Transporter not liable for consignor’s loading error; Vehicle seizure under Section 129(3) quashed
Issue
Whether a transporter can be held liable for tax evasion and have their vehicle seized under Section 129(3) of the GST Act due to a discrepancy (shortfall) in the quantity of goods compared to the E-way bill, when the error was on the part of the consignor and the transporter had no proprietary interest in the goods.
Facts
The Interception: The petitioner (Anish Transport Company) was transporting goods from Dehradun to Delhi. The vehicle was intercepted by GST authorities at Meerut.
Documentation: At the time of interception, the driver produced all valid documents, including the E-way bill and Tax Invoice.
The Discrepancy: Physical verification revealed a shortfall in the goods. The vehicle carried 138 cartons (16,295 boxes) against the E-way bill declaration of 167 cartons (19,685 boxes).
The Explanation: The consignor admitted that the shortfall was an inadvertent “loading error” that occurred during the night.
Department’s Action: Despite the explanation and valid documents, the authorities seized the vehicle and initiated proceedings under Section 129(3) against the transporter, alleging tax evasion.
Release Order: Crucially, the release order passed by the authorities explicitly recorded that the goods belonged to the consignor (owner) and released them to the consignor, not the transporter.
Decision
No Proprietary Interest: The Allahabad High Court observed that the transporter was merely a carrier with no proprietary interest in the goods. The release order itself confirmed the goods belonged to the consignor.
Valid Documents: Since the transporter carried all required valid documents (invoice and e-way bill), and the discrepancy (shortfall) was a result of the consignor’s error, no mens rea (intent to evade) could be attributed to the transporter.
Transporter vs Owner Liability: The Court held that presumption of tax evasion cannot be legally attributed to the transporter when the error lies at the consignor’s end. Penalizing the transporter for a loading error committed by the consignor is legally unsustainable.
Ruling: The seizure order and the proceedings under Section 129(3) against the transporter were quashed. The Writ Petition was allowed, and all amounts deposited by the transporter were ordered to be refunded.
Key Takeaways
Transporter Protection: A transporter cannot be penalized for discrepancies in the quantity of goods (especially shortfall) if they carry valid documents and the error is admitted by the consignor.
Shortfall vs Excess: Allegations of evasion are harder to sustain in cases of “shortfall” (carrying less than declared) compared to “excess” (carrying undeclared goods), as carrying less does not typically imply an intent to smuggle goods out without tax.
Ownership is Key: If the department releases goods to the consignor accepting them as the owner, it cannot simultaneously seize the transporter’s vehicle for the owner’s fault, provided the transporter is not complicit in a fraud.