The GST Appellate Tribunal (GSTAT), Lucknow Bench, has dismissed a departmental appeal seeking restoration of a ₹2.12 lakh penalty imposed on a trader transporting iron scrap. The department had alleged that the goods were loaded from an undeclared warehouse, relying primarily on the truck driver’s statement.

The bench of Santosh Kumar Srivastava (Judicial Member) and Arvind Kumar (Technical Member) found that the consignment was accompanied by a valid tax invoice and e-way bill, and that physical verification revealed no discrepancy in the description, quantity, quality, weight or value of the goods. It also held that the department had not produced sufficient independent evidence to substantiate its allegations about the loading point, the declared business premises or the weighbridge.

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The bench upheld the first appellate authority’s order setting aside the penalty imposed under Section 129(3) of the Central Goods and Services Tax Act and Uttar Pradesh GST Act, 2017.

The case arose when a truck carrying old iron scrap was intercepted by the State Tax Mobile Squad near Bhithauli on Sitapur Road, Lucknow, on October 31, 2023. The consignment, weighing 15,815 kilograms, was being transported from Lucknow to Muzaffarnagar.

The driver produced a tax invoice, e-way bill and weighbridge slip. The documents showed the dispatch location as Talkatora Road, Lucknow.

According to the department, however, the driver stated in Form GST MOV-01 that the goods had been loaded from a warehouse at Puraniya, Lucknow. The department alleged that the Puraniya premises had not been declared as an additional place of business or warehouse in the supplier’s GST registration.

The department also alleged that the weighbridge named in the slip was closed or non-operational and that no business activity was found at the declared Talkatora Road premises.

Treating the alleged difference in the dispatch location as a statutory contravention, the proper officer issued a notice and imposed a penalty of ₹2,12,400 on November 5, 2023. The amount comprised ₹1,06,200 each under central GST and state GST.

The taxpayer challenged the penalty before the Additional Commissioner, Grade-II (Appeal)-Second, State Tax, Lucknow.

The first appellate authority found that the goods were covered by the tax invoice and e-way bill and that no discrepancy had been detected in their description or quantity. It also found that the allegation about loading at Puraniya was based principally on the driver’s statement, without independent and conclusive evidence.

The authority further observed that the department had not produced sufficient documentary evidence to support its allegations about the weighbridge and the declared place of business. It set aside the penalty on March 28, 2024, and directed that the amount deposited be refunded or adjusted in accordance with the applicable provisions.

The department then approached the GSTAT under Section 112(3), seeking restoration of the penalty.

Before the tribunal, the department argued that a supplier must disclose the premises from which business activities are carried out and that loading goods from an undeclared warehouse violated the applicable registration requirements.

It maintained that the driver’s statement was recorded at the time of interception and deserved evidentiary weight. The department also argued that the difference between the alleged loading point and the dispatch address in the documents affected the reliability of the transport documents.

The department contended that a separate finding of dishonest intention was not indispensable in every case involving a statutory contravention under Section 129.

The taxpayer maintained that the physical verification report in Form GST MOV-04 showed that the goods matched the accompanying documents. It said the e-way bill was valid until November 3, 2023, and the truck was travelling towards the declared destination.

The trader submitted that the Talkatora Road premises had been approved as an additional place of business on September 24, 2023, before the interception. It also relied on a Legal Metrology calibration certificate dated September 19, 2023, to dispute the allegation that the weighbridge was non-operational.

The taxpayer argued that the driver’s statement was recorded without giving it an opportunity to cross-examine him. It also disputed the allegation at the notice stage and maintained that the department had produced no independent evidence to establish the claimed loading point.

The tribunal described the physical verification recorded in Form GST MOV-04 as central to the case. It noted that the department’s own record showed no discrepancy between the iron scrap found in the truck and the particulars in the tax invoice and e-way bill.

The bench observed that the goods were moving with valid documents and that their physical particulars matched those documents. It relied on an Allahabad High Court decision in Om Prakash Kuldeep Kumar v. Additional Commissioner Grade-2 concerning detention where the genuineness of accompanying documents was not disputed.

The tribunal also found that the driver’s statement formed the primary basis of the department’s case, but that the record did not establish a verifiable connection to support the allegation that the goods had been loaded from an undeclared warehouse.

Referring to the Supreme Court’s decision in Andaman Timber Industries v. Commissioner of Central Excise, the bench observed that a statement recorded without providing the taxpayer an opportunity to cross-examine the witness could not, in the circumstances, override the documentary material relied upon by the trader.

The tribunal found that the Talkatora Road dispatch site had been approved as an additional place of business before the interception. It said the officer had not placed objective evidence on record—such as a contemporaneous spot-verification report, photographs or independent witness statements—to support the claim that the registered premises were non-operational.

The bench also relied on the weighbridge’s calibration certificate and found that the department had not produced evidence to substantiate its claim that the weighbridge was non-operational.

Once the taxpayer produced the registration and calibration documents, the tribunal held, the department had to bring positive evidence to support its contrary allegations. It could not rely solely on the driver’s statement and departmental assumptions.

The bench held that intent to evade tax was a prerequisite for confirming a penalty under Section 129(3). On the facts before it, the tribunal found no evidence that the goods were being diverted to an unregistered market or an undisclosed buyer.

It noted that the vehicle was intercepted on the route towards the declared destination and that the transaction was recorded in the registered dealer’s tax returns. The bench concluded that even an assumed procedural variance could not, in these circumstances, be treated as an attempt to conceal the supply chain.

Finding no reason to interfere with the first appellate authority’s assessment, the GSTAT dismissed the department’s appeal and upheld the order setting aside the ₹2.12 lakh penalty.

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