[Rajat Gupta is a tax lawyer who deals with matters pertaining to GST. He may be reached at gupta.rajat853@gmail.com.]
The Indian Government introduced an e-way bill system under the Goods and Services Tax (GST) regime with effect from April 1, 2018. In the previous tax regime, the concept of e-way bill did not exist and dealers were subjected to the whims and fancies of tax inspectors and officers. An e-way bill is required to be generated in every case where movement of goods is caused by a registered person and the consignment value is Rs. 50,000 or more.[1] Although there are certain circumstances in which an e-way bill is not required to be generated even if the consignment value is Rs. 50,000 or more, the same are not relevant for the purpose of the present discussion.
The objective of an e-way bill is to curb the malpractice of tax evasion by ensuring that the amount of goods mentioned in the invoice is duly uploaded on the online portal. Since the whole process is online and inter-linked, there is hardly any scope for manipulation in the documents. Thus, any mismatch in the bills and the returns will invite trouble for the dealers. Further, it also aims to provide relief from inspector raj in cases of interception and seizure of vehicles. Despite these provisions, there are several glitches in the system which are causing inconvenience to the taxpayers.
One of the major problems is that there is no provision allowing for rectification of the e-way bill. Once generated, an e-way bill can only be updated with respect to the vehicle number of the conveyance in which the concerned goods are being transported. Otherwise, the rules provide only for cancellation of the bill within 24 hours of generation if it suffers from any mistake and before it is verified by the proper officer.[2] Therefore, if a dealer supplying goods X mistakenly mentions goods Y in the e-way bill, the only recourse available to him is to cancel the bill and generate a new one. Now, if the movement has not been effected, there would not be a problem as the new bill can be generated immediately and sent along with the goods. Same would be the case if the goods are delivered to their destination with the wrong e-way bill as the requirement for an e-way bill arises only during the movement of the goods and not thereafter. However, if the movement has been effected and the new bill is not generated meanwhile, it may cause problem if the goods are intercepted during the course of transportation. This is because, in this case, goods in conveyance will be different from those mentioned in the e-way bill, and the officer will have prima facie suspicion of tax evasion by the dealer. Even though there is no intention to evade tax on the part of the dealer and the mistake is rectifiable, it is a rare possibility that the same would be ignored by the inspector. In this regard, section 126 of the Central Goods and Services Tax Act, 2017 (CGST) may came to the rescue of dealers and transporters. It provides that if the amount of tax evaded is less than Rs. 5000 (termed as minor breach), or if the procedural requirements not affecting tax liability are not complied with, or if any omission in documentation is made which is rectifiable and without malice, then the concerned officer shall not impose penalty on the dealer or the transporter. Despite this provision, vehicles are being intercepted and dealers are being penalized even in cases of unintentional omission/mistake.
Recently, the Indore bench of the High Court of Madhya Pradesh upheld the penalty of Rs. 1,32,13,683 imposed by the Commissioner on the transporter for not updating part-B of the e-way bill. The court reasoned that since part-B is mandatory, its absence raises doubts on the genuineness of the bill. Note that part-B of the e-way bill contains information related to the transporter and the vehicle number in which goods are being transported and, thus, has nothing to do with the amount of tax or the consignment which is entered in part-A. Moreover, part-B can be updated anytime during the validity of the bill. The information contained in part-B is just to track the consignment and ensure that the goods in the vehicle and those mentioned in the bill are same. This judgment, it is submitted, will set a wrong precedent as it does not leave room for consideration of procedural irregularities while generating the e-way bill.
The Allahabad High Court had the occasion to deal with a case wherein goods were seized for non-generation of the e-way bill. However, before the seizure order could be issued, the relevant documents along with the e-way bill were produced showing the tax charged on the goods. It was held by the High Court that the e-way bill can be produced before issuance of the seizure order even if the goods have been detained by the concerned officer. The dealer should not be penalized merely because he could not produce the bill earlier. It is submitted that the liberal approach adopted by the High Court enabled it to give due consideration to the intention of the dealer.
We see different approaches taken by High Courts in cases of lack of proper documentation. The author believes that courts need to adopt a flexible approach while deciding the issue of penalty. Imposing penalty on procedural irregularities, where a party has not evaded tax, raises questions on the real purpose of the e-way bill. Since the system of e-way bill is facing several practical challenges, the GST Council needs to address this issue urgently to bring coherence between the law and the actual practice. It would be more convenient if a provision for rectification of the e-way bill is introduced as it will solve several practical difficulties arising in the course of business. Further, the officers intercepting the concerned vehicles should, before issuing a seizure order, consider the intention of the dealer as regards non-furnishing of the e-way bill or any other irregularity. Meanwhile, dealers should be extremely careful while generating e-way bills so as to avoid any uninvited trouble for themselves.
[1] The CGST (Second Amendment) Rules, 2018, rule 138(1).
[2] Ibid, rule 138(9).