Introduction
One of the main objectives of the Government for introduction of the Goods and Services Tax (hereinafter referred to as “GST”) was to facilitate the businesses by easy movement of goods across the country.
Alongside, a proper system of documentation of the movement of goods was to be developed. Hence, the concept of an Electronic Way Bill (hereinafter referred to as “E-Way Bill”) was introduced.
The issuance of an E-Way Bill is mandatory for a registered person under GST, for the transport of goods in vehicles exceeding Rs. 50,000/-. It is issued by a carrier and the details such as the name of consignor, consignee, the origin point of a consignment and its route and destination are mentioned on it.
Therefore, the E-Way Bill is a mechanism for the compliance to be made through a digital interface wherein the relevant information with regard to the consignment is uploaded on the GST Portal prior to the movement of goods.
Generation of E-Way Bill is advantageous to both the Government and the businesses. For the Government, the E-Way Bill entails reduction in expenses on logistics, efficient invoicing and reduced tax evasion. Whereas, from the point of view of businesses, the E-Way Bill enables efficient and rapid transportation of goods by avoiding check-posts which in turn lead to the efficient utilisation of resources.
E-Way Bill Provisions in GST
The concept of issuance and mechanism of issuance of an E-Way Bill has been provided under Rule 138 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”). An E-Way Bill consists of two parts, Part A and Part B.
Rule 138 (1) of the CGST Rules states that Part A of the E-Way Bill must be furnished by the person causing movement of goods, the consignment value of which exceeds Rs. 50,000/-. Part B must be furnished by the person responsible for the transportation of the said goods.
Rule 138 (2) of the CGST Rules further states that when the goods are transported by a person who is a registered consignor or recipient, the said person shall provide information regarding the transporter in the Form GST EWB-01 on the common portal.
Penalties for non-compliance
Wherever an E-Way Bill is required to be issued under Rule 138 of the CGST Rules and is not issued, the same will be considered as a contravention of the law. There are two kinds of penalties that can be imposed in this situation. The first one is monetary penalty and the second one is the detention and seizure of the goods and vehicles.
According to Section 122(1)(xiv) and Section 130(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”), if taxable goods are being transported which are not covered by the specified documents including E-Way Bill, the person transporting the said goods shall be liable to pay a penalty of Rs. 10,000/- or the amount of tax sought to be evaded, whichever is higher.
- Detention and Seizure
As per Section 129(1) of the CGST Act, goods that are transported in contravention of the provisions and any conveyance that is used to transport the said goods are liable for detention or seizure.
The seized goods can be released when the owner of the goods makes the payment of 200% of tax payable on the goods and in case of exempted goods, 2% of the total value of goods or Rs. 25,000/- whichever is less.
In case, the owner of the goods does not pay the penalty, then the seized goods shall be released on the payment of 50% of the value of goods or 200% of the tax payable on such goods whichever is higher, and in case of exempted goods, payment of 5% of value of goods or Rs.25000/- whichever is less. The goods can be released only after furnishing security equivalent to the amount of penalty payable.
Further, Section 130 of the CGST Act also reiterates that the goods and conveyances used for transportation in contravention to the provisions of this Section are liable to be confiscated.
In case of failure of issuance of Part B of an E-Way Bill under Rule 138(2) of the CGST Rules, 2017, where the goods are transported for a distance of more than 50 kilometres, makes the E-Way Bill invalid. Also, the Central Board of Indirect Taxes and Customs (hereinafter referred to as the “CBIC”) vide Circular No. 64/38/2018-GST dated 14.09.2018 had notified that in the event a consignment of goods being accompanied by proper invoices and other specified documents but not by an E-Way Bill, provisions of the Section 129 of the CGST Act would be applicable and accordingly, proceedings may be initiated.
The CBIC vide Circular No. 41/15/2018-GST dated 13.04.2018 stipulated the procedure for detention, seizure and release of goods and conveyances. When there is failure to produce required documents by the person-in-charge of the conveyance, the statement of such person shall be recorded in FORM GST MOV-01.
- Exemption of Liability in certain cases
The CBIC vide Circular No. 64/38/2018-GST dated 14.09.2018, notified that in the event of a consignment being accompanied by invoices and other specified documents including an E-Way Bill, the provisions under Section 129 of the CGST Act may not be attracted in the following situations, namely;
- GSTIN is correct but there are spelling mistakes in the names of consignor and consignee;
- Errors are present in the PIN Code but the addresses of the consignor and consignee are correct provided that the said PIN Code error does not have the effect of increasing the validity period of the E-Way Bill;
- Error in the address of the consignee provided that other details such as the locality is correct;
- Error in one or two digits of the document number mentioned on the E-Way Bill;
- Error in one or two digits/characters of the vehicle number.
In such situations as mentioned above, Rs. 500/- penalty each under the CGST Act, 2017 and the SGST Act, 2017 shall be imposed (Rs. 1000 under IGST Act) under FORM GST DRC-07 for each consignment.
Judicial Precedents
In M/s Indus Towers Limited v. The Assistant State Tax Officer [WP(C).No. 196 of 2018], the Department had detained the goods under Section 129 of the CGST Act as the goods being transported were not accompanied by Form KER-1 and it was filed only after the goods had been detained.
The Petitioner contended that the impugned goods had been purchased from a different state and IGST had already been paid. The Form KER-1 was inadvertently omitted by their employees.
The Kerala High Court held that the goods and conveyance can be detained and confiscated during the movement only if there is a reason to believe that the said movement was with an intention to evade tax.
The High Court also observed that it would not be appropriate on the part of the Department to detain the goods merely on the ground that the goods are not accompanied by an E-Way Bill while ignoring the existence of other documents during the movement. Accordingly, direction was issued to the Department to release the goods and the order levying tax and penalty was quashed.
In M/S Kairali Granites v. The Assistant Tax Officer [WP(C).No. 15994 of 2018], the details of the conveyance transporting a consignment of marble granite slabs and tiles was not updated as mandated by Rule 138(2) of the CGST Rules. The Kerala High Court held that the E-Way Bill was a mandatory document and it cannot be considered as a minor defect, leading to a ground for detention.
In Gati Kintetsu Express (P.) Ltd v. Commissioner, Commercial Tax of MP & Ors [W. P. No.12399 of 2018], a company engaged in multimodal transportation was carrying goods to a distance of 1200-1300 kms, and did not file Part B of the E-Way Bill, for which a penalty amounting 100% to the value of goods were imposed. The Appellant contended that such a heavy penalty cannot be imposed as it is a technical breach and there was no intention to evade tax. The Madhya Pradesh High Court held that the distance being 1200-1300kms, Part B of the E-Way Bill was mandatory to be filed and the Learned Authority had rightly imposed the penalty and the Court directed the Petitioner to pay the same.
AMLEGALS Remarks
E-Way Bill is undoubtedly an effective step in preventing bottlenecks at check-posts and enforcing uniformity in E-way bills throughout the country. However, the measures regulating the enforcement of E-Way Bills are more than stringent and the penalties for non-compliance exceed reasonable bounds.
Therefore, levying tax and enormous penalty for the mere absence of Part B of the E-Way Bill should not be mandatory. Instead, the offence could be dealt with by imposing appropriate fines.
Since the irregularities in or absence of E-Way Bills can still have significant consequences, it is necessary on the part of the businesses to take reasonable measures in order to ensure compliance.
-Team AMLEGALS, assisted by Mr. Subham Bhowal (Intern)
For any queries or feedback, please feel free to get in touch with chaitali.sadayet@amlegals.com or aditi.tiwari@amlegals.com.
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