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Mere non-cancellation of eway bill within 24 hours cannot lead to presumption by revenue about re-use of same eway bill: High Court

Rule 138(9) does not prescribe that taxpayer must necessarily cancel the e-way bill if no transportation of the goods is made within 24 hours of its generation.

High Court held that merely becuase eway bill was not cancelled within 24 hours, it cannoe be presumed that taxpayer was re-using the same eway bill. Court also held that there can be no doubt that Rule 112 does not allow for additional evidence to be led at the instance of the respondent in the appeal. 

Facts of Case

The petitioner is a trader in Pan Masala and other goods. It claims to have sold disputed goods to a dealer in West Bengal against its Tax Invoice nos. SAT/19-20/0059, dated 24.11.2019 and SAT/19-20/0060, also dated 24.11.2019. Two e-way bills were also prepared being e-way bill nos. 491096371734 and 491096371789. Both e-way bills were prepared on 24.11.2019 at 02.32 PM and 02.33 PM respectively. Bilty of M/s Ganpati Road Carriers Pvt. Ltd. being LR/321 and LR/322 were also prepared for transportation of those goods.

It is also undisputed that the goods in question along with the aforesaid two tax invoices, e-way bills and, two Bilty were found accompanying the goods on 28.11.2019 when the same were intercepted by the revenue authorities. At the stage of seizure i.e when the order under Section 129(1) of the CGST Act was passed, only one allegation was proposed to be levelled by the proper officer - of reuse of the aforesaid e-way bills.

Arguments by Reveue

At the stage of the appeal, certain additional evidence has been entertained by the appeal authority in the shape of receipt of toll plaza indicating that the goods had moved on 24.11.2019 itself, at 7.31 PM. Relying on Rule 138(9) of the Central Goods and Service Tax Rules, 2017, it has been reasoned by the appeal authority that since the goods were not being transported immediately upon preparation of the e-way bills on 24.11.2019, the same should have been cancelled. Since the e-way bills were not cancelled and the transportation of the goods commenced four days thereafter, it has been inferred that the said e-way bills had been reused.

Relying on Rule 112 of the Rules, it has been further submitted that the right to lead additional evidence at the stage of appeal, has been granted to the appellant only. Therefore, the appeal authority has wrongly allowed the application of the revenue authority who was the respondent in the appeal. 

Arguments by Petitioner

Petitioner submits that Rule 138(9) of the Rules does not, in any way, provide either automatic cancellation of e-way bills or cancellation of e-way bills by way of necessary option to be adopted by a dealer, in case, the goods are not transported within 24 hours of such e-way bills being generated. Merely because transportation of the goods did not commence for four days thereafter, it may not itself lead to any adverse inference of second use of that e-way bills. 

Held

The Rule does not prescribe that the dealer must necessarily cancel the e-way bill if no transportation of the goods is made within 24 hours of its generation. It certainly does not provide any consequence that may follow if such cancellation does not take place. On the contrary, the Rule permits a dealer to cancel the e-way bill only if the transportation does not take place and the dealer choses to cancel such e-way bill within 24 hours of its generation.

Even if the dealer does not cancel the e-way bill within 24 hours of its generation, it would remain a matter of inquiry to determine on evidence whether an actual transaction had taken place or not. That would be subject to evidence received by the authority. As such it was open to the seizing authority to make all fact inquiries and ascertain on that basis whether the goods had or had not been transported pursuant to the e-way bills generated on 24.11.2019. Since the petitioner-assessee had pleaded a negative fact, the initial onus was on the assessing authority to lead positive evidence to establish that the goods had been transported on an earlier occasion. Neither any inquiry appears to have been made at that stage from the purchasing dealer or any toll plaza or other source, nor the petitioner was confronted with any adverse material as may have shifted the onus on the assessee to establish non-transportation of goods on an earlier occasion.

The presumption could not be drawn on the basis of the existence of the e-way bills though there did not exist evidence of actual transaction performed and though there is no statutory presumption available. Also, there is no finding of the assessing authority to that effect only. Mere assertion made at the end of the seizure order that it was clearly established that the assessee had made double use of the e-way bills is merely a conclusion drawn bereft of material on record. It is the reason based on facts and evidence found by the assessing authority that has to be examined to test the correctness of the order and not the conclusions, recorded without any material on record.

Then, as to the power of the appeal authority to entertain additional evidence, again, there can be no doubt that Rule 112 of the Rules does not allow for additional evidence to be led at the instance of the respondent in the appeal. In the case of penalty or assessment, where the appeal may be filed by the assessee alone, the correctness of the order is to be tested on the strength of the reasons given in that order and not on the basis of any supplementary or other material that may be brought on record by the revenue authority during the appeal proceedings.

Accordingly, it is found that the order passed by the appeal authority is erroneous, being contrary to the provisions of law.

The appeal authority had no jurisdiction to examine fresh evidence at the behest of the revenue or record fresh reasons to support original order. The proper authority, had not recorded any reason to establish evasion of tax or attempt to evade tax or even reuse of the documents by the petitioner. Though he raised that issue in the seizure proceedings, he did not record any finding that effect in the final order dated 3.12.2019 passed under Section 129(3) of the Act. He simply rejected the explanation furnished by the assessee without recording any reason and consequently imposed tax and penalty.

In view of the above, no useful purpose would be served to remand the proceeding now as that would amount to giving the revenue a second inning to built a fresh case that too after being aware of the defense set out by the assessee in the first leg of the proceedings. The order dated 3.12.2019 passed by the proper authority under Section 129(3) of the Act is found to be perverse and is set aside. Any amount that may have been deposited by the petitioner-assessee, may be returned to it, in accordance with law.

A VERY GOOD RULING BY THE HIGH COURT. AT CERTAIN OCCASIONS LIKE THE PETITIONER FACED, TAX PAYERS ARE BEING SIMPLY PENALISED WITHOUT THE AUTHORITY OF LAW. TAX PAYERS HAVE HOPE IN HIGH COURTS ONLY.

KINDLY COMMUNICATE THE CASE NUMBERS AND THE NAME OF COURT ALONG WITH PETITIONER AND RESPONDENT

Replied to CHANDRAMOHANAN NAIR

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Logically analysed the facts and decided on correct principles of law.

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