JUNE 15, 2020

By Preetha Mahadevan, Advocate

E-way Bill: Introduction

SECTION 68 of the Central Goods and Services Tax Act, 2017 ("CGST Act") provides that the Government may require the person in charge of a conveyance carrying any consignment of goods to carry with him certain documents and such devices as may be prescribed.

Electronic Way-Bill ("E-Way Bill") is basically a compliance mechanism wherein, by way of a digital interface, the person causing the movement of goods uploads relevant information prior to the commencement of movement of goods and generates E-way bill on the GST portal.

Under GST Laws, an E-way bill is an electronic document generated on the GST portal evidencing movement of goods. It has two components - Part A comprising of details of GSTIN of recipient, place of delivery (PIN Code), invoice or challan number and date, value of goods, HSN code, transport document number (Goods Receipt Number or Railway Receipt Number or Airway Bill Number or Bill of Lading Number) and reasons for transportation; and Part B comprising of transporter details (Vehicle number etc.).

Chapter XVI of the CGST Rules, 2017 provides for E-way Rules. As per Rule 138 of the CGST Rules, 2017, every registered person who causes movement of goods (which may not necessarily be on account of supply) of consignment value more than Rs. 50,000/- is required to furnish information in part A of the E-way bill. The part B containing transport details helps in generation of E-way bill.

Rules 138(2) to 138(14) provide for rules for different situations, based on the transportation arrangement between parties and the value of goods etc.

Rule 138-A provides for the documents and devices to be carried by a person in-charge of a conveyance and Rule 138-B provides for verification of documents and conveyances. Rule 138-C deals with inspection and verification of goods and Rule 138-D provides for the facility of uploading information regarding detention of vehicles.

The intention behind the framing of the aforementioned Rules relating to E-Way bills are in furtherance of the objective in Section 68 of the CGST Act, 2017 i.e. in providing a manner for inspecting goods in movement.

Introduction of Rule 138E

The Central Government vide Notification No. 74/2018–C.T. dated 31.12.2018 amended the CGST Rules, 2017 and inserted Rule 138E. The said Rule was further amended vide Notification No. 33/2019-C.T. dated 18.07.2019. The Rule 138E was notified to take effect from 21.11.2019 vide Notification No. 36/2019-C.T. dated 20.08.2019

138E. Restriction on furnishing of information in PART A of FORM GST EWB-01. - Notwithstanding anything contained in sub-rule (1) of rule 138, no person (including a consignor, consignee, transporter, an e-commerce operator or a courier agency) shall be allowed to furnish the information in PART A of FORM GST EWB-01 in respect of a registered person, whether as a supplier or a recipient, who, -

(a) being a person paying tax under section 10, has not furnished the returns for two consecutive tax periods; or

(b) being a person other than a person specified in clause (a), has not furnished the returns for a consecutive period of two months :

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[Emphasis supplied]

The said Rule 138E sought to bring about a restriction on the facility to issue E-Way bills in Part A of Form GST EWB 01. In effect, it sought to restrict a person from generating E-Way bill from the GSTN Portal in case the person has not furnished returns for a consecutive period of two months. 

Delegated Legislation:

Rule 138E being a delegated legislation must be within the conformity of the parent statute. The Notification No. 33/2019-C.T. dated 18.07.2019 was issued under Section 164 of the CGST Act.

Sec. 164(1) provides for the power to make rules "for carrying out the provisions of this Act". Sec. 164(2) provides that the Government may make rules when called for by a specific provision in the Act.

Therefore, for framing the Rule 138E, there must first be a provision in the CGST Act to enable action for non-filing of returns. Let us examine the provisions under the CGST Act, 2017 that provides for consequences for non-filing of returns.

(1) Section 46 read with Section 62 provides for issuance of Notice and best adjustment assessment to assesses who default in filing returns;

(2) Section 47 seeks to impose a late fee for delay in furnishing returns;

(3) Section 122 seeks to impose penalties for collecting but failing to pay tax to the Government.

(4) Section 50 seeks to charge interest on the delayed payment of tax.

In the present case, it can be seen from a perusal of the CGST Act that there is no specific provision which provides blocking of e-way bill generation facility for return defaulters.

Rule 138E seeks to impose restrictions on the movement of goods by cancelling the facility to generate e-way bills which is beyond the intention of Sections 46, 47 and 62 of the CGST Act. Had Section 46 or Section 62 of the CGST Act, 2017 delegated powers to frame rules on the manner in which assessees who default in filing returns are to be dealt with, then, Rule 138E would have drawn power from Section 164 read with Section 46/ Section 62.

Further, Section 68, which deals with E-way Bills also does not grant any power to impose any restriction on its generation/issuance.

It is settled law that subordinate or delegated legislation is ultra vires the parent Act when it is found to be in excess of the power conferred by the parent Act. In the case of Shabnam Petrofils Pvt. Ltd. v. Union of India reported at 2019-TIOL-1656-HC-AHM-GST. The Hon'ble High Court of Gujarat held (in paragraph 27) as below:

…………………………….

(xi) It is a well settled principle that the delegated legislation has to be in conformity with the provisions of the parent statute. By prescribing for lapsing of ITC, the Notification No.05/2017-C.T. (Rate) dated 28.06.2017, as amended by Notification No. 20/2018-C.T. (Rate) dated 26.07.2018, has exceeded the power delegated under Section 54(3)(ii) of the CGST Act.

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[Emphasis supplied]

Attention is also drawn to the following cases:

- Sales Tax Officer Vs. K.I. Abraham reported in 1967 AIR 1823

- UOI & Ors. Vs. S. Srinivasan reported in (2012) 7 SCC 683

- Indian Association of Tour Operators Vs. UOI & Ors. reported in 2017-TIOL-1715-HC-DEL-ST

Given that the said Rule 138E of the CGST Rules, 2017, travels beyond the scope of the parent CGST Act, 2017, it can be said to be suffering from the vice of excessive delegation and is liable to be stuck down as ultra vires the CGST Act, 2017.

Restriction imposed in Rule 138E is arbitrary and violative of Article 14 & 19(1)(g)

The E-Way bill facility is required only for suppliers engaged in the movement of goods of value over a prescribed amount (Rs.50,000/-). Therefore, not all suppliers are required to use the facility of generating E-Way Bills. For example, a taxpayer who is a pure supplier of services such as a Consultant may never be engaged in the transportation of goods and, therefore, would have no use for generating E-way Bills.

Therefore, even if such a supplier of services has defaulted in filing returns for two consecutive periods, blocking of their E-way Bill portal will not have any effect on their business.

Even if it assumed that the intention behind the said Rule 138E is to penalise defaulters, the Rule effectively penalises taxable persons engaged in the supply of goods only. Taxable persons engaged in the pure supply of services can continue to undertake their business without any penal effect.

Rule 138E creates a disparity between the same class of taxpayers and is therefore violative of Article 14 of the Constitution of India. There is no intelligible differentia between suppliers of goods and suppliers of services, who have both committed the mischief sought to be addressed by Rule 138E.

Rule 138E, therefore, also interferes with the right of suppliers of goods to profession and trade under Article 19(1)(g) of the Constitution of India. For this reason, the said Rule 138E is liable to be struck down as arbitrary and violative to Articles 14 and 19(1)(g) of the Constitution of India.

[The views expressed are strictly personal.]