The Goods and Services Tax Appellate Tribunal (GSTAT), Lucknow Bench, has held that detection of goods exceeding the quantity declared in a tax invoice and e-way bill does not, by itself, justify imposing a penalty on the entire consignment when the remaining goods are supported by valid documents.

The Bench of Santosh Kumar Srivastava (Judicial Member) and Arvind Kumar (Technical Member) dismissed the Department’s appeal against an order restricting the penalty under Section 129 of the CGST/UPGST Act, 2017, to 32 excess pieces of shuttering plywood. The accompanying invoice and e-way bill covered the remaining 418 pieces.

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The bench emphasised that the penalty must correspond to the nature and extent of the contravention established by the evidence.

The dispute arose when Mobile Squad Unit-4, Lucknow, intercepted a vehicle transporting shuttering plywood from the assessee to M/s Purvanchal Ply, Lucknow. The interception took place at Ring Road, Lucknow, at approximately 3:33 a.m. on July 18, 2023.

The person in charge produced Tax Invoice No. MP/23-24/90 and an e-way bill, both dated July 17, 2023. These documents covered 418 pieces of shuttering plywood measuring 1,244.3024 square metres.

Physical verification revealed 450 pieces measuring approximately 1,339.56 square metres. The discrepancy was therefore confined to 32 additional pieces measuring approximately 95.258 square metres.

The Proper Officer initiated proceedings under Section 129, alleging contravention of Section 31 and Rules 46 and 138. Following a notice in Form GST MOV-07, an order in Form GST MOV-09 dated July 19, 2023, imposed a penalty of ₹57,870 calculated with reference to the entire consignment.

The taxpayer challenged the penalty, submitting that valid documents accompanied 418 pieces and that the transaction had been recorded in its regular books of account. It also maintained that payment, including applicable GST, had been received through banking channels.

The principal objection was that the Proper Officer had calculated the penalty on the entire consignment even though the discrepancy concerned only 32 pieces.

The Additional Commissioner, Grade-II (Appeal)-4th, State Tax, Lucknow, accepted this distinction. The authority determined the value of the excess goods at approximately ₹11,431, applying a rate of ₹120 per square metre. In contrast, the Proper Officer had calculated the original penalty by considering the entire consignment value of ₹1,60,748.

By Order-in-Appeal No. 74 dated June 28, 2024, the authority partly allowed the taxpayer’s appeal and confined the penalty to the undocumented excess goods, with consequential benefits.

The Department approached the Tribunal under Section 112(3), seeking restoration of the original ₹57,870 penalty.

It argued that transportation of goods exceeding the quantity declared in the invoice and e-way bill constituted a substantive statutory violation and indicated an intention to evade tax. According to the Department, the additional goods would have remained unaccounted for had the vehicle not been intercepted and physically verified.

The Department also contended that Section 129 could apply upon establishment of a statutory contravention without separate proof of an intention to evade tax in every case. It maintained that the First Appellate Authority had wrongly restricted the penalty to the excess quantity.

The taxpayer defended the appellate order and relied on the valid documentation supporting the declared goods.

The Tribunal identified the central issue as whether the penalty could extend to the entire consignment when the established discrepancy related only to the excess quantity.

It noted that the presence of the additional 32 pieces was undisputed. Equally, the invoice and e-way bill covered 418 pieces. Detection of excess goods did not automatically establish that the entire consignment was being transported without valid statutory documents.

The Bench held that the allegation of non-compliance could not be extended to the documented goods without further supporting evidence.

The Department had produced no cogent material establishing that the remaining 418 pieces were transported without valid documents, that the accompanying documents were false or fabricated, or that the declared transaction was fictitious.

The Tribunal explained that powers under Section 129 must be exercised with reference to the nature and extent of the contravention established from the record. The authority imposing the penalty must determine the goods in respect of which the statutory breach actually occurred.

While acknowledging that Section 129 may be attracted without proof of a separate dishonest intention in every case, the Bench held that deliberate tax evasion could not be presumed against the entire consignment without an adequate factual foundation.

The Department had failed to demonstrate how a discrepancy concerning 32 pieces justified treating all 450 pieces as goods transported in contravention of statutory requirements.

The Tribunal also noted that the First Appellate Authority had not completely absolved the taxpayer. It had acknowledged the excess quantity and retained the penalty attributable to those goods. Its intervention corrected the basis on which the original penalty had been calculated.

The Tribunal found no legal infirmity, perversity or material irregularity in the First Appellate Authority’s decision.

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