The Goods and Services Tax Appellate Tribunal (GSTAT), Thiruvananthapuram Bench, has held that when goods belonging to a principal are returned by a job worker after completion of job work, the value of the original goods is not required to be included in the consignment value declared in the e-way bill. 

The bench of Subramanya Rayaprol (Vice-President) and Ramamoorthi Sriram (Technical Member) clarified that the taxable supply on such return movement is the job-work service, and the transaction value is therefore restricted to the job-work charges along with applicable tax.

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The department alleged that the goods were not accompanied by valid documents and that there was no valid e-way bill accompanying the consignment. Proceedings were initiated under the GST provisions, resulting in a penalty of ₹1,25,442 each under the CGST and SGST Acts, aggregating to ₹2,50,884, under Section 129(3). Metalloids India paid the amount to secure release of the goods and conveyance and subsequently challenged the order before the appellate authority. 

The first appellate authority dismissed the appeal and upheld the penalty, prompting the taxpayer to approach the GSTAT.

The taxpayer contended that the movement was governed by Section 143 of the CGST Act read with Rule 45 of the CGST Rules, dealing with job-work transactions.

It was argued that transportation of goods from the job worker back to the principal after completion of job work could not be treated as an independent outward taxable supply of the goods themselves.

The taxpayer further submitted that the value of the principal’s goods, stated to be ₹6,96,900, was not required to be included in the e-way bill because the taxable supply on the return movement was only the job-work service.

According to the taxpayer, the movement was supported by the job-work tax invoice, e-way bill, receipt note, original delivery challan and corresponding documentation for the earlier movement to the job worker. 

The appellant also argued that there was no allegation of suppression, clandestine removal, undervaluation, wrongful availment of input tax credit, tax evasion or revenue loss. It therefore contended that Section 129 could not be mechanically invoked merely because of an alleged documentation discrepancy. 

The department pointed out that the original e-way bill generated for movement of the goods from Metalloids India to Roofstyle Industries declared 2,300 kg of material valued at ₹6,96,900.

According to the department, however, the return e-way bill generated for movement from Roofstyle Industries back to Metalloids India showed zero quantity and only the job-work invoice value. The department argued that the e-way bill therefore failed to properly represent the physical goods being transported. 

The department further argued that the e-way bill should have reflected the original material value along with the job-work charges because the vehicle was physically carrying goods worth ₹6,96,900.

It contended that showing only ₹1,841, representing the job-work charges including applicable tax, substantially understated the value of the consignment and justified action under Section 129. 

The Tribunal first examined the allegations contained in the show cause notice.

The SCN alleged that the goods were not accompanied by appropriate documents and that no e-way bill was available with the consignment.

However, on examining the documents forming part of the department’s own record, the Tribunal found that these allegations were factually incorrect.

The Tribunal noted that the invoice issued by Roofstyle Industries, the job worker, contained the description and quantity of the goods, HSN details, job-work charges and GST charged on those services.

The Tribunal therefore found that the goods were accompanied by a valid tax-paid invoice. It observed that once such an invoice was available, there was no requirement for another delivery challan in the circumstances alleged by the department. 

The Tribunal also examined the CBIC circular governing documentation in job-work transactions.

It noted that CBIC Circular No. 38/12/2018 provides for the principal to prepare a delivery challan when goods are sent to a job worker and requires the job worker to return one copy of the challan along with the goods.

According to the Tribunal, the department’s own records showed that Delivery Challan No. 3 dated May 4, 2023, issued by Metalloids India, was among the documents tendered at the time of interception.

The Tribunal consequently concluded that the appellant had complied with the statutory requirements relating to the delivery challan. It observed that the SCN’s allegation regarding absence of such documentation was based on inaccurate facts contradicted by the department’s own records. 

On the second major allegation concerning the e-way bill, the Tribunal found that the return movement from Roofstyle Industries to Metalloids India was covered by E-way Bill.

The Tribunal noted that the e-way bill had been tendered at the time of interception and was also reflected in the department’s own records.

It therefore held that the allegation in the SCN that the goods were not accompanied by an e-way bill was contradicted by the department’s own documentation. 

The Tribunal concluded that the allegations in the SCN were, in its words, factually inaccurate when tested against the documents issued or maintained by the SGST authorities themselves.

On this factual ground alone, the Tribunal held that the SCN deserved to be set aside. 

The Tribunal next examined the order issued under Section 129(3).

While the SCN alleged that there was no e-way bill accompanying the goods, the detention order subsequently referred to the absence of a valid e-way bill.

The Tribunal treated this as a significant change in the basis of the proceedings.

It observed that the validity of the e-way bill had not been the allegation contained in the SCN. Consequently, the order could not introduce a fresh ground that had not been put to the taxpayer.

The Tribunal held that this violated the principles of natural justice because the taxpayer had not been given an opportunity to respond to the newly introduced allegation. 

The Tribunal also found the detention order to be non-speaking, since it did not explain why the e-way bill available on record was considered invalid.

According to the Tribunal, in the absence of reasons, the taxpayer could not reasonably be expected to defend itself against such an allegation.

The GSTAT found similar defects in the first appellate order.

Although the appellate authority acknowledged that an e-way bill had been generated for the return movement from Roofstyle Industries to Metalloids India, it nevertheless proceeded to raise an additional issue concerning an alleged e-way bill for movement from A.S. Metals, Kochi to Metalloids India.

The Tribunal noted that this allegation did not form part of the original SCN.

It further questioned the relevance of such an e-way bill to the particular movement during which the goods had actually been intercepted, namely the transportation from Roofstyle Industries, Thripunithura, to Metalloids India, Pathanamthitta. 

The Tribunal accordingly held that the appellate authority had relied upon irrelevant grounds that were not part of the SCN and had failed to properly apply its mind to the actual dispute.

The central legal issue before the Tribunal concerned the value that should be declared in the e-way bill when a job worker returns goods belonging to the principal.

The Revenue argued that the e-way bill should reflect the original material value of ₹6,96,900 along with the job-work charges.

The Tribunal, however, rejected this contention.

It examined Explanation 2 to Rule 138 of the KGST/CGST Rules, under which the consignment value is the value determined under Section 15 and declared in the relevant invoice, bill of supply or delivery challan, along with applicable tax and cess.

The Tribunal then considered Section 15(1), which provides that the value of a taxable supply is the transaction value, i.e. the price actually paid or payable for the supply, subject to the statutory conditions. 

Applying these provisions, the Tribunal held that when a job worker returns the principal’s goods after completing the job work, the supply involved is the job-work service.

Consequently, the transaction value is restricted to the job-work charges plus applicable duties.

The original value of the goods belonging to the principal, which had merely been subjected to job work, does not become part of the consignment value merely because the goods are physically being transported back to the principal. 

The job-work invoice issued by Roofstyle Industries showed a value of ₹1,841, inclusive of job-work charges and applicable CGST and SGST.

The Tribunal found no allegation that the principal and job worker were related or that the amount stated in the invoice was not the sole consideration for the supply.

It therefore treated ₹1,841 as the transaction value and, consequently, the consignment value for the purpose of the e-way bill provisions. 

The Tribunal then considered the threshold prescribed under Rule 138.

Since the applicable transaction and consignment value was only ₹1,841, the amount was substantially below the ₹50,000 threshold referred to by the Tribunal for mandatory generation of an e-way bill.

The Tribunal therefore accepted the taxpayer’s contention that the movement of the job-worked goods back to the principal was not covered by the e-way bill requirement in the circumstances of the case. 

The Tribunal consequently held that when generation of an e-way bill itself was not mandatory, proceedings alleging a defective e-way bill or absence of an e-way bill could not be sustained.

The department argued that the return e-way bill effectively represented zero quantity of goods and therefore could not be considered a valid e-way bill for the physical goods in transit.

The Tribunal rejected this argument because the issue of alleged misrepresentation of quantity or invalidity of the e-way bill had not been properly raised in the SCN or the original order.

It held that the department’s attempt to introduce new grounds at the Tribunal stage could not cure defects in the original proceedings. 

The Tribunal further observed that the Revenue had not identified a statutory provision supporting its contention that the original value of the principal’s goods had to be added to the job-work charges for determining the e-way bill value. 

The Tribunal ultimately answered the question of law in the negative, holding that when goods belonging to a principal are returned by the job worker after completion of job work, the value of the goods on which job work has been undertaken is not includable in the consignment value to be declared in the e-way bill. 

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