The Goods and Services Tax Appellate Tribunal (GSTAT), Lucknow State Bench, has set aside an appellate order affirming a penalty of ₹1,57,516, holding that the mere expiry of an e-way bill cannot, by itself, establish an intention to evade tax when the surrounding circumstances and documents do not support such an inference.

The bench comprising Santosh Kumar Srivastava (Judicial  Member) and Arvind Kumar (Technical Member) allowed the appeal filed by M/s Om Fuels, Ayodhya. It found that the department had relied primarily on the expired e-way bill without producing independent evidence of diversion of goods, suppression of the transaction or any deliberate attempt to evade tax.

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The appellant/assessee had purchased goods from Gujarat for transportation to Ayodhya, Uttar Pradesh. The consignment was accompanied by the relevant tax invoice and an e-way bill valid until 11:59 p.m. on October 22, 2025.

The vehicle was intercepted by departmental authorities at approximately 6 a.m. on October 24, 2025, near the declared ship-to address in Ayodhya. Upon examining the accompanying documents, the officer found that the e-way bill had expired and its validity had not been extended.

Treating the movement of goods with an expired e-way bill as a contravention of the statutory requirements, the proper officer initiated proceedings under Section 129 of the Central Goods and Services Tax Act, 2017, and the Uttar Pradesh Goods and Services Tax Act, 2017.

A penalty of ₹1,57,516 was imposed by an order dated October 24, 2025. The First Appellate Authority, State Tax, Ayodhya, rejected the taxpayer’s appeal on November 21, 2025, and upheld the penalty, prompting the appeal before GSTAT.

The taxpayer submitted that the consignment had travelled from Gujarat to Ayodhya over a substantial distance. It referred to the approximately 1,300-kilometre road journey between Ahmedabad and Ayodhya and argued that the transportation delay was not deliberate.

Explaining why the e-way bill had not been extended, the taxpayer cited an inadvertent oversight, the non-availability of regular staff during the Diwali festive period and the closure of its office on October 23, 2025, on account of Bhai Dooj. It also submitted that the driver had not informed it about the impending expiry.

The taxpayer maintained that the goods were travelling to the declared destination and that the tax invoice and transportation documents were available. It argued that the department had identified no discrepancy in the identity of the goods, the destination or the underlying transaction.

According to the taxpayer, the lapse in extending the e-way bill could not be treated as conclusive evidence of tax evasion without additional material showing concealment, diversion or suppression.

The department defended the penalty, submitting that the taxpayer was responsible for ensuring that goods in transit were accompanied by a valid e-way bill.

It argued that the e-way bill had expired before interception and that failure to extend its validity constituted a statutory contravention warranting proceedings under Section 129.

The department also maintained that long-distance transportation, office closure during the festive period and inadvertence did not absolve the taxpayer of its compliance obligations. In its submission, the availability of a tax invoice and movement towards the declared destination did not excuse the absence of a valid e-way bill.

The tribunal identified the central question as whether expiry of an e-way bill, without independent material establishing an intention to evade tax, was sufficient to sustain the penalty.

It acknowledged that the statutory provisions governing movement of goods require compliance with documentation and e-way bill requirements. However, it held that a procedural contravention must be examined in the circumstances in which it occurred.

The bench distinguished between a lapse in documentation and an intention to evade tax. It found that expiry of the e-way bill alone did not conclusively establish that the taxpayer intended to evade payment of tax.

The tribunal considered the substantial transportation distance and the explanation for non-extension relevant to its assessment. Its conclusion, however, rested on the overall circumstances and the absence of evidence of tax evasion, rather than the distance alone.

Examining the record, GSTAT found no established diversion of goods, suppression of the transaction or discrepancy in the identity of the consignment.

The department had also produced no independent evidence showing that the taxpayer deliberately allowed the e-way bill to expire to evade tax. There was no material indicating that the goods were travelling to an undisclosed destination or that the transaction was fictitious.

The tribunal held that the authority seeking to sustain a penalty must establish its factual basis. In this case, the department had relied substantially on the expired e-way bill without demonstrating any additional circumstance indicating an intention to evade tax.

Although expiry could establish a lapse in compliance with documentation requirements, the bench held that such a lapse could not automatically be equated with deliberate tax evasion.

The bench referred to the Supreme Court’s decision in Assistant Commissioner (ST) & Others v. M/s Satyam Shivam Papers Pvt. Ltd., decided on January 12, 2022. The Supreme Court declined to interfere with the Telangana High Court’s judgment and found the inference of tax evasion based merely on an expired e-way bill to be baseless in the circumstances of that case.

GSTAT applied the principle that expiry of an e-way bill cannot automatically be treated as proof of an intention to evade tax where the surrounding circumstances and available material do not support that conclusion.

The tribunal also relied on the Allahabad High Court’s decision in M/s Hindustan Herbal Cosmetics v. State of U.P. and Others, concerning the absence of material establishing an intention to evade tax.

Additionally, it referred to Hindustan Steel Ltd. v. State of Odisha, in which the Supreme Court explained that discretion to impose a penalty must be exercised judicially and that technical or minor breaches do not ordinarily warrant penalty merely because its imposition is legally permissible.

Allowing the appeal, GSTAT set aside Order-in-Appeal No. AD091125018789P dated November 21, 2025, which affirmed the ₹1,57,516 penalty.

The tribunal directed that any amount deposited by the taxpayer be dealt with in accordance with law, subject to verification of payment records and compliance with the applicable statutory procedure. The order therefore does not provide an unconditional direction for immediate refund.

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