Case Name – Nancy Trading Company V/s State of UP ( HIGH COURT OF ALLAHABAD)
Case Name : Nancy Trading Company V/s State of UP ( HIGH COURT OF ALLAHABAD) :
ORDER DATE : 15-07-2024
Background: Nancy Trading Company had its goods detained during transit because they failed to generate an E-tax invoice as required by Rule 48 of the CGST Rules. Despite having other essential documents like tax invoices, GRs (Goods Receipts), and E-way bills, the authorities seized the goods and imposed penalties.
Key Points:
Documents in Transit: The goods had all necessary documents (tax invoice, GRs, E-way bills) except for the E-tax invoice, which was a technical omission.
No Discrepancy in Goods: There were no discrepancies regarding the quality and quantity of goods mentioned in the accompanying documents.
Human Error: The failure to generate the E-tax invoice before moving the goods was acknowledged as a human error on the part of Nancy Trading Company.
Change in Law: The turnover threshold for mandatory E-way bill issuance was reduced from Rs. 20 crores to Rs. 10 crores effective from August 1, 2022. The petitioner claimed a genuine mistake due to not being aware of this change.
Legal Proceedings: The tax authorities initiated penalties under Section 129(3) of the CGST Act, which allows for action in case of non-compliance. However, there was no evidence or finding of intent to evade taxes (mens rea).
Court’s Decision:
- The Allahabad High Court ruled in favour of Nancy Trading Company.
- They emphasized that the error was technical and not intentional, with no evidence of tax evasion intent.
- Since there was no finding of mens rea and considering the technical nature of the error, the penalties imposed by the tax authorities were deemed
- The court quashed the orders imposing penalties and directed any deposited amounts to be returned to the petitioner.
Simplified Explanation:
Nancy Trading Company’s goods were detained because they forgot to generate an E-tax invoice, though they had other required documents. The court found this was a minor mistake, not an attempt to dodge taxes. They also noted that the law recently changed about when E-way bills are needed. Because no one showed evidence Nancy Trading Company wanted to avoid paying taxes, the court agreed the company shouldn’t be fined.Top of Form
Relevant Rule under which E – Invoice is Mandatory : Rule 48 of CGST Rules.
Rule 48. Manner of issuing invoice.-
(1) The invoice shall be prepared in triplicate, in the case of supply of goods, in the following manner, namely,-
(a) the original copy being marked as ORIGINAL FOR RECIPIENT;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.
(2) The invoice shall be prepared in duplicate, in the case of the supply of services, in the following manner, namely,-
(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.
(3) The serial number of invoices issued during a tax period shall be furnished electronically through the common portal in FORM GSTR-1 .
1 [(4) The invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained therein on the Common Goods and Services Tax Electronic Portal in such manner and subject to such conditions and restrictions as may be specified in the notification.
2 [ Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt a person or a class of registered persons from issuance of invoice under this sub-rule for a specified period, subject to such conditions and restrictions as may be specified in the said notification.]
(5) Every invoice issued by a person to whom sub-rule (4) applies in any manner other than the manner specified in the said sub-rule shall not be treated as an invoice.
(6) The provisions of sub-rules (1) and (2) shall not apply to an invoice prepared in the manner specified in sub-rule (4).]
Section 129. Detention, seizure and release of goods and conveyances in transit.-
(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,-
1[(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;
(b) on payment of penalty equal to fifty per cent. of the value of the goods or two hundred per cent. of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;]
(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:
Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
2[****]
3[(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).]
(4) 4[No penalty] shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.
5[(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable under sub-section (3):
Provided that the conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less:
Provided further that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the proper officer.]
