The Supreme Court has declined to interfere with the Allahabad High Court judgment upholding a GST tax and penalty demand of ₹90,62,400 after goods were intercepted while being transported without a valid e-way bill.
The bench of Justice Manoj Misra and Justice Vijay Bishnoi while exercising jurisdiction under Article 136 of the Constitution, observed that it did not find sufficient ground to interfere with the impugned Allahabad High Court judgment.
The litigation originated from the interception of a consignment of 400 bags of Arecanut sold by the petitioner to M/s Jagdamba Enterprises, Nagpur. The goods were being transported from Delhi to Nagpur through M/s Ravi Goods Transport.
Buy Now: Recovery Of Tax Dues And Penalty Against Legal Heirs Of A Deceased Assessee : Case Compilation
The vehicle was intercepted at Mathura at around 4:28 a.m. on June 10, 2022. At the time of interception, the consignment was not accompanied by an e-way bill. The e-way bill was generated only later, at 7:36 a.m. on the same day, approximately three hours after the goods had been intercepted. The e-way bill was subsequently shown as valid until June 16, 2022.
Physical verification of the consignment also resulted in another significant dispute. According to the authorities, the goods were not merely Arecanut as declared in the documents but Chikni Bhuni Supari, or processed Arecanut, attracting GST at 18% instead of the 5% rate declared by the petitioner.
Following the detention, a show-cause notice was issued on June 16, 2022. The authorities subsequently passed an order under Section 129(3) of the Uttar Pradesh GST Act, 2017, raising a tax and penalty demand of ₹90,62,400.
Before the Allahabad High Court, the petitioner argued that the detention and penalty proceedings were initiated without providing an effective opportunity of hearing.
It was contended that the person who had downloaded the e-way bill was not present at the place of detention and that the driver had left without informing the petitioner about the absence of the e-way bill. According to the petitioner, once the driver informed the firm about the problem, the e-way bill was immediately generated and produced before the authorities.
The petitioner also disputed the classification of the goods. It argued that the goods had been declared as Arecanut and that the alleged misclassification could not by itself justify detention of the goods in transit. According to the petitioner, at most, the authorities could have detained the goods for preparation of appropriate papers for transmission to the assessing authority.
The State authorities opposed the petition and argued that the circumstances demonstrated an intention to evade tax.
The State pointed out that the vehicle had been intercepted at 4:28 a.m., whereas the e-way bill was generated only at 7:36 a.m. The authorities also raised doubts regarding the genuineness of the transaction after finding discrepancies during verification of the seller’s records.
The driver’s statement was also relied upon. According to the State, the goods had been transferred from another vehicle and loaded into the intercepted vehicle at Bakauli, Delhi. The authorities noted that the petitioner’s registered business did not have a principal or additional place of business at Bakauli.
An inquiry conducted by the Delhi tax authorities allegedly found that the firm’s declared place of business could not be traced, following which proceedings for suo motu cancellation of registration were initiated.
The State further relied upon the classification discrepancy, contending that the physically verified goods were processed betel nut falling under HSN 21069030 and taxable at 18%, whereas the goods had been declared as Arecanut attracting tax at 5%.
The Allahabad High Court identified the principal issue as whether carrying an e-way bill is mandatory during the movement of goods from one place to another.
The Court held that the legal position had already been settled following the 14th Amendment to the Uttar Pradesh GST Rules, 2017, which came into force on April 1, 2018. Following the amendment, goods in transit were required to be accompanied by an e-way bill.
The Court relied particularly upon its earlier decision in Akhilesh Traders v. State of U.P., where it had held that when goods are transported without the required invoice or e-way bill, a presumption of intention to evade tax can arise.
Importantly, the presumption is not described as irrebuttable. The owner or transporter can rebut it by producing appropriate material explaining the circumstances. However, in the present case, the High Court found that the petitioner failed to rebut the presumption.
A crucial observation of the High Court was that generating the e-way bill after interception does not automatically extinguish the liability arising from its absence at the time of transportation.
The Court relied upon its earlier decision in Jhansi Enterprises, where it had held that mere production of documents after interception cannot establish that there was no intention to evade tax. The Court noted that there must be reasonable grounds explaining why the documents were not available when the goods were intercepted.
The High Court also distinguished older judgments relied upon by the petitioner because those cases concerned transactions predating April 2018, when practical difficulties in generating e-way bills existed.
After the April 2018 amendment, the Court held, there was no comparable difficulty in generating and downloading an e-way bill, making compliance with the requirement mandatory.
The petitioner had also argued that the penalty order was passed without service of notice.
The High Court rejected this contention after examining the material on record. It found that the notice had been served upon the vehicle driver and was also sent through email to both the seller and the buyer on June 16, 2022.
Neither party responded to the notice or participated in the proceedings. The Court therefore found no basis to accept the argument that the petitioner had been denied an opportunity of hearing.
The High Court did not base its conclusion solely on the absence of the e-way bill.
It noted that the goods were intercepted without the required document, the e-way bill was generated only about three hours after interception, the firm’s business activity was not found at its registered premises, and the registration itself was subsequently subjected to suo motu cancellation proceedings.
The Court further found significance in the discrepancy between the goods declared in the transaction documents and the goods actually found during physical verification. The declared goods attracted GST at 5%, while the goods found by the authorities were treated as goods taxable at 18%.
According to the High Court, these circumstances, taken together, revealed an intention to evade tax.
The matter ultimately reached the Supreme Court through a Special Leave Petition arising from the Allahabad High Court’s March 5, 2025 judgment.
On August 14, 2026, the Supreme Court condoned the delay but found no good ground to interfere with the High Court’s judgment under Article 136. The SLP was accordingly dismissed.
The Supreme Court’s order is brief and does not independently discuss the merits of the e-way bill issue. The operative consequence, however, is that the Allahabad High Court’s decision remains undisturbed.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
