The Allahabad High Court has set aside an appellate order upholding a penalty under Section 129 of the GST Acts, holding that the driver’s statement on plain paper has ‘very little evidentiary value’.
The bench of Justice Vikas Budhwar has observed that the appellate authority failed to consider the taxpayer’s key grounds of challenge and relied upon a driver’s statement that was not recorded in the prescribed statutory format and remanded the matter for fresh adjudication with directions to pass a reasoned and speaking order after granting an opportunity of hearing.
The petitioner/assessee is engaged in the manufacture and trading of ice cream and dairy products. The dispute arose from a stock transfer made to its Noida branch through a tax invoice dated January 9, 2025. The goods, comprising deep freezer machines and tricycles, were being transported from Ghaziabad to Noida when the vehicle was intercepted by the State Tax Mobile Squad in the early hours of January 10, 2025. An e-way bill had also been generated for the movement.
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Although the driver produced the tax invoice and e-way bill during inspection, the authorities noticed that the e-way bill reflected Ghaziabad as the place of delivery, whereas the goods were actually proceeding towards Noida. Treating this discrepancy as a contravention of the GST provisions, the authorities detained the goods, issued proceedings under Section 129 of the GST Acts, imposed a penalty, and released the goods after the petitioner deposited the amount. The petitioner’s statutory appeal against the penalty was subsequently rejected by the appellate authority on July 11, 2025.
The petitioner contended that the discrepancy was purely technical and resulted from an inadvertent software error while generating the e-way bill. Ghaziabad was mistakenly reflected as the place of delivery instead of Noida because of a technical glitch in the accounting software, and there was never any intention to evade GST or defraud the revenue.
The petitioner further argued that the appellate authority ignored several grounds specifically raised in the memorandum of appeal and mechanically affirmed the penalty without dealing with those submissions.
A major issue before the Court concerned the evidentiary value of the driver’s statement recorded by the Mobile Squad.
The petitioner argued that the alleged statement had merely been written on a plain sheet of paper instead of being recorded in Form GST MOV-01, the statutory format prescribed under the GST inspection procedure. Consequently, the statement could not legally be relied upon for imposing a penalty. The petitioner relied upon the Allahabad High Court’s earlier decision in M/s K.Y. Tobacco Works Pvt. Ltd. v. State of U.P., where the Court had held that a statement not recorded in Form GST MOV-01 carries very little evidentiary value.
The State opposed the writ petition, arguing that the explanation regarding a software glitch was an afterthought advanced only after the interception of the goods. According to the authorities, the discrepancy in the e-way bill could not be dismissed as a mere technical error because the goods were being transported differently from what had been declared in the transport documents.
The State further contended that both the original authority and the appellate authority had examined the available material and recorded concurrent findings of fact which did not warrant interference in writ jurisdiction.
The court observed that the central issue was whether procedural irregularities had vitiated the proceedings.
The Court noted that the compliance affidavit filed before it itself showed that the driver’s statement had been recorded on a plain sheet of paper. Referring to the earlier decision in K.Y. Tobacco Works, the Court reiterated that such a document possesses “very little evidentiary value” when it is not accompanied by Form GST MOV-01 as required under the statutory procedure.
The Court further found that the appellate authority had not discussed the driver’s statement at all. Instead, it merely proceeded on the assumption that because the petitioner had not specifically disputed the statement, it stood accepted.
The High Court emphasized that once a litigant raises specific grounds in an appeal, the appellate authority is legally bound to examine each of them.
The Court observed that the authority may ultimately accept or reject those submissions on merits, but it cannot ignore them without assigning reasons. Since the right of appeal is a valuable statutory right, the appellate authority must pass a reasoned and speaking order addressing every material contention raised by the appellant.
According to the Court, several important grounds raised by the petitioner—including the alleged software error, absence of intent to evade tax, and admissibility of the driver’s statement—were never properly considered by the appellate authority.
Finding the appellate adjudication legally unsustainable, the High Court set aside the appellate order dated July 11, 2025.
The Court remitted the matter to the appellate authority with directions to grant the petitioner an opportunity of hearing. Pass a fresh reasoned and speaking order within three months. Consider every contention raised by the petitioner along with all relevant aspects of the case. Limit adjournments sought by the petitioner to exceptional circumstances, with no adjournment exceeding ten days on any single occasion.
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