Writ Tax No.44 of 2023

Facts of the Case

J.K. Cement Ltd., registered under the GST Act and engaged in manufacturing cement, wall putty and adhesives, dispatched five consignments of J.K. Cement White MaxX Premium White Portland Cement, WallmaxX putty and MaxX waterproof putty from Gwalior to Panna, both in Madhya Pradesh, accompanied by tax invoices and G.R. documents but no e-way bill. In transit, the vehicle briefly passed through Uttar Pradesh, where it was intercepted, and an order under Section 129(3) was passed imposing a penalty of Rs.1,75,236 for absence of an e-way bill; the first appeal was dismissed. The petitioner approached the Allahabad High Court directly, as the GST Appellate Tribunal had not yet been constituted in the State.

Issues Involved

  1. Whether a Madhya Pradesh state notification dated 14.08.2018/24.04.2018 exempting specified items from carrying an e-way bill within Madhya Pradesh applied to goods that merely transited through Uttar Pradesh.
  2. Whether the Section 129(3) penalty was sustainable absent any discrepancy in the accompanying documents or evidence of intent to evade tax.

Petitioner's Arguments

  • Counsel submitted that under the Madhya Pradesh notification, only items at serial numbers 1 to 11 required an e-way bill for movement within the state, and the goods in question were not covered, so no e-way bill was required for the Gwalior-to-Panna movement.
  • It was argued that the goods were accompanied by all requisite documents, with no discrepancy found, and that since the origination and destination were both within Madhya Pradesh, the proceedings should, at most, have been initiated under Section 122(xiv) rather than Section 129.

Respondent's Arguments

  • The Additional Chief Standing Counsel submitted that the goods were not carrying an e-way bill during transport, and that the Madhya Pradesh notification was of no help since it applied only within that State and not to Uttar Pradesh, through which the goods passed.

Court Order / Findings

  • The Court found it undisputed that the origination (Gwalior) and destination (Panna) of the goods were both in Madhya Pradesh, that tax invoices and G.R. were genuine, and that Madhya Pradesh's own notification exempted the goods from carrying an e-way bill at the relevant time.
  • Since the goods were never intended to be unloaded in Uttar Pradesh and merely transited through a short stretch of that State, the Court held that the seizure on the sole ground of a missing e-way bill, without any other discrepancy or indication of intent to evade tax, could not be sustained.
  • The impugned orders were set aside, and any amount already deposited by the petitioner was directed to be refunded within 20 days of production of a certified copy of the order. The writ petition was allowed.

Important Clarification

  • An e-way-bill exemption granted by the state of origin and destination for specified goods travels with the consignment through an intervening transit state, so a penalty cannot be founded solely on the transit state's own e-way-bill requirement where none applied at either end of the actual movement.
  • A technical fault such as a missing e-way bill, unaccompanied by any discrepancy in quantity, quality or documentation and without indication of an intent to avoid tax, does not by itself justify a Section 129 penalty.

Sections Involved

  • Section 129(3), CGST Act, 2017 — penalty for detention of goods transported in contravention of the Act.
  • Section 122(xiv), CGST Act, 2017 — penalty for transporting taxable goods without cover of prescribed documents, suggested as the appropriate lesser provision.
  • State e-way bill exemption notification (Madhya Pradesh) — exempting specified goods from the e-way bill requirement within the state.

Decision – In Favour of

The decision is in favour of the assessee, with the penalty orders set aside and refund of the deposited amount directed.

Case Details

Court: High Court of Judicature at Allahabad
Case Number: Writ Tax No.44 of 2023
Coram: Hon'ble Mr. Justice Piyush Agrawal
Date of Order: 28.08.2023

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