24 七月 2018

E-way bill system – Time to relax penal provisions

by Nipun Arora


It has been more than a year since India made the historic transition from the traditional indirect taxation regime comprising of central excise duty, service tax, VAT, etc., to an all-new integrated indirect taxation regime i.e. Goods and Services (GST). The government while implementing GST on the midnight of 30th June, 2017 declared the objective of implementing GST by calling it as Good and Simple Tax. Although the government might have had an intention to make tax payers life convenient and hassle free, the reactions of the industry representatives over last few months who have repeatedly expressed their grievances through representations seeking resolution to their endless problems convey a different message. Another area of concern is the time taken to design user friendly and glitch free system. In this article, we shall analyse certain implications arising out of the Madhya Pradesh High Court’s order dated 5-7-2018 in the case of Gati Kintetsu Express Private Limited (Petitioner) relating to imposition of penalty for not updating Part B of Form EWB-01 (E-Way Bill) (W.P. No. 12399 of 2018).

E-Way Bill is required to be generated and carried along with the consignment of goods whenever goods are moved from one place to another irrespective of the fact whether the movement has been initiated for supply of goods or for any other purpose. Whereas Rule 138 of CGST Rules provides that registered person causing movement of goods shall generate E-Way Bill, first proviso to Rule 138 provides transporter can also generate an E-Way Bill subject to authorisation received from registered person. Therefore, it can be established that rules are made flexible to an extent that E-Way Bill can be generated by any of the three parties involved in movement of goods i.e. consignor (where consignor is initiating movement of goods), consignee (where consignee is initiating movement of goods) or transporter of goods (where authorised). E-Way Bill contains all the relevant details required for transportation of goods and it is divided in two parts, Part-A and Part-B. Whereas Part-A contains details of the goods moved, consignor and consignee, Part B contains relevant details of transporter and vehicle in which goods are to be moved. Both the parts required to be filled in E-Way Bill are mandatory as per second explanation to Rule 138(3). 

The government is foreseeing E-Way Bill as game changing measure to curb evasion of taxes by evidencing movement of goods against an invoice by generation of E-Way Bill and tracking movement of goods. Since the E-Way Bill is in implementation phase, it was expected that government should have kept demand and penal provisions a bit less stringent and allowed the industry to adapt to itself to this system. However, the same is not reflected by emerging case law. In the recent judgement delivered by Madhya Pradesh High Court, the petitioner had filed a writ petition against the order passed Commissioner, Commercial Tax of MP confirming demand and imposing penalty of Rs.1,32,13,683/- due to failure in updating Part B of Form EWB-01 (E-Way Bill). In this case, the petitioner was moving goods from Maharashtra to Uttar Pradesh. The vehicle was intercepted in State of Madhya Pradesh for verification and the E-Way Bill was found incomplete as Part B of Form EWB-01 was not updated. It was also found that non-filing of appropriate details in Form GST EWB-01 resulted in violation of Rule 138(5) of CGST Rules.

As per provisions of Explanation 2 to Rule 138(3), E-Way Bill shall not be valid for movement of goods by road unless the information in Part-B of FORM GST EWB-01 has been furnished except in the case of movements covered under the third proviso to sub-rule (3) and the proviso to sub-rule (5). Therefore, it can also be said that in the present case, goods were moved under cover of an invalid E-Way Bill.In this case, the petitioner took a plea that it could not upload details due to system glitches and therefore, the demand should be dropped, whereas the Court observed that had there been a system glitch, the same should have been brought to the knowledge of appropriate forum and evidence should have been presented before the Court.

At this juncture, a question arises whether a transporter who is engaged in transportation of goods for relatively lesser amount of freight and does not hold any interest in goods or tax alleged as evaded thereon can be made liable to make a payment of such a huge amount to the tune of around Rs. 1.32 Crores.

Section 122(1)(xiv) of CGST Act provides that if a taxable person transports taxable goods without the cover of specified documents, he shall be liable to penalty of Rs. 10,000 or amount equal to tax evaded, whichever is higher. Section 129 of CGST Act deals with detention, seizure and release of goods and conveyances in transit. Section 129(1)(b) casts liability on transporter not to transport goods while they are contravention of provisions of the CGST Act or rules made thereunder. Any transportation of goods by contravening provisions of CGST Act or rules shall be liable for seizure and shall be released on payment of the applicable tax and penalty equal to 50% of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to 5% of the value of goods or Rs. 25,000, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty. Further fourth proviso to Section 20 of IGST Act provides that in cases where the penalty is leviable under the CGST Act and the SGST Act or the UTGST Act, the penalty leviable under the IGST Act shall be the sum total of the said penalties.

Therefore, in the demand was raised amounting to 100% of value of goods i.e. Rs.1,12,61,419 and tax payable thereon i.e. 19,52,264/- aggregating to Rs. 1,32,13,683/-.In the present case, the petitioner placed reliance on the judgment in the case of VSL Alloys (India) Pvt. Ltd. vs. State of UP where the assessee was granted relief on the grounds that there was no contravention of provisions of law. However, the Court in the present case, while upholding the order of the tax authority, distinguished VSL Alloys on facts as in case of VSL Alloys, the goods were moving upto a distance of 50 Kms for delivery to transporter for further transportation which is in line with provisions of law whereas in the case of the petitioner, goods were moving for a distance of 1100-1200 Km.

The intention of the government may be bona fide as to eliminate revenue leakage but imposing such a huge penalty on the transporter does not appear to be appropriate in view of the fact that we are in the early days of implementation of GST in general and E-Way Bill system, in particular. It seems that the government needs to revisit and relax these provisions.

[The author is a Senior Associate, GST Practice, Lakshmikumaran & Sridharan, New Delhi]



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