2025 (4) TMI 1053 - HC - GST

Challenge to penalty order - detention of goods - Requirement of person in-charge of a conveyance is statutorily required to carry a physical copy of the tax invoice under the West Bengal Goods and Service Tax Rules 2017 - HELD THAT - Section 68 of the 2017 Act deals with inspection of goods in movement. Sub-section 3 of Section 68 empowers the intercepting officials to require the person in charge of the conveyance to produce the documents prescribed and upon being required to do so the said person shall be liable to produce the documents and devices and also allow the inspection of the goods. Clause (a) of sub-Rule (1) of Rule 138A of the 2017 Rules states that the person in-charge of a conveyance shall carry the invoice or bill of supply or delivery chalan as the case may be. Clause (b) of sub-Rule (1) of Rule 138A speaks of a copy of the e-way bill. Sub-Rule 2 of Rule 138A deals with invoices issued in the manner prescribed under Sub-Rule (4) of Rule 48. It states that such invoice may be produced electronically for verification by the proper officer in lieu of physical copy of such tax invoice - Upon a conjoint reading of Sub-Rule 1(a) and Sub-Rule 2 of Rule 138A of the 2017 Rules this Court holds that the person in-charge of a conveyance shall carry the physical copy of the tax invoice except in cases falling under sub-Rule (2) of Rule 138 A of the 2017 Rules. It is well settled that mere change of route or even if the conveyance is intercepted at a location which may not be en route geographically as per the declaration made in the e-way bill cannot be a ground for invocation of the provisions of Section 129 of the 2017 Act as no inference can be drawn in such cases that there was intention to evade taxes. It is not in dispute that the e-way bill was produced at the time of inspection of the goods carried by the conveyance. It is not the case of the revenue that there is any discrepancy as to the quality or quantity of the goods as mentioned in e-way bill with that found at the time of physical inspection of the goods which were in the conveyance. The Hon ble Division Bench in Ashok Sharma 2025 (2) TMI 1002 - CALCUTTA HIGH COURT held that in case there is no dispute as to the quantity or quality of the goods and also that there is no intention to evade payment of tax the provision under Section 129 of the 2017 Act could not have been invoked. Conclusion - The person in-charge of a conveyance shall carry the physical copy of the tax invoice except in cases falling under sub-Rule (2) of Rule 138 A of the 2017 Rules. The order passed by the appellate authority dated January 16 2025 affirming the penalty order passed by the original authority dated May 2 2024 are set aside. The writ petition stands allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the person in-charge of a conveyance is required to carry a physical copy of the tax invoice under the West Bengal Goods and Service Tax Rules, 2017, or whether an electronic image of the tax invoice on a mobile device suffices as compliance with Rule 138A of the 2017 Rules.

- Whether mere deviation from the declared route in the e-way bill can be a valid ground for imposing penalty under Section 129 of the West Bengal Goods and Service Tax Act, 2017 (the 2017 Act).

- Whether the provisions of Section 129 of the 2017 Act can be invoked in the absence of any intention to evade payment of tax or any discrepancy in the quantity or quality of goods transported.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Requirement of Physical Copy of Tax Invoice under Rule 138A of the 2017 Rules

Relevant Legal Framework and Precedents: Section 68(3) of the 2017 Act empowers officials to require the person in-charge of a conveyance to produce prescribed documents and allow inspection. Rule 138A of the 2017 Rules mandates that the person in-charge of a conveyance shall carry (a) the invoice or bill of supply or delivery challan, and (b) a copy of the e-way bill or e-way bill number, either physically or via RFID device. Sub-Rule (2) of Rule 138A allows for electronic production of invoices only if issued under the manner prescribed in Sub-Rule (4) of Rule 48, i.e., via a QR code with embedded Invoice Reference Number (IRN).

The petitioner relied on a coordinate Bench decision which held that an image of the tax invoice on a mobile device suffices compliance. The petitioner argued that physical carriage of the invoice is not mandatory if the electronic image is available.

Court's Interpretation and Reasoning: The Court undertook a conjoint reading of Sub-Rule 1(a) and Sub-Rule 2 of Rule 138A and concluded that physical carriage of the tax invoice is mandatory except in cases where the invoice is issued electronically as per Sub-Rule (4) of Rule 48. Since the petitioner did not produce the tax invoice electronically in the prescribed manner, the person in-charge was under a statutory obligation to carry the physical copy.

The Court distinguished the petitioner's contention that displaying an image on a mobile device suffices, holding that this does not meet the statutory requirement under Rule 138A(1)(a). The Court's view aligns with the coordinate Bench decision but finds that the facts here do not meet the exception allowing electronic production.

Key Evidence and Findings: The person in-charge failed to produce the physical tax invoice at the time of interception, nor was the tax invoice produced electronically in the prescribed manner.

Application of Law to Facts: The statutory obligation to carry the physical tax invoice was not complied with, justifying the detention of goods and imposition of penalty.

Treatment of Competing Arguments: The petitioner's reliance on electronic image production was rejected for lack of compliance with the specific statutory exception. The State's argument that physical documents must be produced was accepted.

Conclusion: The person in-charge was required to carry the physical tax invoice, and failure to do so constituted non-compliance under Rule 138A(1)(a).

Issue 2: Validity of Penalty Imposition for Deviation from Declared Route in E-Way Bill

Relevant Legal Framework and Precedents: The show-cause notice alleged the vehicle was intercepted at a location not en route as per the e-way bill declaration. The petitioner argued that mere deviation in route cannot be a ground for penalty under Section 129 of the 2017 Act. The petitioner cited two High Court decisions: one from Karnataka holding that deviation in route does not imply tax evasion, and another from Allahabad holding that under GST there is no obligation to disclose the route, unlike under the VAT Act.

Court's Interpretation and Reasoning: The Court noted that neither the 2017 Act nor the Rules impose any obligation on the selling dealer to disclose the route of transportation. The Court relied on the Allahabad High Court decision which held that the absence of a statutory provision requiring route disclosure means that deviation from the declared route cannot justify seizure or penalty.

The Court further referred to the Karnataka High Court decision which held that mere change of route or interception at a non-en route location does not establish an intention to evade tax, which is a necessary condition for invoking Section 129.

Key Evidence and Findings: The e-way bill was produced at the time of inspection; there was no dispute regarding the quantity or quality of goods. The revenue did not allege any discrepancy in tax payment or evasion.

Application of Law to Facts: Since the e-way bill was produced and no tax evasion was alleged or established, deviation from the route declared in the e-way bill cannot be a ground for penalty.

Treatment of Competing Arguments: The State could not point to any statutory provision mandating route disclosure or penalizing route deviation. The Court rejected the State's contention that route deviation justified penalty.

Conclusion: Deviation from the declared route in the e-way bill, without evidence of tax evasion or discrepancy in goods, does not warrant penalty under Section 129 of the 2017 Act.

Issue 3: Invocation of Section 129 of the 2017 Act in Absence of Intention to Evade Tax

Relevant Legal Framework and Precedents: Section 129 of the 2017 Act deals with detention, seizure, and release of goods and conveyances in cases of tax evasion or non-compliance. The petitioner relied on a Division Bench decision of this Court which held that Section 129 cannot be invoked if there is no dispute as to quantity or quality of goods and no intention to evade tax.

Court's Interpretation and Reasoning: The appellate authority did not find any intention on the petitioner's part to evade tax. The petitioner annexed a copy of the tax invoice, and the revenue did not dispute its veracity or allege any short payment of tax.

Key Evidence and Findings: No discrepancy in goods or tax payment was established; the tax invoice was available though not physically produced at the time of interception.

Application of Law to Facts: Without evidence of tax evasion or discrepancy, the penalty under Section 129 was not justified.

Treatment of Competing Arguments: The State relied on non-production of physical documents and route deviation, but did not establish intention to evade tax. The Court favored the petitioner's argument based on absence of evasion.

Conclusion: Section 129 cannot be invoked in the absence of intention to evade tax or discrepancy in goods or tax payment.

3. SIGNIFICANT HOLDINGS

- "Upon a conjoint reading of Sub-Rule 1(a) and Sub-Rule 2 of Rule 138A of the 2017 Rules, this Court holds that the person in-charge of a conveyance shall carry the physical copy of the tax invoice, except in cases falling under sub-Rule (2) of Rule 138 A of the 2017 Rules."

- "It is not the case of the petitioner that the tax invoice was produced electronically. Therefore, the person in-charge of the conveyance was under a statutory obligation to carry the physical copy of the tax invoice."

- "There is no provision which casts an obligation upon the selling dealer to disclose the route to be taken during the transportation/movement of goods."

- "Mere change of route or even if the conveyance is intercepted at a location which may not be en route geographically as per the declaration made in the e-way bill, cannot be a ground for invocation of the provisions of Section 129 of the 2017 Act as no inference can be drawn in such cases that there was intention to evade taxes."

- "In case there is no dispute as to the quantity or quality of the goods and also that there is no intention to evade payment of tax the provision under Section 129 of the 2017 Act could not have been invoked."

- The Court set aside the penalty order and appellate order affirming it, allowing the writ petition and directing refund of penalty paid.