GST update No 283 on validity of detention order for mistake in the name of consignee

GST law introduced various new concepts such as generation of e-way bill, “bill to ship to” model and so on. However, there has been lot of disputes reported for improper documents found during the transportation of goods including invoice and e-way bill. Recently, one case was reported before hon’ble Madras High Court in the case of M/S MACMET ENGINEERING LIMITED V/S THE COMMISSIONER OF COMMERCIAL TAXES wherein the vehicle was intercepted due to discrepancy in mentioning the name of the consignee under “bill to ship to model”. The detailed discussion on the verdict is the subject matter of discussion of our present update.
The petitioner is engaged in supply of bulk materials transporting systems and provides solutions for bulk materials transportation such as coal, limestone etc. The petitioner is registered under GST at Kolkata, West Bengal and entered into EPC contract with ITD Cementation India Limited for supply of jetty and pipe conveyor system. The petitioner opened site office within 1.5 kms radius from the work site and obtained GST registration for stock transfer. Since, no supplies were effected from the site, NIL returns were filed. Consequent to the EPC contract, purchase orders were placed to M/s. Phoneix Conveyor Belt India Private Limited. The supply under this transaction is in “Bill to Ship to” model wherein the billing shall be done to the petitioner and goods shall be shipped directly to the ITDC at Udangudi. On 26.07.2022, the supplier M/s Phoneix raised 5 invoices for consignments dispatched along with invoices, e-way bills, packing list etc in accordance with Rule 138A of the CGST Rules, 2017. However, the vehicles were intercepted and show cause notices were issued alleging that the driver of the vehicle did not possess tax invoices that were to be issued by the petitioner to the ITD Cementation India Limited. It was also proposed to levy penalty under Section 129 of the CGST Act. The petitioner admitted that there is error on the partof their supplier M/s. Phoenix in mentioning the Ship to details as the name of petitioner was mentioned instead of ITDC.
It was submitted that they had raised supply invoice on ITDC prior to date of interception and details of same are available in GSTN Portal, which can be accessed by the Officer. The hard copy of the invoice raised by them on ITDC was also submitted by the petitioner to the second respondent along with other documents. The counsel of petitioner further argued that there was only mistake in respect of mentioning the name of consignee in the E-way bill which should be issued in the name of ITDC. However, ship to address was correctly mentioned in the invoices. It was also submitted that the ultimate user of the goods is ITDC and the Macmet Engineering shall raise invoices upon ITDC and in any case, the place of supply shall be Tamil Nadu. Thus, there shall be no loss of revenue to the Tamil Nadu Government. Further, since the mistake is committed by M/s Phoenix, there is no loss of tax either by Phoenix or by the petitioner. It should be treated as minor breach under Section 126 of the Act.
Reliance was further placed on Press Release dated 23.04.2018 which is only clarificatory in nature. The materials produced demonstrates that there is no evasion of tax and hence, no proceedings should have been initiated against the petitioner. It was also contended that the roving square officers are not competent to decide the valuation, and had raised the tax demand and penalties. Therefore, there is violation of guidelines given in Circular No. 10/2019 dt 31.05.2019. Moreover, the petitioner company is a reputed company having 300 Crores Turnover and is not a fly-by-night company. The purchase order was also produced clearly mentioning that goods are to be shipped to ITDC. There is only one mistake committed and rest all particulars are correct and hence, there is no tax evasion. Reliance was placed on following rulings:-
• Jeyyam Global Foods Pvt. Ltd. Vs. Union of India [2019 (21) G.S.T.L. 465 (Mad.)]
• N.V.K.Mohammed Sulthan Rawther and Sons vs. Union of India [2019 (20) G.S.T.L. (Ker.)]
• K.P.Suganth Limited vs. State of Chattisgarh [2020 (38) G.S.T.L. 317 (Chhattisgarh)
The Counsel of revenue submitted that the driver of the vehicle furnished invoices and it was noticed that there is no reference of ITDC in the tax invoice. Further documents were carried related to only “Bill to” address which was in violation of the provisions of Law. It was stated that it is a triangular transaction wherein there are 3 parties. It was argued that the second invoice was not raised earlier which is not connected to the aforementioned triangular transaction and was produced at the time of hearing only. Thus, it is violative of “Bill to Ship to” model and as a result transaction chain is cut-off. Hence, the tax is also curbed. This cannot be a minor breach since, there a turnover of the company is high and hence, there are high chances of tax evasion by camouflaging the transaction in an improper method. Therefore, the penalty is rightly imposed. It was argued that the judgements relied upon by the petitioner are not at all relevant to the present case.
The Court stated that the present situation was similar to one case delivered by this Court of Jeyyam Global Foods Pvt. Ltd. V/s Union of India wherein it was stated that the jurisdictional assessing officer is authorised to verify the documents produced for genuineness of the transaction and verification is not to be done by the Roving Squad Officers. Further reliance was drawn to N.V.K.Mohamed Sulthan Rawther and sons vs. Union of India [2019 (20) G.S.T.L. 708 (Ker.), Shri Venkateshvara Logistics Fleet Owners and Transport Contractors vs. Asstt. Commr. Of C.T. & C. Ex. Cus. & S.T., Vijayapur. Therefore, it was held that looking into the present situation, the petitioner already uploaded the particulars on the GST Portal even before the detention which can be cross verified by assessing officer as well. Therefore, the detention order was quashed, and it was directed to the jurisdictional officer to take up the case and then decide the matter.
It is expected that the roving mobile squad officers realise that detention orders should be passed only when there is major discrepancy in the documents furnished by the transporter/assessee. In cases where the malafide intention to evade tax is not there, the detention order should not be passed by invoking provisions contained in section 129 of the CGST Act, 2017. It is hoped that these binding Judicial Rulings are unreservedly followed by the departmentalauthorities so that the litigation cost borne by the taxpayers is reduced.

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GST update No 283 on validity of detention order for mistake in the name of consignee

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