The Goods and Services Tax Appellate Tribunal (GSTAT), Raipur Bench, has held that payment of a penalty to secure release of detained goods does not cure a defective adjudication or prevent the taxpayer from challenging the levy. 

The bench of Pradeep Kumar Vyas (Judicial Member) and Chandra Bhushan Singh () set aside a ₹1,09,142 penalty order concerning transportation of beverages without an e-way bill and directed fresh adjudication after an effective hearing. However, it preserved the original show-cause notice and left the company’s ultimate liability to penalty open.

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The Tribunal distinguished the requirement to generate an e-way bill from the separate statutory obligation to determine a penalty through a fair hearing and a reasoned order.

The appellant/assessee which manufactures and supplies carbonated soft drinks and packaged beverages, dispatched goods from Raipur to M/s Fagun Cold Drinks at Fingeshwar on April 4, 2024. The consignment had a taxable value of ₹2,18,118.98, with CGST and SGST of ₹21,552.24 each and compensation cess of ₹11,467.22.

The invoice recorded preparation at 8:52:46 p.m. and removal of the goods at 9:22:46 p.m. The vehicle was subsequently intercepted without an e-way bill.

Although the departmental forms recorded the interception time as “11:30” without specifying whether it was morning or night, the Tribunal resolved the conflicting accounts in favour of interception at approximately 11:30 p.m. It found that the department’s assertion of an 11:30 a.m. interception was inconsistent with the invoice and dispatch chronology.

A notice in Form GST MOV-07 was issued on April 4, 2024. While it permitted the company to show cause within seven days, the penalty order in Form GST MOV-09 followed the very next day.

The company paid ₹1,09,142 through Form GST DRC-03 on April 6, 2024, following which the goods and conveyance were released. The penalty comprised CGST of ₹43,104, SGST of ₹43,104 and compensation cess of ₹22,934.

The Joint Commissioner (Appeals), State Tax, Raipur, upheld the penalty by an order dated May 16, 2025, prompting the appeal before the Tribunal.

The Tribunal rejected the argument that the movement was exempt from the e-way bill requirement merely because it took place within Chhattisgarh.

It examined the State notification dated June 19, 2018, which generally exempted intra-State movement but retained the requirement for specified goods moving between districts where the consignment value exceeded ₹50,000. The specified goods included mineral waters, aerated waters and beverages under headings 2201 and 2202.

Since the documents showed movement of beverages from Raipur to Fingeshwar, the Tribunal held that an e-way bill was prima facie required for the consignment.

The company claimed that repeated attempts to generate the e-way bill had failed because of technical problems with the portal. It also cited urgent business requirements and requests from the recipient as reasons for dispatching the goods with a tax invoice and transporter’s document.

The Tribunal observed that the record did not contain contemporaneous portal errors, help-desk tickets, complaints or other technical material establishing the alleged failure. The claimed urgency was also unsupported by contemporaneous evidence.

Nevertheless, it clarified that the 30-minute interval between invoice preparation and dispatch did not itself disprove the explanation. The timing of the alleged attempts and the supporting evidence required examination during fresh adjudication.

The Tribunal held that Section 129(4) requires an effective opportunity of hearing before a penalty is determined. Merely mentioning an opportunity in the notice does not satisfy that requirement when the proceedings are concluded before the opportunity can meaningfully operate.

Here, the notice allowed seven days to respond, but the officer passed the penalty order the next day.

The Tribunal also found substantive defects in Form GST MOV-09. The document contained unselected alternatives and visible drafting placeholders in the portion intended to record the officer’s reasoning and determination.

It did not clearly address the company’s explanation, the documents claimed to have accompanied the consignment, or the basis for finally determining the proposed penalty. The Tribunal consequently found that the order could not be treated as a completed, reasoned adjudication.

Relying on the Supreme Court decision in ASP Traders v. State of U.P., as cited in the ruling, the Tribunal observed that payment of the demanded amount and release of the goods do not relieve the proper officer of the obligation to pass a reasoned final order after the hearing required by Section 129(4).

The payment through DRC-03 was relevant to the factual record, including the admitted absence of an e-way bill. However, it could not be treated as a conclusive admission of legal liability or a waiver of the right to challenge the penalty.

The Tribunal further held that the company’s failure to appear before the first appellate authority could not transform an incomplete or non-speaking original order into a valid adjudication.

The appellate authority remained obligated to examine the objections to the original order. Its reliance on the mandatory nature of the e-way bill and the absence of proof of a technical glitch did not adequately address the defects in MOV-09 or the hearing process.

The Tribunal set aside both the penalty order dated April 5, 2024, and the appellate order dated May 16, 2025. It remitted the matter to the original adjudicating authority under Section 113(1).

The show-cause notice dated April 4, 2024, remains operative. The Tribunal expressly restricted fresh adjudication to the allegations already contained in that notice, preventing the officer from introducing a new factual foundation or charge.

The officer must grant a reasonable opportunity to submit a response and supporting material, followed by an effective personal hearing. The authority must examine the invoice, transport document, interception record and evidence concerning the alleged portal failure and dispatch urgency. It must also verify which documents were actually produced at interception.

A fresh speaking order is to be passed preferably within six weeks of receipt of the Tribunal’s order, subject to the limitation prescribed under Section 75(3), with the consequential statutory forms and portal formalities completed in accordance with law.

The Tribunal declined to direct an immediate refund of ₹1,09,142. The deposited amount will remain subject to the outcome of fresh adjudication, and both sides’ contentions on the merits of the penalty remain open.

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