The Goods and Services Tax Appellate Tribunal (GSTAT), Lucknow, has held that vehicle details in Part B of an e-way bill need not be furnished when goods are transported within the same State for a distance of up to 50 kilometres from the consignor’s premises to a transporter’s premises for further transportation.

The bench of Santosh Kumar Srivastava (Judicial Member) and Arvind Kumar (Technical Member) upheld the cancellation of a ₹2,55,792 penalty imposed under Section 129(3) of the CGST/UPGST Act, 2017. It found that the disputed movement covered approximately five kilometres within Kanpur and fell within the exemption under the third proviso to Rule 138(3).

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The Bench further held that an automated warning on the GST portal cannot override an express statutory exemption.

The dispute arose after a State Tax Mobile Squad intercepted a vehicle carrying pan masala and zarda tobacco at Tatmill Crossing, Kanpur, on May 7, 2022.

The goods had been supplied by the assessee to M/s Mohit Agency, Gorakhpur. The person in charge produced tax invoices and Part A details of the e-way bills. However, the vehicle particulars had not been entered in Part B.

The taxpayer maintained that the vehicle was undertaking only the initial local journey from its factory at Fazalganj to the depot of M/s Swastik Transport Corporation at Transport Nagar, Kanpur. The goods were to be transported onward to Gorakhpur through the transporter.

Physical verification recorded in Form GST MOV-04 revealed no discrepancy between the goods carried and the accompanying invoices.

Nevertheless, the adjudicating authority imposed a penalty of ₹2,55,792 through an order dated May 9, 2022. The taxpayer deposited the amount under protest to secure release of the goods and vehicle.

The Additional Commissioner, Grade-2 (Appeals)-IV, State Tax, Kanpur, allowed the taxpayer’s appeal on January 31, 2023.

The appellate authority found that the approximately five-kilometre movement from the consignor’s premises to the transporter’s depot was protected by the third proviso to Rule 138(3). It also relied on the absence of any discrepancy during physical verification and the prior generation of e-invoices.

The appellate order quashed the penalty and recognised the taxpayer’s eligibility for refund or adjustment of the amount paid, in accordance with the applicable rules.

The Revenue challenged that decision before GSTAT under Section 112(3).

At the outset, the taxpayer argued that the disputed penalty was below the ₹20 lakh monetary threshold prescribed for departmental appeals before GSTAT under Circular No. 207/01/2024-GST.

The Tribunal, however, rejected this preliminary objection.

It found that the dispute involved a recurring legal question concerning the mobile squad’s enforcement jurisdiction and the interpretation of the e-way bill rules. The matter therefore fell within the circular’s exclusions permitting appeals on merits irrespective of the monetary limit.

Although the appeal was held maintainable, the Revenue failed on the substantive issue.

The Revenue argued that the consignment’s declared destination was Gorakhpur, well beyond 50 kilometres, and that the exemption could not protect the movement.

The Tribunal examined the particular stage of transportation during which the vehicle was intercepted.

It accepted the finding that the goods were moving approximately five kilometres from the consignor’s factory to the declared transporter’s depot for onward carriage. That initial movement satisfied the conditions of the third proviso to Rule 138(3).

The Bench explained that the provision permits omission of conveyance details in Part B where the journey is within the same State or Union Territory, does not exceed 50 kilometres, and takes the goods from the consignor’s place of business to the transporter’s place of business for further transportation.

Accordingly, the taxpayer was entitled to omit Part B details for that local journey.

The Revenue also relied on the automated warning appearing on the documents that movement was not valid because Part B had not been entered.

Rejecting this argument, the Tribunal held that a portal-generated statement cannot displace the exemption expressly provided by the rules.

It read Explanation 2 to Rule 138(3) together with the third proviso and concluded that the absence of Part B particulars did not invalidate the documents for the qualifying short-distance movement.

The ruling thus distinguishes the general requirement to furnish vehicle details from the specific exception available for local movement to a transporter.

The department further alleged that the vehicle’s location indicated route deviation and a possible attempt to divert the goods for unaccounted sales.

The Tribunal found no concrete evidence supporting that allegation.

On examining the driver’s statement recorded in Form GST MOV-01, it noted that he had identified Kanpur as the source and Gorakhpur as the ultimate destination, consistently with the invoices and accompanying documents. The statement contained no admission of diversion or intended delivery to an undisclosed destination.

The Bench also noted that the physical verification report and detention order were silent on any route discrepancy and identified the absence of Part B as the omission.

It consequently rejected the route-deviation theory as an afterthought introduced at the show-cause stage. Mere suspicion, the Tribunal held, could not substitute for tangible evidence of tax evasion.

The Tribunal placed particular emphasis on the transaction’s documentary and digital record.

It found that formal e-invoices had been generated before dispatch, tax had been charged, and the goods physically verified matched the invoice particulars. The transaction was also recorded in the commercial books and subsequently reported in tax returns.

The Bench further noted that the goods were logged at the transport hub through a goods receipt following their release.

These circumstances supported its conclusion that the transaction was transparent and that the department had not established fraudulent intent.

Finding the first appellate authority’s conclusions well reasoned and supported by the record, GSTAT dismissed the Revenue’s appeal and upheld the order dated January 31, 2023.

The cancellation of the ₹2,55,792 penalty therefore remained undisturbed.

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