The Goods and Services Tax Appellate Tribunal (GSTAT), Bengaluru, has set aside a penalty of ₹20.13 lakh imposed for transporting duty-paid imported goods without a fresh e-way bill during their return journey after a failed delivery and the missing return transit document was a procedural lapse without evidence of tax evasion.

The Bench of Srikanth Venkatraman (Judicial Member) and  Sudha Koka (Technical Member) substituted the penalty under Section 129 of the Central Goods and Services Tax Act, 2017, with a general penalty of ₹25,000 under Section 125.

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The dispute concerned electronic goods, including printers, cameras and cartridges, imported by the company from South Korea. According to the Tribunal’s findings, the company had paid the applicable customs duty and Integrated GST at the port of entry, and the goods were cleared for home consumption on March 23, 2022.

The goods were initially stored at the facility of the customs agent, Dart Global Logistics Private Limited, at Bengaluru International Airport. On March 24, 2022, they were dispatched to Amazon’s additional place of business under a valid e-way bill and supporting import documents.

However, severe traffic congestion caused the vehicle to miss its scheduled delivery slot. Amazon declined to admit the vehicle outside the allotted window, and its premises did not have space to hold the consignment pending another delivery opportunity.

The vehicle consequently began returning to the customs agent’s airport warehouse for temporary storage. During this return movement, the driver or logistics team failed to generate a fresh e-way bill or return delivery challan.

The interception of the consignment led to proceedings under Section 129 and the imposition of a penalty of ₹20,13,640.

The Commercial Tax Officer passed the original adjudication order on April 17, 2022. The first appellate authority subsequently dismissed the company’s appeal through an order dated March 6, 2023.

Before the Tribunal, the central question was whether the absence of a fresh e-way bill during the return journey justified the substantial penalty when the goods were fully duty-paid, their identity was verifiable and the intended delivery had failed for logistical reasons.

The Tribunal also examined whether the movement represented an undocumented commercial transaction or merely the return of an existing consignment to a storage facility.

The Tribunal rejected the lower appellate authority’s treatment of the return journey as an independent, unsupported commercial movement merely because the forward e-way bill had been cancelled after the delivery slot was missed.

It noted that the underlying transaction was supported by Bills of Entry, import invoices, customs clearance records, delivery documents and Amazon’s slot cancellation letters.

The physical verification report in Form GST MOV-04 also recorded no discrepancy in the goods or their quantity.

These circumstances, the Bench held, established that the goods were returning to the warehouse because of an unsuccessful delivery. The movement did not represent a clandestine sale or an attempt to send the goods to an unrecorded buyer.

The Tribunal therefore treated the failure to generate the return transit document as a technical omission within an otherwise documented transaction.

The Bench disagreed with the first appellate authority’s view that Section 129 operated as a strict liability provision under which intent to evade tax was irrelevant.

Relying on the Supreme Court’s decision in Satyam Shivam Papers and the Karnataka High Court’s ruling in Kristna Engineering Works v. State of Karnataka, the Tribunal held that a substantial penalty could not be mechanically imposed for a paperwork lapse where the records disclosed no tax evasion.

The Tribunal emphasised that the applicable customs duty and IGST had already been paid, the goods were accounted for through authentic import records, and their physical verification revealed no mismatch.

In its assessment, the return journey involved no revenue leakage or commercial fraud. The absence of the fresh document, considered alongside the circumstances that caused the vehicle to turn back, did not justify the penalty imposed under Section 129.

The Tribunal acknowledged that the present case involved the absence of a fresh e-way bill for a return journey, whereas some of the precedents concerned expiry or defects in documents covering forward movement.

It nevertheless held that the underlying principle remained applicable: a procedural transit lapse must be assessed in light of the substantive transaction, the available records and any evidence of tax evasion.

The Bench also rejected the attempt to distinguish decisions such as Smart Roofing and Indus Towers solely on differences in the nature of the movement.

It distinguished the Revenue’s reliance on Gati Kintetsu Express, observing that the circumstances of the long-distance commercial movement discussed in that decision differed from the return of fully duty-paid imports following a missed delivery appointment.

Applying the Karnataka High Court’s ruling in Kristna Engineering Works, the Tribunal set aside the first appellate authority’s order and quashed the ₹20,13,640 penalty.

It imposed a general penalty of ₹25,000 under Section 125 for the technical omission of the return transit document.

The Tribunal directed the authorities to refund the company’s 25% cash deposit of ₹5,03,410, made through Form GST DRC-03, and release the bank guarantee furnished during the proceedings, after adjusting the ₹25,000 penalty.

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