Allahabad HC Quashes GST Penalty: E-Way Bill Generated Before Interception Cannot Be Ignored:

Allahabad HC Quashes GST Penalty: E-Way Bill Generated Before Interception Cannot Be Ignored

M/s Om Enterprises, a trader of TMT iron bars, dispatched goods from Bulandshahr on 21.12.2021. Although the tax invoice accompanied the goods, the e-way bill could not be generated immediately due to a technical issue. The e-way bill was successfully generated at 10.59 a.m. the same morning. At 11.29 a.m., the Mobile Squad intercepted the vehicle and initiated proceedings under Section 129 of the GST Act on the ground that the goods were not accompanied by an e-way bill. The petitioner responded to the show-cause notice and produced the e-way bill generated before the interception, but the authorities rejected the explanation, seized the goods, and imposed a penalty.

On appeal, the Additional Commissioner acknowledged that the e-way bill timestamp (10.59 a.m.) preceded the interception (11.29 a.m.), yet dismissed the appeal. Hence, this appeal.

Main Issue: Whether a penalty under Section 129 can be imposed when a valid e-way bill existed prior to detention and was produced during the proceedings. HC's Decision: The Court noted that the e-way bill was generated well before the vehicle was detained and was produced along with the reply to the show-cause notice. Since the authorities never pointed out any defect in the e-way bill and could not demonstrate any intention to evade tax, the Court held that the petitioner’s case fell squarely within the rule laid down in OSR Creation and earlier decisions such as Bans Steel. The Court also distinguished the State’s reliance on Aysha Builders, observing that in that case the e-way bill was generated only after detention, which was not the situation here.

Holding that the discrepancy had been fully cured before any seizure order was passed, the Court ruled that the levy of penalty was unjustified. Both the original and appellate orders were therefore quashed, and the petitioner was held entitled to refund of any amount deposited pursuant to those orders.

To Read Full Judgment, Download PDF Given Below