The Goods and Services Tax Appellate Tribunal (GSTAT), Chennai Bench, has held that a dispute over the absence of an invoice issued by a supplier’s supplier during the movement of goods involves a question of law and requires consideration by a Division Bench, even though the amount in dispute is below ₹50 lakh.

The Bench Praveen Kumar Jain (Judicial Member) and Shaik Khader Rahman (Technical Member) found that the appeal required interpretation of the statutory provisions governing transport documents, detention of goods and penalties. It could not, therefore, be treated as a dispute involving factual verification alone.

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The proceedings arose from the transportation of electric forklift goods from Karnataka to Andhra Pradesh in a vehicle bearing registration number TN88-J0163.

According to the department’s case, the invoice was raised from Haryana to Andhra Pradesh, while the goods physically moved from Karnataka to Andhra Pradesh. The department alleged that the sale bill relating to the transaction between the Karnataka dealer and the Haryana dealer had not been raised.

The goods were detained, and proceedings were initiated under Section 129 of the Central Goods and Services Tax Act, 2017.

As recorded in the Tribunal’s order from the company’s submissions, the First Appellate Authority set aside the penalty of ₹21,06,272 imposed under Section 129(3). It instead imposed a penalty of ₹25,000 each under Section 125 of the CGST and SGST Acts, amounting to ₹50,000.

The department challenged the appellate modification, including the reliance placed on CBIC Circular No. 64/38/2018-GST dated September 14, 2018. It maintained that the alleged defects were not minor and indicated an intention to evade tax.

Before considering the merits of the departmental challenge, the Tribunal examined whether the appeal involved a question of law within the meaning of Section 109(8) of the CGST Act.

The exercise was undertaken pursuant to Principal Bench Office Order No. 3/GSTAT/PB/2026 dated May 14, 2026. Since the amount in dispute was below ₹50 lakh, the preliminary determination would decide whether the appeal should be heard by a Single Member or by a Division Bench.

At the hearing on September 15, 2026, Joint Commissioner A. Swaminathan represented the State Government, while Advocate Deepak Thackur appeared for the company.

The department submitted that no question of law arose and that the dispute was factual in nature. The company disagreed, identifying several issues requiring interpretation of the GST legislation.

The company contended that the appeal raised a legal issue concerning whether Section 129 proceedings could be initiated against a distinct registered person when the supply occasioning the movement of goods was made by another registered person.

It also questioned whether an invoice issued by the supplier’s supplier was a necessary document under Section 68 of the CGST Act read with Rule 138 of the CGST Rules, 2017.

A further issue was whether a penalty under Section 129 could be imposed merely because the original invoice issued by the supplier’s supplier was not carried during transportation.

The company additionally argued that the alleged omission required examination as a possible minor error without an intention to evade tax, particularly when, according to its submissions, the department did not dispute payment of tax.

Its principal position was that the documents required for movement of goods under the applicable statutory framework were in order.

The Tribunal held that the departmental grounds themselves went beyond a simple examination of the documents accompanying the vehicle.

Those grounds questioned the legality of the movement of goods in the absence of the Karnataka-to-Haryana sale bill, the applicability of the CBIC circular, and whether the alleged omissions could be regarded as minor defects or attracted detention proceedings and penalties under Section 129.

Resolving these issues required consideration of the scope and application of Section 68, Rule 138 and Section 129, together with the circular relied upon by the First Appellate Authority.

The company’s questions similarly required examination of the registered person against whom proceedings could be initiated, the documents legally required during transportation, and the consequences of not carrying an invoice issued by the supplier’s supplier.

The Tribunal observed that “question of law” is not defined in the CGST Act. It explained that issues requiring interpretation or application of statutory provisions and legal principles fall within that expression.

Since the dispute concerned the meaning and legal consequences of the relevant provisions, its resolution was not confined to appreciation of facts. The department’s submission that no question of law was involved was accordingly rejected.

The Tribunal directed that the appeal be heard jointly by one Judicial Member and one Technical Member.

It expressly clarified that the order was confined to determining whether a question of law arose and deciding the constitution of the Bench. It did not express any opinion on the merits of the appeal.

The Tribunal has not yet decided whether the disputed invoice was mandatory, whether its absence justified a Section 129 penalty, or whether the First Appellate Authority correctly reduced the penalty. Those issues remain for consideration at the merits hearing.

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