The Goods and Services Tax Appellate Tribunal (GSTAT), Prayagraj State Bench, has set aside a ₹1,77,248 tax-and-penalty demand against an authorised motorcycle dealer, holding that the absence of an e-way bill did not justify action under the version of Section 129 applicable to a November 2021 transaction when the consignment was supported by a genuine e-invoice and there was no evidence of intent to evade tax.
The bench of Mahtab Ahmad (Judicial Member) and Ashish Varma (Technical Member) has observed that passing the final demand order within approximately 57 minutes of issuing the show-cause notice, despite fixing a later date for appearance, denied the dealer a reasonable opportunity of hearing.
BUY NOW: E-Way Bill Judgements From 2020–2026 [Includes Orders of GSTAT]
The bench directed refund of the amount deposited under protest, together with applicable interest, while permitting the department to initiate separate proceedings for the documentation lapse under appropriate provisions of the GST law.
The appellant/assessee is an authorised dealer of Hero MotoCorp Ltd., was transporting six motorcycles to Prakash Motors at Mauaima, Prayagraj, when a mobile squad intercepted the vehicle on the Soraon–Pratapgarh Road on November 23, 2021.
The motorcycles had a total invoice value of ₹4,05,138, including a taxable value of ₹3,16,514.04. The driver produced an e-invoice dated November 22, 2021, but could not produce an e-way bill.
The e-invoice carried an Invoice Reference Number, QR code, acknowledgement details and the individual engine and chassis numbers of all six motorcycles. Physical verification subsequently revealed no discrepancy other than the missing e-way bill.
According to the driver’s recorded explanation, the preceding day had been a business holiday and the dealership’s computer operator was in home isolation due to COVID-19. The consignment had been moved early to meet an urgent delivery request.
The department nevertheless detained the vehicle and goods and initiated proceedings under Section 129 of the Central and Uttar Pradesh GST Acts.
On November 25, 2021, the officer issued a detention order and show-cause notice at approximately 2:47 p.m., demanding tax of ₹88,623.94 and an equal penalty, aggregating to ₹1,77,248. The notice directed the dealer to appear on November 30, 2021.
To secure release of the motorcycles, the dealer deposited the demanded amount under protest at approximately 3:39 p.m. on November 25.
The final demand order followed at approximately 3:44 p.m.—about five minutes after payment and only 57 minutes after issuance of the notice. The vehicle and motorcycles were released later that day.
The first appellate authority upheld the demand on January 16, 2024. It treated Section 129 as imposing strict liability for transporting goods without the prescribed documents, regardless of whether the taxpayer intended to evade tax.
The dealer challenged that decision before GSTAT.
The Tribunal’s reasoning centred on the law applicable when the goods were intercepted.
It noted that the interception, show-cause notice and original demand order all occurred in November 2021, before the amendment to Section 129 took effect on January 1, 2022.
Under the earlier provision, Section 129(6) linked non-payment of the specified tax and penalty to further proceedings under Section 130. The Tribunal reasoned that this statutory connection required Section 129 to be read alongside the intent-to-evade requirement relevant to Section 130.
Consequently, for the transaction before it, the Tribunal held that intent to evade tax was a necessary condition for imposing the Section 129 penalty.
The Bench relied on the Allahabad High Court’s decisions in Falguni Steels and Shyam Sel and Power, which concerned transactions governed by the earlier statutory framework. It also examined J.K. Cement, observing that the shipment in that case was exempt from the relevant e-way bill requirement and that its observations on intent were not essential to the outcome.
The ruling therefore turns specifically on the pre-January 2022 statutory framework, rather than laying down an unrestricted exemption for every consignment transported without an e-way bill.
The Tribunal found that the documentary record supported the dealer’s explanation that the transaction was genuine.
Each motorcycle was individually identifiable through the engine and chassis numbers recorded in the digitally authenticated e-invoice. Physical verification disclosed no mismatch in quantity, description or destination.
The dealer also produced its November 2021 GST returns. The invoice appeared in the business-to-business section of GSTR-1, while GSTR-3B showed discharge of the monthly tax liability, including the liability relating to the six motorcycles.
The Bench further considered the regulatory requirements governing the sale and registration of motorcycles. Drawing guidance from the Madras High Court’s decision in Tvl. R.K. Motors, it reasoned that the registration process and vehicle-specific documentation made an undisclosed sale particularly difficult in the circumstances of this case.
Neither the original authority nor the first appellate authority had recorded a finding that the dealer intended to evade tax.
The Revenue argued that the dealer had not generated the e-way bill even after interception, indicating mala fide conduct.
The Tribunal acknowledged that the case involved complete non-production of the e-way bill before the demand order, rather than its delayed production. However, it found no evidence of an attempt to conceal the goods, their value or their destination.
The engine- and chassis-linked invoice made the consignment readily traceable. The explanation concerning the computer operator’s COVID-19 isolation was also specific and verifiable, the Bench observed.
On these facts, it rejected the proposition that the missing e-way bill, by itself, established an intention to evade tax.
The Tribunal distinguished the Supreme Court’s decision in Guljag Industries, which the first appellate authority had relied upon.
It explained that the decision arose under the Rajasthan Sales Tax Act and involved a statutory provision without the same linkage found between the unamended Sections 129 and 130. The Tribunal also noted that the Supreme Court had identified deliberate conduct involving blank declaration forms in that case.
The Bench distinguished Pushpa Devi Jain on its facts, observing that it concerned an expired or invalid e-way bill and an explanation unsupported by corroborating documents. Here, the consignment was accompanied by a valid e-invoice, vehicle-specific identification and GST return records.
It also referred to the GSTAT Lucknow Bench’s decision in Lucknow Automotives, involving identifiable motorcycles and a bona fide documentation lapse without indications of actual evasion.
The Tribunal independently found the original order defective because the dealer had been denied a meaningful opportunity to respond.
Although the earlier Section 129(3) did not prescribe a specific interval between notice and adjudication, the Bench held that Section 75(4) required an opportunity of hearing when an adverse decision was contemplated.
Issuing the final order within 57 minutes left the dealer effectively no reasonable time to answer the notice. The Bench found that the officer could not properly evaluate the COVID-19 explanation and the traceability of the motorcycles in that compressed period.
It treated the denial of a reasonable hearing as a fatal defect that vitiated the original demand order.
The Bench also noted that the dealer had discharged its regular output tax liability through its GST returns, while separately depositing ₹1,77,248 to secure release of the consignment.
The detention deposit comprised approximately ₹88,624 towards tax and ₹88,624 towards penalty.
The Tribunal characterised the additional collection of tax on the same consignment as, in substance, unconstitutional double taxation, and held that the additional penalty could not be sustained under the statutory framework applicable to the transaction.
The Tribunal set aside the original order dated November 25, 2021, and the appellate order dated January 16, 2024. It directed refund of the entire ₹1,77,248 deposited under protest, along with applicable interest in accordance with law.
However, it recognised that the failure to generate an e-way bill remained an undisputed documentation breach. The department was therefore granted liberty to proceed under appropriate provisions, including Section 122 or Section 125, specifically for that lapse.
The Tribunal did not itself impose a substituted procedural penalty or prescribe a fixed amount.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
