Presumption of intention to evade tax cannot be drawn on the basis of expiry of e-way bill validity

Brief Facts:

• The petitioner is a Private Limited Company carrying on trading business of paper. It receives supplies of paper from two companies.
• It made intra-supply of paper through a tax invoice on 04-01-2020 to a registered person and generated e-way bill on 04-01-2020. According to it, the goods were delivered to a transporter for making delivery to the consignee by an auto trolley bearing No. TS 07 UF 1008.
• The auto trolley started for delivery of the goods at 04:33 p.m. on 04-01-2020 to the consignee, but, on its way, it was stuck in traffic due to a rally protesting CAA and NRC. IT stuck their till 8:30 p.m. by which time the shop of the buyer was closed and so the auto trolley driver took the trolley to his residence with the goods so as to deliver them on the next working day. On 05-01-2020, it was a Sunday and the next working day was 06-01-2020.
• On 06-01-2020, the auto trolley was detained by the GST officials when it was out for delivery at 12:35 p.m. and a detention notice in Form GST MOV-07 dated 06-01-2020 was served alleging that the validity of the e-way bill had expired proposing to impose tax and penalty.
• The petitioner submitted representation on 08-01-2020 by enclosing copy of the Rule 138 of the CGST Rules, 2018 wherein the validity period of the e-way bill for more than 20 kms can be extended for one more additional day and also enclosed copy of the decision rendered by the Allahabad High Court in Writ Tax No. 1471 of 2018.
• The petitioner further alleges that the department passed an order on 22-01-2020 in Form GST MOV-09 ignoring the representations submitted by the petitioner and also the decision of the Allahabad High Court and mentioning that petitioner admitted that tax and penalty are payable, which is factually incorrect since the petitioner had never admitted the same.

Submission by Department:

• Rule 138(10) of the GST Act, 2017 which extended the validity of an e-way bill for one additional day and contended that the distance from the destination was less than 100 kms and so the e-way bill was valid only for an extra 24 hours; that such extension can be made 4 hours before the expiry or 4 hours after expiry, but the e-way bill of petitioner was not so extended.
• The respondent stated that he received the letter dated 08-01-2020 enclosing the judgement of the Allahabad High Court, and stated that he did not follows it because in the instant case there was a clear evidence of tax evasion.
• It was also alleged that to cover up the failure of the dealer to extend the validity of the expired e-way bill, the dealer made self-serving statements which do not prove his bona fides.
• It was also stated that, a dealer can extend the validity of an e-way bill in Part-B and the same can be sent even to the driver’s mobile phone, but the dealer willfully did not do so, and expiry of the e-way bill cannot be treated as a technical mistake.
• It was further stated that the dealer has admitted the tax and penalty and and the same.

Counter reply-affidavit by petitioner:

• They started on 06-01-2020 for delivery of goods before the expiry of the e-way bill period, and hence the detention notice issued is illegal and bad in law.
• The department’s plea that petitioner has admitted the payment of tax and penalty is absurd and baseless and he did not loon into the replies submitted by the petitioner.
• The petitioner also contended that there was no evidence of evasion of tax and pointed out that validity of the e-way bill is different from evasion of tax, and the GST officials should have noted the distinction between the two.
• The petitioner further alleged that for minor mistake of expiry of e-way bill which is beyond the control of petitioner company, it cannot levy such tax and penalty particularly when there is no dispute raised by the department about the protest rally for CAA and NRC. Resulting in traffic jam.
• There was no occasion to levy penalty as the department failed to prove any mens rea on the part of the petitioner, that penalty proceedings are quasi criminal in nature and reliance is placed on the decision of Andhra Pradesh in Delta Lubricants, Vijayawada vs. Deputy Commercial Tax Officer.

Observation of Court:

• Why the GST officials has not chosen to refer to the explanations offered by petitioner is nowhere mentioned in the counter-affidavit filed by the GST officials.
• It was the duty of the GST officials to consider the explanation offered by the petitioner as to why the goods could not have been delivered during the validity of the e-way bill, and instead he is harping on the fact that the e-way bill is not extended even 4 hours before the expiry of 4 hours after the expiry, which is untenable.
• There is no denial by the GST officials of the traffic blockage due to CAA and NRC protests preventing the movement of auto trolley. He also does not dispute that 04-01-2020 was a Saturday, 05-01-2020 was a Saturday and the next working day was only 06-01-2020.

High Court Verdict:

In our considered opinion, there was no material before GST officials to come to the conclusion that there was evasion of tax by the petitioner merely on account of lapsing of time mentioned in the e-way bill because even the GST officials does not say that there was any evidence of attempt to sell the goods to somebody else on 06-01-2020. On account of non-extension of the validity of the e-way bill by the petitioner or the auto trolley driver, no presumption can be drawn that there was an intention to evade tax. In this view of the matter, the Writ Petition is allowed. The department is directed to refund the said amount collected from the petitioner with interest @ 6% p.a. from 20-01-2020.

Read complete Judgement: tshcstatus.nic.in/hcorders/2020/wp/wp_9688_2020.pdf