No allegation or proof of intent to evade tax was presented by the Revenue.
• The authorities’ action ignored the binding Division Bench rulings.

Justice Agrawal noted:

"Once the said fact (availability of Central E-way Bill) is not disputed, neither the detention order nor the penalty order was justified."

Further, regarding the dismissal of appeal, the Court found:

• Denial on mere technicality (delay in filing) was unjustified, especially when substantive justice was at stake.

8. Judgment and Final Order

Based on the above, the Court ruled:

• Penalty Order dated 18.03.2018 and Appeal Dismissal Order dated 29.07.2019 are quashed.
• The writ petition is allowed.
• The State authorities are directed to refund any amount deposited by the petitioner within one month from the date of receipt of the certified copy of this order.

Thus, full relief was granted to M/s Manas Enterprises.

9. Conclusion

This case reiterates important GST principles:

• During transitional periods, substantial compliance (availability of Central E-way Bill) suffices.
• Procedural rigidity cannot be allowed to defeat substantive rights.
• Authorities must keep in mind judicial precedents and ground realities of new law rollouts before enforcing penalties.
• Natural justice requires proportionality and fairness, even where technical lapses are alleged.

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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