M/S Anandeshwar Traders vs. State Of U.P. And 2 Others

Held

The Court held that Rule 138(9) of the CGST Rules does not mandate the cancellation of an e-way bill if goods are not transported within 24 hours, nor does it prescribe any consequence for such non-cancellation. The rule permits cancellation only if the dealer chooses to do so within 24 hours. The Court found that even if an e-way bill is not cancelled, it remains a matter of inquiry to determine on evidence whether an actual transaction took place. The initial onus was on the assessing authority to lead positive evidence of reuse, which was not done. The Court also held that the appeal authority erred in entertaining additional evidence at the behest of the respondent revenue authority, as Rule 112 of the CGST Rules does not permit this. This violated the principle that an order under appeal must be tested on the strength of the reasons given in that order, not on fresh evidence or reasons introduced later. The original order under Section 129(3) of the CGST Act was found to be perverse, lacking any finding or evidence to establish evasion or reuse of documents. Remanding the proceedings was deemed unhelpful as it would give the revenue a second opportunity to build a case. Therefore, the order of the appeal authority was set aside, and any deposited amount was to be returned.

Facts

M/s Anandeshwar Traders, a dealer in Pan Masala, is challenging an order dated December 3, 2019, by the Additional Commissioner Grade-2 (Appeal)-5, Commercial Tax, Kanpur, which confirmed a demand of tax and penalty amounting to Rs. 29,76,110/-. The petitioner claims to have sold goods to Shri Durga Trading Company against Tax Invoice nos. SAT/19-20/0059 and SAT/19-20/0060, dated November 24, 2019, with corresponding e-way bills and bilty. These goods were intercepted by revenue authorities on November 28, 2019. Initially, the allegation was reuse of e-way bills, but no finding to this effect was recorded in the final order under Section 129(3) of the CGST Act. The appeal against this order was dismissed by the Additional Commissioner, who entertained additional evidence (toll plaza receipts) and relied on Rule 138(9) of the CGST Rules, inferring reuse of e-way bills because transportation commenced four days after generation.

Key Issues

1. Whether the appeal authority erred in entertaining additional evidence at the instance of the respondent revenue authority, thereby violating Rule 112 of the CGST Rules and the principle laid down in Mohinder Singh Gill & Anr. Vs. The Chief Election Commissioner, New Delhi & Ors., AIR 1978 SC 851? 2. Whether the inference of reuse of e-way bills, based on the delay in transportation and the non-cancellation of e-way bills under Rule 138(9) of the CGST Rules, is legally sustainable in the absence of a finding by the assessing authority and positive evidence thereof? Petitioner's Arguments: The petitioner argued that Rule 138(9) does not mandate automatic cancellation of e-way bills or impose adverse consequences for non-cancellation within 24 hours. They contended that the reason for assessment must be tested on the original order and cannot be supplemented at the appeal stage. They further argued that Rule 112 of the CGST Rules restricts the admission of additional evidence to the appellant, not the respondent. Respondent's Arguments: The respondent argued that the petitioner should have cancelled the e-way bills under Rule 138(9) if goods were not transported as declared, and the non-cancellation itself is evidence of reuse. They also submitted that the additional evidence received by the appeal authority clearly indicated the second use of e-way bills.