The Goods and Services Tax Appellate Tribunal (GSTAT), Raipur Bench, has held that a penalty under Section 129 cannot follow automatically from an alleged e-way bill violation. The authority must examine the taxpayer’s explanation, establish the movement actually underway when the goods were intercepted, and determine whether the breach was substantive or merely technical.
The bench of Pradeep Kumar Vyas (Judicial Member) and Chandra Bhushan Singh (Technical Member) set aside a tax and penalty demand totalling ₹3,30,544 against SRS Traders. However, it did not finally absolve the trader of liability. Instead, it remanded the matter for fresh adjudication because the available records did not reliably establish the interception location, transport route or timing of an alleged diversion of the goods to an interstate destination.
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The dispute concerned 30 metric tonnes of TMT bars transported on September 1, 2019. Hi-Tech Power & Steel Ltd., situated in Raipur district, issued an invoice naming SRS Traders as the buyer and consignee at Raipur. No e-way bill was generated for this initial movement.
The trader maintained that the goods were originally intended for its business premises within Raipur district and that the movement was exempt under the relevant Chhattisgarh notification.
According to the trader, orders from two buyers in Banda, Uttar Pradesh, were received during transit. The driver was then instructed to halt while onward invoices and e-way bills were prepared. Two invoices covered 10.040 metric tonnes and 19.960 metric tonnes, and the corresponding e-way bills were generated at 3:01 p.m. and 3:07 p.m.
It was admitted that interception preceded generation of these e-way bills. The crucial dispute was whether the vehicle was still undertaking an exempt movement within Raipur district or had already commenced movement towards Banda.
The original authority imposed tax of ₹1,65,272 and an equal penalty. The trader paid the aggregate ₹3,30,544 to obtain release of the goods and vehicle. Its first appeal was subsequently dismissed.
The Tribunal explained that the State notification had to be applied to the actual movement of the consignment. The buyer’s registered address or a temporary halt could not, by themselves, establish that the transport was exempt.
If the goods were genuinely dispatched for a destination within Raipur district and remained on that journey when intercepted, the exemption defence required consideration. An e-way bill for an onward journey that had not yet commenced could not retrospectively be demanded.
Conversely, if the goods were intended for an inter-district or interstate destination from the outset, or had already been effectively diverted towards Banda, subsequently generated e-way bills would not cure an earlier mandatory omission.
The bench also clarified that merely stopping a loaded vehicle does not necessarily end an existing movement or create a fresh commencement point.
Addressing the trader’s explanation of successive sales, the Tribunal noted that Section 10(1)(b) of the IGST Act recognises delivery on the directions of a third person, including directions issued during movement.
Consequently, an onward sale can be genuine even without physical receipt or unloading by the intermediate purchaser. However, this principle does not establish when the destination changed or dispense with the e-way bill required for the movement actually undertaken.
The original transport instructions, subsequent directions and their timing therefore remained material to the dispute.
The Tribunal preferred the reasoning in Asian Switchgear (P) Ltd. v. STO on the question of independently proving intention to evade tax. It observed that Section 129 addresses transport in contravention of the law, whereas specified provisions of Section 130 expressly refer to an intention to evade.
Nevertheless, the absence of a separate mens rea requirement did not make a penalty automatic. The authority was required to examine the explanation, assess the seriousness of the established breach and record reasons.
The trader’s subsequent GSTR-1 and GSTR-3B disclosures supported accounting of the Banda sales, but did not conclusively establish compliance at the time of interception or erase a transit violation, if proved.
The Tribunal found material inconsistencies concerning the interception site and time. The trader’s records referred to Sankara as well as Simga/Bhatapara, while the first appellate order recorded an incorrect interception date and vehicle identification.
The primary driver’s statement and contemporaneous records conclusively fixing the interception location and time were not identifiable in the appeal record. A separate reasoned enclosure referred to in the original demand order was also not identified.
These deficiencies prevented confirmation of the demand. Equally, the gaps in the trader’s transport documents and conflicting explanations prevented final acceptance of its exemption claim.
The Tribunal rejected the allegation that FORM GST MOV-07 had not been served. The trader’s earlier pleadings acknowledged a notice and a written response, supported by service recitals in the available MOV forms. Section 160(2) therefore barred the service challenge.
Fresh proceedings must resume from consideration of the trader’s September 4, 2019 representation on the existing notice. The Tribunal expressly prohibited a fresh notice, new allegation or enhanced demand.
The authority must disclose the contemporaneous material relied upon, provide an opportunity to respond, grant a personal hearing and issue a reasoned order. Fresh adjudication should, as far as practicable, conclude within three months of receipt of the Tribunal’s order.
The ₹3,30,544 release payment and any statutory pre-deposit must be reconciled against the fresh determination. Adjustment or refund will follow if legally due; the payment itself neither waived the appeal nor established final liability.
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