The Goods and Services Tax Appellate Tribunal (GSTAT), State Bench at Varanasi, has upheld a penalty of ₹2,13,010 imposed for transporting copper scrap without a tax invoice and an e-way bill. The Tribunal rejected the trader’s contention that generating the documents after interception, but before the penalty order, was sufficient to establish compliance and absence of an intention to evade tax.

The bench of Narendra Bahadur Yadav (Judicial Member) and Ananjai Kumar Rai (Technical Member) reasoned that, had the vehicle not been intercepted, the goods could have continued to their destination without a contemporaneous record of their movement. Generating documents after interception did not, in the circumstances before it, cure the original contravention.

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The dispute arose from an inspection conducted by the State Tax Mobile Squad near Purjagir in Mirzapur district on December 28, 2022. Acting on specific information, the officers intercepted a vehicle at approximately 12:05 p.m. and found it carrying copper scrap.

According to the order, the driver informed the inspecting officer that he did not possess any bill, transport document or e-way bill for the consignment. He stated that the goods had been loaded near City Kotwali and were to be transported to Ghosia, Aurai, in Bhadohi district, where further instructions about the unloading location would be provided.

Physical verification established that the vehicle contained 978 kg of copper scrap. The vehicle was taken to the Mobile Squad’s office premises, and detention proceedings followed.

On December 29, 2022, an authorised representative of V.K. Brothers submitted a tax invoice dated December 28, 2022, and an e-way bill generated at 7:26 p.m. that day—more than seven hours after interception. The invoice identified M/s Hari Manu Metals, Kanpur, as the recipient.

The adjudicating authority imposed a penalty of ₹2,13,010 under Section 129(3), comprising ₹1,06,505 each under CGST and SGST. The trader paid the amount, following which the goods and vehicle were released on December 29, 2022. Its first appeal was subsequently dismissed.

Trader Claimed a Procedural Lapse, Sought Refund

Before the Tribunal, the appellant argued that the consignment was genuine and duly accounted for. It maintained that no discrepancy had been found in the quantity, ownership or nature of the goods and that the absence of documents at interception was merely a procedural lapse.

The appellant explained that a family function or birthday programme at the proprietor’s residence had disrupted the usual office and accounting arrangements. It also claimed that the vehicle was standing outside an area subject to movement restrictions and that the documents could not reach the driver in time.

A central argument was that the invoice and e-way bill had been submitted before the final penalty order was passed. According to the appellant, the authorities should have considered those documents instead of sustaining the penalty solely because they were generated after detention.

The trader further submitted that its outward supplies declared in GSTR-1 reconciled with GSTR-3B and that the applicable tax had been paid. It sought cancellation of the penalty and refund of the amount deposited, stating that payment had been made under compulsion to secure release of the consignment.

The departmental representative opposed the appeal, arguing that the appellant’s explanations at different stages were contradictory and misleading.

The department maintained that the vehicle had been intercepted while in transit, rather than while parked. It stressed that the e-way bill did not exist when the vehicle was stopped and was generated only later that evening.

It also pointed to the driver’s statement that the goods were being taken towards Ghosia, Bhadohi, while the subsequently produced invoice named a recipient in Kanpur. According to the department, the circumstances supported an inference of an intention to evade tax.

Examining the statutory framework, the Tribunal referred to Section 31 and Section 129 of the GST legislation, along with Rules 138, 138A and 138B.

It noted that Section 31 requires a registered supplier to issue a tax invoice before or at the time of removal of goods where the supply involves movement. Rule 138 requires the prescribed information to be furnished before commencement of movement for consignments exceeding ₹50,000, subject to the applicable provisions.

The bench also emphasised the conjunctive wording of Rule 138A. The person in charge of the conveyance must carry the applicable invoice, bill of supply or delivery challan, together with the prescribed e-way bill particulars. These requirements were mandatory in the circumstances of the case.

Applying those provisions, the Tribunal found that the appellant had prepared the invoice and generated the e-way bill only after the vehicle was intercepted. It held that the consignment could not lawfully have commenced its movement without the required documents.

The Tribunal identified the principal question as whether preparing the invoice and generating the e-way bill after interception could validate the appellant’s earlier conduct.

It explained that the e-way bill mechanism enables authorities to track the movement of goods and check tax evasion. Compliance must therefore occur before movement begins.

The appellant relied on several Allahabad High Court decisions, including Modern Traders, Falguni Steels, OSR Creationand Bans Steel, to argue that penalties should not be sustained where there was no intention to evade tax.

The Tribunal distinguished those decisions on their factual circumstances. It noted that another appeal involving the same appellant, APL/16/VRN/2026, concerned a subsequent supply of copper scrap in which documents had also been generated after interception. That appeal was pending for pronouncement before the same bench.

The Tribunal treated the repetition as relevant to its assessment of the appellant’s conduct and intention.

It relied on the Allahabad High Court’s decision in Jhansi Enterprises v. State of U.P., which discussed the principles stated in Akhilesh Traders. As reproduced in the Tribunal’s order, those decisions recognise that transportation without an invoice and e-way bill may raise a rebuttable presumption of an intention to evade tax.

The taxpayer must provide a reasonable explanation and supporting material to rebut that presumption. Subsequent production of documents alone does not necessarily establish the absence of an intention to evade tax.

The Tribunal rejected the contention that arrangements for a birthday party reasonably explained the failure to prepare the required documents.

Considering the absence of documents during transit and the repetition of similar conduct, the bench found sufficient grounds to sustain the penalty. It concluded that the appeal lacked merit.

The appeal was accordingly dismissed, leaving the ₹2,13,010 penalty intact. The parties were directed to bear their own costs.

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