Introduction
It is said that
the month of ‘January’ is named after
the Roman God
of Beginnings, Janus.
Janus is usually
depicted with two faces, one on each side of the head. One may wonder whether
the positioning of the heads is meant to signify
a glance at both
the past and the future
at the same time. Whether
or not the God signifies so, no doubt that the beginning of a new calendar year is an important time to reflect
on the past, learn from
the rights and wrongs and
commit to change
in the year to come. For businesses, tax consultants and other stakeholders who have had around three years to settle down in the Goods
and Services Tax (GST) regime,
it is a time to provide constructive feedback to the Government so that changes,
if any, can be brought about
through the Annual Financial Statement, also popularly referred to as ‘the Union Budget
of India’.
On our part, we feel that this is a right time to highlight an area in the GST law which
allows businesses to be subject
to excessive penalizing in return for what some may consider
as minor slipups.
It is the intention of this article
to highlight few plausible changes that can be
carried out to the electronic way bill mechanism under GST so as to facilitate
a more transparent and business friendly process.
Way Bill - Historical Perspective
First
and foremost, it is relevant to consider the history that led to the existence
of the electronic way bill. After all, as Edmund Burke
once said, “those who don’t know
history are destined to repeat it.”
Prior to the introduction of the GST regime, every
State had its own enactment that granted the powers to levy Value
Added Tax (VAT) on sale of goods within their territory. These VAT enactments contained a provision
that required the owner or person in charge of goods to obtain a permit for movement in and out of the States.
The Hon’ble Supreme Court in the case ofSodhi Transport Co. 1986 AIR 1099,
is a landmark ruling in the context of Transit Pass. The Hon’ble Supreme
Court held that when the statute employed the phrase “failing which it shall be presumed
that the goods
carried thereby have
been sold within
the State by the owner
or person-in-charge of the vehicle”, it only required authorities to raise a rebuttable presumption that the goods
had been sold
in the State
as the transit
pass was not handed over to
the officer at the check post. At the same time, it was recognized that this
presumption, in no way foreclosed the opportunity that the owner/transporter of the goods had to establish that the goods had in fact been disposed
of in a different way, other than by way of sale within the State.
Although the Apex Court rightly identified the true effect
of the statutory provision, in reality, owners and transporters of goods continued to face litigation and many genuine
cases were subject
to large amounts
of taxes and penalties.
It was expected that the GST regime would put an end to the road permit system
and inspector raj and ensure
a seamless movement of goods across
the country. In fact, the GST Council
accepted proposals of a task force which recommended
abolition of the permit system
considering the entry
tax and value
added tax regimes
had been brought
to an end. Although the Government piggy backed on the idea during the implementation stage
of the taxation
regime and everybody witnessed many a news report on the dismantling of the border
check posts, an allegedly new concept, disguised as the electronic way bill (EWB) was introduced a year after
the birth of the GST regime. A flyer circulated by the CBEC
claimed that the – “E-waybill
is a mechanism to ensure that goods being transported comply with the GST Law
and is an effective tool to track movement of goods and check tax evasion”. Sound
familiar?
A learning from the jurisprudence
Any person who has researched on cases reported
under GST would have surely
noticed that the most common judgements
reported pertained to challenges against
orders of detention issued due to errors in generated EWBs
under Section 129 and
130 of the CGST Act.
What is
interesting in these judgements are the kinds of errors committed that ensued
into litigations. Few reported judgments that resulted in detention/seizure of
the goods are tabulated hereinbelow: -
|
Sl.No.
|
Judgement
|
Nature
of Error committed
|
|
1.
|
Caterpillar India Pvt Ltd.
|
Goods were
un-accompanied by valid
EWBs. Validity of
the Bill generated had expired due to delay in police permission being granted to cause the movement.
|
|
2.
|
Goods
detained on the basis that
the date of the tax invoice mentioned in the EWB was different from
the date mentioned on the tax invoice.
|
|
|
3.
|
Goods seized
one hour after
expiry of EWB.
The goods had reached the destination in time but on account
of no entry,
the vehicle could
not enter the city.
In the meantime, the detention order
was passed.
|
|
|
4.
|
Rajavat Steels
|
The ground
for seizing the
goods was that
the Truck number mentioned in the invoice, EWB and weigh
slip was U.P.-78-DN 7983 while it
should have been
U.P.-78-DN 7938.
|
|
5.
|
Distance
in EWB recorded as 280 instead of 2800 kms.
|
On a perusal of the above
judgements, it is apparent that
mostly, mere procedural and minor infractions that did not involve
fraud/suppression, led to detention of goods which ultimately increased
litigations.
Another interesting twist to the issue occurs
when proper officers
deem fit to insist on payment of not just an amount
equal to 100% tax and penalty
applicable to the goods detained
in terms of Section 129,
but also demand
payment of a fine in lieu
of confiscation equal
to the value of goods
under Section 130.
A real-life incident of such predisposition can be witnessed through the facts of a recent
judgement of the Hon’ble Gujarat
High Court in the case of Synergy Fertichem
Pvt. Ltd vs. State of Gujarat.
The Hon’ble
High Court while
analyzing the simultaneous application of both
Section 129 and
Section 130 recognized that Section 129 operates
in the fields of detention, seizure and release
of goods/conveyances in transit, whilst,
Section 130 dealt with
confiscation of goods/
conveyance and levy
of tax, penalty
and fine thereof.
The Hon’ble High
Court, thus, came to
the conclusion that the two provisions are mutually exclusive
and independent of each other.
As regards
Section 130, the Hon’ble High
Court noted that
since the provision employed the phrase
‘with an intent
to evade the payment
of tax’, authorities can invoke the same only when a definite intent
to evade payment
of tax is established.
Accordingly, it was held that
even at the stage of detention and seizure itself
or after the tax and penalty is paid by the owner of the goods in terms of Section 129, if there
exists incriminating evidence
of tax evasion, action under Section 130 of the CGST Act can also be initiated.
Even
though the Hon’ble High Court concluded so, what is interesting, is a passing
observation made by the Hon’ble Judges. Relevant excerpt from the judgement is
as follows :-
All that
we intend to say is that, in a given
situation, the authorities should adopt a practical approach
to resolve the dispute
rather than enter into a long-drawn litigation. The Government should
strive hard to ensure that the litigation arising from the new tax regime gets minimized
over a period of time.
A simpler solution in the offing?
– Conclusion
The authors
humbly hold in high regard,
the passing observations of the Hon’ble
High Court. It is indeed
felt that a simpler
solution to resolve
matters pertaining to detention and confiscation of goods is the need of the hour. Few recommendations
are as follows.
Introducing the concept of ‘Rebuttable Presumption’ - It is noted that CBEC themselves have recognized that the
purpose of introducing the EWB mechanism is to check tax evasion.
However, unlike the erstwhile VAT laws which required officers to proceed
on the basis of a rebuttable presumption as interpreted by the Apex Court in the case of
Sodhi Transport Co. (supra),
Section 129 of the CGST
Act does not grant space
for officers to proceed on the basis
of such a presumption that so long as tax has been paid on the goods
transported, initiation of action against the owner/person-charge of goods
should be avoided. Suitable amendments to the Act and issuance of a circular
instructing officers to not initiate
action so long
as the concerned persons are able to prove that the applicable taxes have been paid, may be carried out. Such a magnanimous
and less pedantic approach would go a long way in radically reducing
the number of detentions and
seizures under the Act and
would wean out cases of detention on the
basis of mere technical errors,
such as the ones discussed in detail above.
Adjustment of Taxes paid against output
liabilities- A suitable
amendment to CGST Act can be carried
out to allow adjustment of taxes
paid under Section
129 of the CGST Act
against output liabilities arising in respect
of the supply
of the goods that
were detained. In the present
framework, the concerned persons may be faced with
a double whammy by virtue of being
liable to remit
100% tax twice,
once, for the release of detained goods
and second, for discharging
their output liabilities, over and above payment of penalties.
Reduced penalties for non-supply movements - As regards goods moved for reasons other than by way of supply,
i.e., under the cover of a delivery challan, a separate legal provision may
be introduced to only levy
a general penalty on the concerned persons
for committing errors
and contravening the provisions of the Act/Rules, as long as the said persons are able to establish to the relevant
officers that the goods have in fact been disposed
of in a method other than by way of supply.
Distinct provisions for different
offences - Separate penal provisions can be introduced for offences, depending
upon their severity. Levy of 100% tax and penalty on all persons contravening
the provisions of the Act/Rules, irrespective
of the seriousness of the offence is arbitrary and excessive. A person who transports goods without
generating an EWB and a person who has committed a clerical error
by mentioning an incorrect vehicle
number on the EWB
cannot be seen on the same footing.
Such a provision is violative
of Articles 14 and 19(1)(g)
of Constitution of India
as recognized by the Hon’ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills 2015 (326)
E.L.T. 209 (S.C.).
Introduction of a dispute
resolution mechanism - An efficient
dispute resolution mechanism in all States and Union Territories
can be introduced specifically for handling matters pertaining to detention and
confiscation of goods. The law can be amended to mandate closure
of the such matters within
a prescribed time limit, to ensure, speedy
redressal of such matters.
If some
of the ideas
put forth through
this article are in fact
implemented, it would
go a long way in actually making
the GST law, Good
and Simple while
also ensuring ease
of doing business
in India. It would also
silence few voices
who feel that
the EWB mechanism is just old wine in a new bottle.
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