The Goods and Services Tax Appellate Tribunal (GSTAT), Bengaluru, has held that the mere absence of IGST on a delivery challan accompanying an interstate job work consignment does not establish a contravention warranting detention under Section 129 of the Central Goods and Services Tax Act, 2017.

The bench of Srikanth Venkatraman (Judicial Member) and Sudha Koka (Technical  Member) set aside the tax and penalty imposed on the movement of goods from Karnataka to Maharashtra and directed the department to refund ₹2,17,764, along with statutory interest, within eight weeks, after verifying the demand and payment records.

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The appellant undertook job work for its Solapur unit in Maharashtra. It received polypropylene (PP) granules from that unit, converted them into PP woven fabrics, and returned the processed goods.

The appellant dispatched PP woven fabric, PP wastage, and scrap to Solapur. The consignment was accompanied by an e-way bill and a delivery challan dated the same day. The e-way bill identified the movement as job work.

The enforcement officer intercepted and detained the consignment, treating the accompanying documents as defective. According to the officer, the goods were not capital goods covered by Section 143 of the Act, and the appellant had failed to charge IGST on the interstate movement between the two entities.

Invoking Section 129(1)(a), the officer demanded ₹1,08,882 as tax and an equal amount as penalty. The appellant paid the amounts to secure release of the consignment.

The Joint Commissioner of GST (Appeals), Kalaburagi, upheld the action by an order dated February 27, 2026. The appellant subsequently approached the Tribunal.

The appellant submitted that the goods were being returned to the principal after processing and that the movement did not constitute a taxable supply.

It argued that the consignment complied with Rule 55 of the CGST Rules because it was supported by a delivery challan and an e-way bill. Consequently, the absence of IGST on the challan could not be treated as a documentary defect justifying detention.

The appellant further contended that the question whether a transaction constituted job work or a taxable supply was a matter for assessment and could not be conclusively determined through detention proceedings under Section 129.

It also challenged the first appellate authority’s finding that an interstate transaction had been declared as an intrastate transaction, submitting that this conclusion was contrary to the documents on record.

The department supported the first appellate authority’s reasoning and sought dismissal of the appeal.

The appellant raised an additional ground questioning the application of the pre-amended version of Section 129(1)(a).

It submitted that, on the interception date in January 2024, the provision contemplated a penalty equal to 200% of the tax payable, whereas the officer had demanded tax together with a penalty equal to 100% of the tax.

Relying on the Supreme Court’s decision in National Thermal Power Co. Ltd. v. CIT, the Tribunal admitted the additional ground. It held that the issue was a pure question of law arising from the facts already on record.

However, the Tribunal rejected the argument that applying the earlier provision rendered the entire proceedings void from inception.

It explained that the amendment effective from January 1, 2022, changed the amount payable for release of detained goods but did not remove the officer’s substantive power to detain goods where the Act or Rules had been violated.

Although the officer had erred in demanding tax and penalty under the earlier formulation, that error alone did not invalidate the entire order as void ab initio.

On the merits, the Tribunal found that the authorities had failed to examine the transaction under the provisions governing job work and movement of goods without payment of tax.

It observed:

“The mere absence of IGST on the delivery challan could not, without identifying the applicable charging provision and the nature of the alleged taxable supply, establish a contravention warranting detention under Section 129.”

The Bench rejected the enforcement officer’s reasoning that Section 143 applied only to capital goods. It clarified that the provision covers both inputs and capital goods sent for job work.

In the circumstances of the case, the authorities could not justify the demand merely by pointing to the interstate nature of the movement and the absence of IGST on the delivery challan.

The Tribunal also identified inconsistencies in the first appellate authority’s reasoning.

One part of the appellate order stated that an interstate transaction had been treated as an intrastate transaction. Another part proceeded on the ground that IGST had not been charged on interstate transportation.

The Tribunal found these observations contradictory. It further noted that the first appellate authority had failed to examine Section 143 read with Rule 55 and had repeated the enforcement officer’s reasoning verbatim.

After examining the e-way bill and delivery challan itself, the Tribunal found that both documents contained the information required under Rules 55 and 138 of the CGST Rules.

The e-way bill recorded the movement as job work, and the Tribunal found no violation of the Act or Rules warranting invocation of Section 129.

The Tribunal set aside the first appellate order and the imposition of tax and penalty.

It directed the department to refund ₹1,08,882 in tax and ₹1,08,882 in penalty, totalling ₹2,17,764, within eight weeks from the order, together with statutory interest, subject to verification of the demand and payment records.

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