Kiran Raj

The Allahabad High Court has dismissed a writ petition challenging the imposition of tax and penalty on goods transported without a valid e-way bill, stating that non-compliance with statutory requirements raises a presumption of intent to evade tax. The court observed, "It is mandatory on the part of the seller to download the e-way bill once the goods are put in transit. Subsequent downloading of the e-way bill would not absolve the liability under the Act."

The matter was heard by Justice Rohit Ranjan Agarwal, who upheld the tax and penalty demand of Rs. 90,62,400 imposed under the State Goods and Services Tax Act, 2017 (SGST Act). The court found that the intercepted goods were misclassified for tax purposes and that the petitioner’s firm was not conducting business from its registered location.

The petitioner, M/s Gurunanak Arecanut Traders, a registered dealer under the SGST Act, transported 400 bags of Arecanut from Delhi to Nagpur via M/s Ravi Goods Transport. The goods were intercepted in Mathura at 4:28 a.m. on June 10, 2022, and found to be without an accompanying e-way bill. The e-way bill was generated later at 7:36 a.m. on the same day and was valid until June 16, 2022.

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Following a physical verification, authorities determined that the goods in transit were "Chikni Bhuni Supari" (processed arecanut), taxable at 18%, rather than unprocessed arecanut, which is taxed at 5%. A detention order was issued under Section 129(1) of the SGST Act on June 16, 2022. Since the show-cause notice remained unattended, the Commercial Tax Officer passed an order under Section 129(3) on June 24, 2022, imposing tax and penalty amounting to Rs. 90,62,400.

The petitioner initially challenged this decision before a Division Bench of the High Court in Writ Tax No. 933 of 2022, which was dismissed on July 12, 2022, on the grounds that an appeal under Section 107 of the SGST Act was available. The petitioner then filed an appeal before the Additional Commissioner (Grade-II) (Appeals), Aligarh, which was dismissed on August 18, 2022. The petitioner subsequently approached the High Court through the present writ petition.

The petitioner argued that the detention and penalty orders were passed without granting an opportunity for a hearing and that the first appellate authority issued a non-speaking order. It was contended that the e-way bill was generated immediately after the driver realized the omission and that misclassification of goods should not be the basis for detention. The petitioner placed reliance on decisions in M/s Modern Traders v. State of U.P., Axpress Logistics India Pvt. Ltd. v. Union of India, and Raj Iron and Building Materials v. Union of India, among others.

The respondent, represented by the Standing Counsel, submitted that the interception of goods before the e-way bill was generated indicated an attempt to evade tax. The GST portal records revealed discrepancies, including differing signatures of the firm's proprietor on the rent agreement and tax invoices. Further investigation found that the seller’s registered business location in Delhi was non-existent, leading to the initiation of suo motu cancellation of its registration.

The court recorded, “The interception of the vehicle was in a place away from the godown and this entire argument is obviously an afterthought. Accordingly, the application of Section 129(3) of the Act by the authorities is valid and just in law.”

The judgment cited a co-ordinate bench’s decision in Akhilesh Traders v. State of U.P., which held that failure to carry an e-way bill creates a rebuttable presumption of tax evasion. The court stated, "If the goods had not been intercepted, the Government would have been out of its pocket with respect to the GST payable on the said goods."

The court further noted, “Once finding has been recorded by authorities and petitioner firm never participated in the proceedings before the authorities, no case is made out for interference by this Court.”

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The High Court dismissed the petition and upheld the tax and penalty imposed by the authorities. The court stated, “The petitioner has not complied with the provisions of law, hence the steps taken by the respondent authorities are proper and in accordance with the law and require no interference by this court.”

It was observed that reliance on earlier judgments was misplaced, as those cases involved transactions before April 2018, when technical difficulties in generating e-way bills were prevalent. The court concluded that in the present case, the petitioner’s conduct indicated an intention to evade tax, and the subsequent generation of an e-way bill could not absolve liability under the law.

Advocates Representing the Parties

For Petitioner: Pooja Talwar, Advocate.

For Respondents:  Arvind Kumar Mishra, Standing Counsel.

Case Title: M/S Gurunanak Arecanut Traders v. Commercial Tax and Another
Neutral Citation: 2025:AHC:30988
Case Number: Writ Tax No. 1177 of 2022
Bench: Justice Rohit Ranjan Agarwal

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