Walkthrough Series- Analysis and Interpretations of GST Notices- Part 2

Over this blog series, we are trying to bring out various aspects of GST notices and how to handle it. 

Notices for E Way Bills:

Notice for E Way bill has a restricted scope, where the challenge remains for the proper officer is to probe into the due process compliance and to uphold the principles of natural justice. In linkage to upholding natural justice, the procedure set in law is guided by circulars 41, 49 and 64. 

Circular 41: Procedure for inspection of goods in movement – A brief analysis:

The circular lays down the procedure for the inspection, detention, release and confiscation of the goods and conveyances. 

As provided in Section 68 of the CGST Act, 2017, the person in charge of the conveyance to carry essential documents which are: 

 Invoice/ bill of supply / delivery challan

 Copy of E-Way bill in physical form (OR) E-Way Bill Number in Electronic form 

 If carrying imported goods, then, Bill of Entry of such goods and the Date of Bill of Entry as mentioned in Part A of the Form GST EWB – 01

The above said documents are also to be validated in the GST E-Way Bill portal. Before the start of the conveyance, the said E-Way Bill is to be generated and the necessary documents are to be given to the Person In charge of the conveyance. Section 129 of the CGST Act, 2017 provides for detention, seizure and release of the goods in movement or the conveyance. The circular lays down the procedure for inspection of the proper officer and to intercept a conveyance.

The above said procedure, is laid down and has to be followed by the Proper Officer. Important perspective to lean on to understand is that the proper officer doesn’t have the authority to doubt the correctness of the tax treatment provided in the self-assessed tax. The only way to initiate an inspection is on the grounds of “NOT HAVING THE REQUIRED DOCUMENTS”. When the said documents are available, there is no scope for inspection, detention or seizure merely on the basis of doubting the tax treatment. The Person in charge of the conveyance is to be given a report of detention if the period of detention lapses 30 minutes in Form EWB-04. Not providing the same is a contravention of law on the side of the proper officer and any computation or validation shall be challenged. 

Appeal for the order issued by the Proper Officer shall be challenged only after 100% of the PENALTY is pre-deposited as provided in Form APL-01, in line with Section 107 of the CGST Act, 2017. This is because, for the release of the goods, tax or interest shall not be demanded. On the payment of penalty, the proper officer should release the seized goods. 

Rescue by circular

Circular 64 provides a relief for the tax payer and the Person in charge of the vehicle, where, the proper officer shall not initiate proceedings on the following grounds: 

 When the value of goods transported is within ₹ 50,000/-, only a valid invoice is sufficient.

 When E-Way bill is available, yet there are some errors like

 Spelling Mistakes in the name of the consignor or consignee.

 Address is correctly mentioned but there is an error in the pin code, subject to the condition that, such error increases the validity of the E-Way Bill.

 Error in one or two digits in the documents mentioned in the E-Way Bill.

 Error in 4 or 6 level HSN, where, the first two digits are correct, and, correct rate of tax is paid on the said goods. 

 Error up to two digits (OR) Characters in the vehicle number

The above said errors, shall be penalized only as per Section 125 of the CGST Act, 2017 where, a penalty to a tune of ₹. 500/- each for CGST and SGST (OR) ₹. 1000/- shall be collected in case of IGST Act, 2017 be imposed in Form GST DRC-07. 

 It is to be further noted that, E-Way Bill becomes invalid, if PART B of Form GST EWB-01 is not furnished. 

 The only exception for not furnishing Part B of the said form is when, the goods are transported for a distance of up to 50 kilometers within the State or Union territory to or from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the recipient, or as the case may be, the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01

It is also important to note that the circular creates a new category of non-compliance of Mala fide movement of goods, in any other circumstances mentioned in the circular, as the circular mentions the above as Bona fide Non-compliance. 

It is also to be noted by the tax payer, once the conveyance is stopped and inspected the proper officer cannot inspect the vehicle again, unless there is strong evidence to prove that there is evasion of tax. It is necessary to note that the words evasion of tax holds higher weightage, as it is not mere failure of tax, but accompanied with the intention to defraud the government. 

End of old regime practices: 

Experience of the officers under old tax regimes, is completely with held in GST Law. The Proper Officer shall not go beyond the scope of inspection of documents. If any other validation is done, when the documents are proper, the said validation shall be outside the authority of the officer and shall be dismissed immediately as pronounced by the Gujarat High Court in FS enterprise vs. State of Gujarat case. Even when the information is given by the intelligence, if the documents and the goods match and sufficient documents are carried, there is no authorization for expansion of the powers of the proper officer. 

New Regime Developments:

The GST Regime provides that, a CRYPTIC NOTICE, that is, a notice which contains only the intent, purpose and requirements are conveyed to the tax payer shall be a sufficient notice. It is the duty of the proper officer, to contain every bon fide record placed by either the Person in charge of the Conveyance at the time of interception or records placed by the tax payer. In case the taxpayer was not given an opportunity of submitting the documents and that he has been alleged on the basis of mere suspicion is also violation of principles of natural justice as verdict by the Allahabad High Court reads in Ranchi Carrying Corporation vs. State of Uttar Pradesh Case. 

It is a contravention of law, when, penalty is imposed without considering the said records and it is Mala fide on part of the Proper Officer in levying the same. Further, while determining fine or penalty, as it is at the option of the officer, the sum of fine and penalty shall not exceed 100% of the penalty. It intricate to the point that, the fine amount shall not be higher than the market value of the goods carried.  

It is important to know the position and authority of the proper officer while providing bond under MOV-08, as it shall be the scope of the assessing officer and not the detaining officer. The detaining officer shall not involve in determining the value of the bond, its under valuation or sureties as adjudged by the Kerala High Court in Sameer Mat Industries vs. State of Kerala case. 

- KN Akshaya , MA  LLB