GST evasion cannot be presumed simply because the goods were delivered after the E-Way bill expired due to external factors like traffic blockage: Supreme Court


The Supreme Court observed that the non-extension of the electronic invoice would not automatically amount to tax evasion, in particular when the non-delivery of goods during the period of validity of the electronic invoice was due to external factors, such as that traffic obstruction.

A bench comprising judges Dinesh Maheshwari and Hrishikesh Roy dismissed an appeal filed by the Revenue Department against the order of the Telangana High Court, which set aside the order, imposing a tax and penalty passed by an Assistant Sales Tax Officer, with costs.

Factual background

The defendant (M/s. Satyam Shivam Papers Pvt. Ltd.), a paper distributor, generated an electronic invoice dated 04.01.2020 to make an intrastate delivery. The automatic trolley contracted to make the delivery on 04.01.2020 (Saturday) was unable to do so as it got stuck in traffic due to political rallies between CAA and NRC. The driver of the automatic trolley took the goods to his home for delivery the next working day, i.e. 06.01.2020. En route for delivery on 06.01.2020, he was arrested by a state tax NCO and served with a notice of detention alleging that the validity of the electronic waybill had expired and the shipment had been unloaded in a private place (driver’s residence). The Respondent made statements explaining the reasons for the delay in delivery. Rule 138 of the CGST Regulations, 2018, according to which the validity of an electronic waybill of more than 20 km may be extended for an additional day was also cited by the respondent. The Assistant Sales Tax Officer assessed tax and a penalty against the Respondent. A writ petition was filed in the Telangana High Court challenging the said order, which was eventually cleared and a cost of Rs. 10,000 was imposed on the Revenue Department.

Supreme Court decision

The Court was satisfied with the review of the facts and the High Court’s subsequent findings. The Apex Court found that the inference drawn by an assistant sales tax officer that the respondent was evading tax simply because his e-freight bill had expired a day earlier, disregarding the explanation provided in the representations, was baseless. She asserted that the respondent had no intention of evading tax and that the delay in delivery was due to a traffic blockage, which was an event beyond the respondent’s control. The Court also suspected the Assistant Sales Tax Officer’s intention to pursue the litigation against the Respondent because after the goods were detained, they were kept at his relative’s residence. In view of the harassment inflicted on the respondent by the Department of Revenue, the Court decided to increase the cost imposed to Rs. 59,000 which exceeded the cost of Rs. 10,000 imposed by the High Court. The Supreme Court ordered that the state was entitled to recover the amount of the costs from the officers responsible for the “totally unnecessary litigation”.

Case Name: Assistant Commissioner (ST) and Ors. v. M/s. Satyam Shivam Papers Pvt. Ltd and Anr.

Reference: 2022 LiveLaw (SC) 87

Case # and date: Request for Special Leave (C) 21132 of 2021 | Jan 12, 2022

Corum: Judges Dinesh Maheshwari and Hrishikesh Roy

Counsel for Applicants: Attorneys, MP Venkat Reddy, Mr Prashant Tyagi, MP Srinivas Reddy, Registered Attorney M/S. Venkat Palwai Law Associates.

Click here to read/download the order

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