GST Returns

Under Valuation of Goods by Dealer to Avoid E way Bill not Allowed

E way Bill

On 14th February 2023, Allahabad High Court pronounced a judgement in the case titled M/S Radha Fragrance Vs UOI, wherein the petitioner filed the writ petition under Art. 226 of the Indian Constitution against the order dated 02nd March 2019 passed by First Appellate Authority and the order dated 14th February 2019 passed by the state tax officers detaining the goods and the vehicle. The court dismissed the appeal of the petitioner, holding that undervaluation of goods by the dealer to avoid E way Bill is not allowed and the dealer can’t take shelter from the technicalities of rule 138, which waives off the requirement of the E-Way bill if the value of goods is less than 50,000. The present article shall deal with the aspects covered in the case to provide a better understanding of the same.

Facts of the Case

The petitioner is a regd. dealer with the  Haryana State Goods and Service Tax Act, 2017, having a business of manufacturing and sale of Chewing Tobacco and Pan Masala. The petitioner was sending goods from Harayan to Jharkhand through the below four Tax Invoices.

  1. Tax Invoice No.RFTB/18-19/9, 30 Cartoons Chewing Tobacco for a sum of Rs.47,465/-, which included discount, IGST and Cess.
  2. Tax Invoice No.RF/18-19/10, 30 Cartoons Pan Masala for a sum of Rs.49,068/-, which included discount, IGST and Cess.
  3. Tax Invoice No.RFTB/18-19/8, 30 Cartoons Chewing Tobacco for a sum of Rs.47,465/-, inclusive of discount, IGST and Cess.
  4. Tax Invoice No.RF/18-19/11, 30 Cartoons Pan Masala for a sum of Rs.49,068/-, which included discount, IGST and Cess.

The mobile squad, respondent no.5, inspected the goods in transit from Haryana to Jharkhand. During the inspection, only 2 tax invoices were provided, i.e. invoice No.RF18-19/10 and RF18-19/11  which were for Pan Masala,  he and didn’t produce any  tax invoice  for the tobacco

At the time of the vehicle verification conducted on 5th Feb 2019, it was discovered that the vehicle was transporting 120 Cartons of Pan Masala and tobacco instead of 60 Cartons, and the same was evident from tax invoices produced by the driver. The goods didn’t have the E-Way Bill as per Rule 138  due to the value of goods being claimed to b0  below Rs.50,000/-.

It was further found out by respondent no. 5 that each cartoon contained 200 boxes, 32 pouches were kept in each box, and the MRP of each pouch was printed as Rs.4, totalling the value of 60 Cartoons as Rs.15,36,000/- and  subsequent to allowing a discount of 25% and excluding tax and Cess, the basic value was Rs.6,12,766 while the value on both the invoices was declared collectively Rs.69,600/

A show cause notice in Form MOV 07 was issued on 6th Feb .2019, followed by a detailed reply being filed in pursuance of the same on 13th Feb 2019 wherein it was mentioned that tax invoices of tobacco were misplaced by the driver and couldn’t be produced at the time of interception of goods.

The value of 30 cartoons of tobacco was Rs.47,465/- each being sent to M/s Alliance Trading Co. and M/s ASP Enterprises. The question as to the jurisdiction of the State of Uttar Pradesh in intercepting the goods and detaining the same was also raised. The dealer also submitted an explanation that he had recently started the business, and in order to promote his business, he was charging a price much below the MRP printed on the pack.

 On 14th Feb 2019, Respondent No.5 passed the order u/s 129(3) of the Central GST Act, 2017 r/w Section 20 of Integrated GST Act, 2017, rejecting the explanation submitted by the dealer followed by directing the petitioner for depositing the integrated tax to the extent of Rs.7,27,235/- and the same amount of penalty totalling Rs.14,54,470/-.

Aggrieved by the order,  the petitioner filed an appeal u/s 107 of the GST Act of 2017 before the First Appellate Authority, respondent No.4.  which was dismissed by the order impugned dated 02nd March 2019, confirming the order dated 14th Feb .2019 hence the present writ petition.


Whether in the shelter of certain protection is given under Rule 138 dispensing requirement of E-Way bill for goods valuing below Rs.50,000/-, a dealer being a manufacturer can be allowed to send his goods to different consignees by undervaluing the goods, and the Tax Authorities shouldn’t take action under the Act.

Contentions of the Petitioner

The petitioner’s ld counsel of the petitioner submitted that Section 4 of the Integrated GST Act, 2017 r/w Section 2(91) of the Central GST Act, 2017[1] provides for authorization of officers of State Tax or Union Territory Tax as Proper Officers for performing the function under the Act.

As per him, there hasn’t been the issuance of any notification by the Central Government u/s 4 of the Integrated GST Act as a ‘Proper Officer’ exercising power contained u/s 129(3) of the Central GST Act, 2017. According to him, the State Taxing Officers had no power of detaining and checking the vehicle, and in case of any discrepancy, the matter should have been reported to the  Assessing Officer of the State of Haryana, where the matter could be dealt with during the assessment proceedings.

In his opinion, the tax invoices for tobacco were generated along with tax invoices of Pan Masala on 2nd Feb 2019, but owing to the driver’s fault, the same was not produced before the detaining authority and was submitted at the time the reply was given to the notice.

He further opined that the mandatory requirement of carrying an E-Way bill according to Rule 138 is only when the goods are valued at Rs.50,000/- or more.

In the instant case, as the goods of Pan Masala and Tobacco, which were sent to two different consignees, were less than Rs.50,000/-,  therefore downloading the E-Way bill wasn’t necessary in this case.

Another contention of the counsel was that the dealer was offering a huge discount as he had started his business only in the year 2018 to compete in the Pan Masala segment. Therefore, the price disclosed in the Tax Invoices can’t be disbelieved, considering the competitiveness of the business.

Contentions of the Standing Counsel

On the contrary, the learned Standing Counsel made a submission that the petitioner deliberately undervalued the goods with the motive of avoiding the E-Way bill and production as well as the sale being uploaded on the web portal.

In his opinion, during transit, the driver of the vehicle was only carrying with him two tax invoices and bility for Pan Masala and wasn’t having tax invoices for Tobacco with him.

The tax invoices were produced later on, along with an explanation furnished by the dealer. He then submitted that the price of one Cartoon, calculated based on the MRP of Rs.4/- per Pan Masala and after providing trade discounts of 25%, was fixed at Rs.10,240/- while the tax invoices reflect the price of one Cartoon at Rs.1,160/-.

This, as per  him, was done so that after giving a discount of 25% and adding IGST and Cess, the value of goods would come below Rs.50,000/-  which would avoid the  need of downloading the E-Way bill mandated under Rule 138

Observations of the Court

The court opined that the sole purpose of downloading an E-Way bill is to record every good, in transit, in the Web Portal so that the Government has a clear picture of the goods which are manufactured and sold by the dealers, either Inter-State or Intra-State.

The necessity of downloading the  E- Way bill for goods below 50,000  is dispensed by the government only with the objective of protecting the small traders, and the same doesn’t allow the dealer to undervalue his goods so as to escape it from bringing to the notice of the Government and the Taxing Authorities by uploading the same on the Web-Portal.

It was also observed by the court that the petitioner had started his business in the year 2018, and prior to the interception of the goods, it carried 11 transactions, and none of the transactions was neither reported on the Web Portal, nor the  E-Way bill was downloaded by him which implies that all the transactions carried out by the dealer were below Rs.50,000/-.

If such conduct of a dealer were permitted, it would harm the business world, leading to a parallel economy, thereby frustrating the very purpose of enactment of the Goods and Service Tax Act and the idea of ‘One Nation One Tax’ which was subsuming all other taxes into one and bring transparency in the business world.

The transactions carried by the dealer clearly show that a huge amount of Pan Masala and Tobacco was being transported, undervaluing the goods without downloading the mandatory E-Way bill.  The benefit of section 138 cannot be given to the dealer in the garb of technicalities, who has intentionally undervalued his goods with the purpose of escaping from the eyes of the law.

The case cited by the petitioner were considered to be distinguishable on the facts of the case and cant be relied upon.

60 Cartons of Pan Masala contained 3, 84,000 pouches. The printed price on each pouch is Rs.4/-, totalling the value of goods is Rs.15,36,000/-. The detaining authority arrived at the basic value of Rs.6,12,766/-. After providing a discount of 25% and deducting the tax and Cess

 If the argument of the petitioner’s counsel regarding the dealer being new in the business and giving a heavy discount was just his way of surviving and establishing himself in the market is taken to be correct, then it cannot be assumed and expected that the value of Pan Masala for 60 Cartoons, as disclosed by the dealer, would be Rs.69,600/- i.e. roughly one-tenth of the value arrived by the detaining authority based on the declaration made on the pouch of each Pan Masala.


This Court found the case to be about grossly undervaluing the 3,84,000 pouches of Pan Masala being sent by the dealer, disclosing its price as Rs.69,600/-. The only conclusion which can be drawn according to the aspects of the case was that the dealer had undervalued the goods to this extent with the sole objective of avoiding the download of the E- Way bill to bring the transaction on record.

Moreover, the Taxing Authorities have also found that one of the consignees situated at Jharkhand was actually registered with the Taxing Authorities disclosing his nature of business as ‘Works Contract and Suppliers of Services’ and not in the business of trading.

The court held that the only conclusion that could be drawn from the action of the dealer that the transactions being not recorded with the Revenue with the intention of escaping the payment of due tax in the garb that E-Way bill is only required in case value of goods is more than Rs.50,000/-.

Thus, the court finally held that it could be safely said that no interference was needed in the action of the State Authorities in detaining the goods and imposing tax and penalty, which have been affirmed by the first Appellate Authority because the dealer can’t be permitted to take shelter of the non-requirement of E-Way bill in case the value of the goods < 50,000 Rs.50,000/-.


It was a clear case of undervaluation of goods by the dealer who transported huge quantities of Pan Masala and Tobacco, showing the negligible value of goods. The court has dealt with the case wisely and firmly established the fact of Rule 138 as it has been formulated for the benefit of small traders, and no person can take shelter from the technicalities of the said rule to escape the payment of tax.

Also Read:
The Significance of E-way Bill Generation under GST Regime
E-Way Bills and Issue Related to the Generation of E-Way Bill


Shubhangi Jain

Shubhangi has completed her B. A.LLB (H) with specialization in Business Laws from Amity University. She is particularly interested in legal research and writing and wishes to utilize her knowledge to create informative legal content. She has prior experience in corporate and criminal litigation and has great drafting skills. She has also published various research papers in reputed journals.

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