Generating an e-way bill after interception does not cure the legal violation.

Generating an e-way bill after interception does not cure the legal violation.

Issue

Is the detention of goods and the levy of a penalty under Section 129 of the CGST Act, 2017, justified if the e-way bill for the goods in transit was generated by the taxpayer after the vehicle had already been intercepted by the tax authorities?

Facts

• A vehicle that was transporting goods was intercepted by GST officers.
• At the specific time of this interception, the goods were not accompanied by a valid e-way bill, which is a mandatory requirement.
• The assessee generated the e-way bill only after the vehicle had been stopped by the authorities. They then produced this newly generated e-way bill to the officer before the final seizure and penalty orders were formally passed.
• The assessee’s argument was that since the e-way bill was produced shortly after the interception, the seizure and penalty were unjustified.
• The revenue department, however, was able to prove with evidence from the official records (MOV-06, the inspection report) that the e-way bill was, in fact, generated “much after” the interception had already taken place.

Decision

The High Court ruled decisively in favour of the revenue.

• The court held that the law is clear: a valid e-way bill must be generated before the commencement of the movement of goods and must accompany the goods throughout their journey.
• It was an undisputed fact that at the moment of interception, this legal requirement had not been fulfilled.
• The court stated that the act of generating the e-way bill post-interception is a self-serving action that does not cure the original and fundamental violation of the law.
• Therefore, the court found no reason to interfere with the seizure and penalty orders that had been passed by the department.

Key Takeways

• The E-way Bill Must Precede the Movement: The legal requirement is unambiguous. A valid e-way bill must exist before the goods begin their journey and must be available for inspection at any point during the transit.
• Post-Facto Compliance is Not a Valid Defense: Generating mandatory documents after a contravention has already been detected by the authorities is not a valid defense. Compliance is judged based on the state of affairs at the time of the check.
• The Moment of Interception is the Decisive Point: The legality of the goods’ transit is determined based on the documents and compliance status at the exact moment the vehicle is intercepted by the authorities. Anything done after this point to correct a deficiency is generally considered irrelevant.
• Absence of E-way Bill is a Major Violation: Unlike minor clerical errors on an e-way bill, the complete absence of the document at the time of interception is treated as a significant violation, often seen as indicative of an intent to evade tax, thereby justifying the stringent measures under Section 129.