Absence of E-Way Bill Alone Does Not Justify Harsh Penalty:
Allahabad High Court Grants Interim Relief to RR Enterprises
Introduction
and Summary
The Allahabad High Court,
in a significant interim relief to the petitioner, M/s R.R. Enterprises, held
that mere absence of an e-way bill cannot, by itself, establish an intent to
evade tax, especially when other valid documents like tax invoices are
present. The Court also clarified that when the owner of goods steps forward
to claim them, the applicable penalty provision under GST is Section 129(1)(a),
not the harsher 129(1)(b), which applies when ownership is disputed.
This decision offers a
pragmatic and balanced interpretation of GST law, particularly in the
context of goods-in-transit and procedural lapses, and restrains the use of unreasonable
penalties for mere documentation shortcomings.
Case
Overview
- Case Title:
Shri Raju Ujir / M/s R.R. Enterprises vs. State of U.P. and Others
- Case Number:
Writ Tax No. 1834 of 2025
- Court:
High Court of Judicature at Allahabad, Court No. 10
- Presiding Judge:
Hon’ble Justice Piyush Agrawal
- Date of Order:
6 May 2025
Factual
Background
1. Movement
of Goods and Interception: M/s R.R. Enterprises was
transporting goods from Delhi to Telangana when the consignment was
intercepted in Agra, Uttar Pradesh by Mobile Squad Unit-10 of the State
Tax Department.
2. Ground
for Detention: The goods were detained solely on the
ground that no e-way bill was available at the time of interception, even
though the tax invoice and other supporting documents were available.
3. Show
Cause Notice and Penalty Order: On 9 March 2025,
a show cause notice was issued under Section 129 of the CGST Act, and soon
thereafter, a penalty order of ₹94,50,000 was passed under Section
129(1)(b).
4. Appeal
and Dismissal: The petitioner filed an appeal before
the Additional Commissioner Grade-2 (Appeal)-III, Agra, which was
dismissed on 8 April 2025, leading to the current writ petition.
5. GST
Registration History: The petitioner’s registration had
been suspended on 22 February 2025 but was subsequently restored. It
was emphasized that as of the date of detention (9 March 2025), both the supplier
and recipient were validly registered.
Petitioner’s
Submissions
Appearing for the
petitioner, Ms. Akashi Agrawal made a series of well-founded arguments,
focusing on the nature of the breach and proportionality of the penalty:
1. No
Malafide or Tax Evasion: The goods were accompanied by a
valid tax invoice, and the e-way bill omission was inadvertent.
This alone cannot be taken as sufficient evidence of tax evasion.
2. Circular
Dated 31.12.2018 – Ownership Definition: The petitioner relied
on Clause 6 of the CBIC Circular dated 31.12.2018, which clarifies that:
If the invoice or any
specified document accompanies the consignment, then either the consignor or
consignee shall be deemed to be the owner for the purpose of Section 129(1).
3. Ownership
Not Disputed – Apply Section 129(1)(a): Since the petitioner
(seller) came forward to claim ownership of the goods, Section 129(1)(a)
should have applied. This would permit release of goods on payment of tax
and penalty equivalent to 200% of tax payable.
4. Appeal
Dismissed Without Proper Consideration: The appellate authority
failed to adequately address the applicability of Section 129(1)(a),
misapplied legal standards, and upheld an excessive penalty without examining
intent or ownership.
5. Registration
Valid at Relevant Time: Although the recipient’s
registration was later cancelled on 30 April 2025, both supplier and buyer were
registered at the time of seizure, negating any argument that the
transaction was fictitious or non-genuine.
Respondents’
Position
The learned Additional
Chief Standing Counsel did not dispute the factual submissions made by
the petitioner. Importantly:
- No alternate circular or provision
was cited that contradicted the petitioner’s reliance on the 2018 CBIC
Circular.
- The registration restoration and
ownership claim were not rebutted.
- No evidence of intent to evade
was furnished, despite the magnitude of the penalty imposed.
Court’s
Observations and Interim Directions
The Hon’ble Court, after
examining the facts and legal submissions, made the following key observations:
1. Prima
Facie Case in Favor of Petitioner: The documentary
compliance (except e-way bill) and the petitioner's proactive role in
claiming ownership made a strong prima facie case in favor of the
petitioner.
2. Requirement
of Section 129(1)(a) Fulfilled: Since the owner of the
goods had come forward, the case attracted Section 129(1)(a), not
129(1)(b), which is harsher and applies when ownership is not established.
3. Balance
of Convenience and Irreparable Injury: With high-value goods
under detention and no valid justification for a penalty of ₹94.5 lakh, the Court
found it necessary to grant interim relief.
4. Conditional
Release Ordered: The Court ordered that:
o The
goods shall be released forthwith, provided the petitioner complies with
Section 129(1)(a) (i.e., payment of applicable tax and 200% penalty).
o For
the balance amount (if any), the petitioner may furnish non-cash
security, such as a bond or indemnity, to the satisfaction of the
authority.
5. Further
Proceedings: The Court fixed a six-week deadline
for the respondents to file a counter affidavit. The case is
scheduled to be listed again in July 2025 for further hearing.
Key Legal
Takeaways
This order underscores
critical aspects of GST adjudication concerning goods in transit:
1. Absence of E-Way Bill
≠ Tax Evasion
- While the e-way bill is a statutory
requirement, its absence alone cannot automatically imply
evasion.
- The Court placed emphasis on the intent
and surrounding circumstances, not just formal defects.
2. Ownership Determines
Penalty Provision
- Under Section 129(1):
- Clause (a)
applies if the owner steps forward.
- Clause (b)
applies if the owner is not known or does not claim the goods.
- This distinction is crucial in deciding
the quantum and mode of penalty.
3. Circulars Have Binding
Effect
- The Court gave due weight to Clause
6 of the CBIC Circular dated 31.12.2018, indicating its binding nature
on tax authorities.
4. Judicial Oversight on
Arbitrary Penalties
- The judgment acts as a check on
administrative excesses, especially where massive penalties are
levied without proper application of mind.
Conclusion
The Allahabad High
Court’s interim order in M/s R.R. Enterprises vs. State of U.P. reflects
a balanced approach that favors reasoned compliance over blind penalization.
It upholds the taxpayer’s rights when procedural lapses do not result in
revenue loss or fraud.
The decision serves as a reminder
to authorities that penalties must be proportionate, justified, and
procedurally sound. At the same time, it encourages businesses to ensure
full documentation, especially in transit situations, to avoid unnecessary
legal complications.
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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