GST and Tax update

GST CASE LAWS 06.11.2026

Ashwani Kumar — Fri, 06 Nov 2026 12:03:13 +0000

GST CASE LAWS 06.11.2026

Relevant Act	Section	Case Law Title	Citation	Brief Summary
Integrated Goods and Services Tax Act, 2017	Section 13	Expedia Online Travel Services India (P.) Ltd. v. Commissioner of Central Goods and Services Tax, Haryana	Click Here	Business support and software development services rendered on a cost-plus basis to overseas affiliates without end-customer privity or binding authority did not qualify as intermediary services; export conditions were met, and unutilised ITC refund with interest was admissible.
Central Goods and Services Tax Act, 2017	Section 17	Dhanaula Co-Op Agri. Service Society Ltd. Dhanaula v. State Tax Officer-Cum-Proper Officer	Click Here	Reversal of Input Tax Credit (ITC) for a cooperative agricultural society dealing in exempt cattle feed is restricted solely to common ITC on goods or services used for both taxable and exempt supplies, subject to verification and computation of common credit.
Central Goods and Services Tax Act, 2017	Section 44	Dhanaula Co-Op Agri. Service Society Ltd. Dhanaula v. State Tax Officer-Cum-Proper Officer	Click Here	Annual return GSTR-9 permits the correction of clerical errors for the respective year; demand for differential tax due to discrepancies between GSTR-1 and GSTR-9 required remand to the original authority for fresh adjudication after allowing the assessee to explain clerical differences.
Central Goods and Services Tax Act, 2017	Section 54	Kedia Agro v. Principal Commissioner Hyderabad GST Commissionerate	Click Here	An inverted tax structure ITC refund accrued prior to 18-07-2022 cannot be denied solely because the RFD-01 application was filed after that date, as restrictions apply prospectively and accrual rights cannot be curtailed by executive circulars lacking statutory authority.
Central Goods and Services Tax Act, 2017	Section 74	Sanjeeb Kumar Dehuri v. Mukesh Kumar Kakani	Click Here	Where an FMCG retailer delayed filing returns but subsequently filed all pending returns, paid tax mainly via ITC along with interest, and showed no wilful misstatement, fraud provisions under Section 74 were inapplicable, justifying a reduced penalty under non-fraud treatment.
Central Goods and Services Tax Act, 2017	Section 74	Sain Medicaments (P.) Ltd. v. Commissioner of Central Tax	Click Here	Invoking fraud-based demands without setting out foundational facts, evidence of wilful misstatement, or suppression of facts is untenable, warranting the setting aside of the impugned order.
Central Goods and Services Tax Act, 2017	Section 75	Sanjeeb Kumar Dehuri v. Mukesh Kumar Kakani	Click Here	Only the proper officer holds jurisdiction to determine penalties under non-fraud provisions; an appellate authority cannot directly modify and determine a non-fraud penalty, necessitating remand for proper redetermination.
Central Goods and Services Tax Act, 2017	Section 122	Sain Medicaments (P.) Ltd. v. Commissioner of Central Tax	Click Here	Adjudicating penalties under fraud-based clauses when the show-cause notice proposed non-fraud penalties breaches the statutory bar against going beyond show-cause notices, rendering the penalty order self-contradictory and unsustainable.
Central Goods and Services Tax Act, 2017	Section 122	Shekhar Basappa Wali v. Shrinivasa Traders	Click Here	Penalty for issuing fake invoices without actual supply was validly imposed where registrations were cancelled, vehicle details on e-way bills were false, and key banking records were withheld.
Central Goods and Services Tax Act, 2017	Section 122	Shekhar Basappa Wali v. Shrinivasa Traders	Click Here	Deleting penalties for falsifying records and altering e-way bill details based on absence of specific offences or reliance on CBIC circulars is unjustified since statutory penal provisions prevail.
Central Goods and Services Tax Act, 2017	Section 129	Ajendra Kumar Tripathi v. Bajaj Enterprises	Click Here	Cumulative facts establishing tax evasion—such as weight discrepancies, supplier mismatches, sequential e-way bills from different GSTINs for a single invoice, and undeclared loading locations—justify goods detention and penalty.
Central Goods and Services Tax Act, 2017	Section 129	Ravish Kumar Singh v. Mani Ply	Click Here	When a vehicle is intercepted with excess goods, penalties under detention provisions can be imposed only on the specific quantity of goods found without valid documentation, provided no fictitious overall transaction is established.
Central Goods and Services Tax Act, 2017	Section 140	Sain Medicaments (P.) Ltd. v. Commissioner of Central Tax	Click Here	Procedural portal failures preventing the filing of pre-GST returns cannot extinguish vested rights to carry forward undisputed CENVAT credit via TRAN-1, provided substantial compliance is met at the earliest opportunity.
Central Goods and Services Tax Act, 2017	Section 140	Ashwani Kumar Sharma v. Bhagat Deepak Kumar	Click Here	Disallowing transitional credit citing single invoice entries without verifying attached annexures detailing multiple underlying invoices is unwarranted and requires proper verification by the original authority.
Central Goods and Services Tax Act, 2017	Section 140	Ashwani Kumar Sharma v. Bhagat Deepak Kumar	Click Here	Section 140(2) read with Rule 117 allows the transition of entire unavailed CENVAT credit on capital goods received prior to the GST regime, irrespective of prior non-availment due to pending inspections.

Unavailed pre-GST capital goods credit, including 100% amounts and clerical invoice annexures, is fully transitionable through TRAN-1 without prior partial availment limits.

Ashwani Kumar — Fri, 06 Nov 2026 11:57:43 +0000

Unavailed pre-GST capital goods credit, including 100% amounts and clerical invoice annexures, is fully transitionable through TRAN-1 without prior partial availment limits.

Issue

Whether transitional Input Tax Credit (ITC) on capital goods received in the pre-GST period can be transitioned through Form GST TRAN-1 under Section 140(2) when no prior credit had been availed due to pending inspections, and whether credit supported by a consolidated invoice carrying an annexure of multiple underlying invoices is allowable upon verification.

Facts

The appellant, a manufacturer of coated steel sheets and coils, received capital goods in the pre-GST period.
Due to pending mandatory inspections under the existing pre-GST law, no CENVAT credit was availed prior to July 1, 2017.
Post-GST, the appellant filed Form GST TRAN-1 and declared the full duty paid on these capital goods in Table 6(a), alongside transitioning about ₹2.14 lakhs of credit.
The Adjudicating Authority and orders-in-original disallowed the entire claim, holding that Section 140(2) permitted transition of only the un-availed balance where some credit had already been availed, and further disallowed ₹1.54 lakhs of credit citing a single consolidated invoice No. 3500117 dated April 11, 2017, with an annexure listing 81 invoices.
The First Appellate Authority sustained both disallowances, relying partly on CBIC Circular No. 182/14/2022.
Before the Tribunal, the appellant explained that the single-invoice entry arose from clerical oversight and produced all 81 underlying invoices with a consolidated list.

Decision

Transition of Un-availed Capital Goods Credit: In favour of the assessee; Section 140(2) read with Rule 117 covers any CENVAT credit not carried forward in returns, irrespective of whether any prior partial credit had been availed. Rule 117(2)(a) does not mandate a non-nil earlier availment, nor does the statute confine transition of capital goods credit to 50%.
Allowance of Credit on Verification: In favour of the assessee / matter remanded; since the single invoice carried an annexure detailing the 81 underlying invoices and the appellant produced copies, an outright denial without verification was unwarranted. The matter was remanded to the original authority for limited verification and allowance of credit if otherwise in order.

KeyTakeaways

Scope of Section 140(2): Transitional credit on pre-GST capital goods can be claimed via TRAN-1 even if 0% of the credit was availed under the earlier regime, provided the duty was paid and the credit was not carried forward in returns.
No Statutory Limit to 50%: The law does not restrict the transition of capital goods credit in TRAN-1 to 50% of the eligible amount; 100% unavailed duty is transitionable.
Annexures and Clerical Oversight: Consolidated invoice entries supported by annexures and underlying bills cannot be summarily rejected without examining the furnished source documents.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , CHANDIGARH BENCH

Ashwani Kumar Sharma

Bhagat Deepak Kumar^*

Jatinder Pal Singh, Judicial Member
and Pradeep Kumar Goel, Technical Member

APL/186/CHD/2026

OCTOBER 28, 2026

Hari Babu Koduri for the Appellant. Veer Singh Meena, AR, Smt. Vaishali Chandhok and Smt. Balwinder Kaur, Superintendents for the Respondent.

ORDER

1. The present appeal has been filed by M/s JSW Vallabh Tin Plate Pvt. Ltd. (now known as JSW Steel Coated Products Ltd.), hereinafter referred to as “the Appellant”, against Order-in-Appeal No. LUD-GST-001-APP-67/2024 dated 01.03.2024 (“the Impugned Order”) passed by the Additional Commissioner, GGST Appeals Commissionerate, Ludhiana (“the Appellate Authority”). It is stated in the Appeal Memo that M/s JSW Vallabh Tin Plate Pvt. Ltd. amalgamated with M/s JSW Steel Coated Products Limited as per NCLT Order dated 19.05.2023. The Appellant is registered with the CGST Department with GSTIN 03AAACN5702D1Z6.

2. Before proceeding further, it is relevant to note that the cause title of the present appeal appearing on the GSTAT Portal is: “Ashwani Kumar Sharma v. Bhagat Deepak Kumar, Joint Commissioner, Ludhiana and Ors.”. It appears that the name of the official who has filed the appeal on behalf of the Appellant company is appearing as the Appellant in the cause title. Further, the name of the Appellate Authority who has passed the Impugned Order is appearing as the Respondent in the cause title. As per Rule 33(1) of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, in an appeal filed by a person other than the Commissioner, the Commissioner concerned shall be made the respondent to the appeal. Hence, the cause title of this appeal should be corrected and read as: “M/s JSW Vallabh Tin Plate Pvt. Ltd. (now JSW Steel Coated Products Ltd.) v. Commissioner, CGST, Chandigarh“.

BRIEF FACTS

3. In brief, the facts of the case are that the Appellant was engaged in manufacture and sale of Coated Steel Sheets/Coils. The Appellant company received capital goods during the preGST period i.e., prior to 01.07.2017. As mandatory and routine inspection of the capital goods received was pending, CENVAT credit was not availed in respect of a few Invoices/ Bills of Entry, during the pre-GST period. By the time inspection was over and the goods were accepted, the GST regime came into effect. Therefore the Appellant could not avail CENVAT credit on the said capital goods. The Appellant claimed Input Tax Credit (“ITC”) in respect of the Central Excise duty / Additional Duty of Customs as per the relevant Invoices/ Bills of Entry, by including the relevant Invoices / Bills of Entry in TRAN-01.

4. The Superintendent, CGST, Range-2, Rajpura issued Show Cause Notice No. CGST-20/CERA Audit/RI/03/2022/77 dated 25.05.2022 (“the SCN”) in Form DRC-01, proposing disallowance of the ITC availed by the Appellant through TRAN-1 along with recovery of interest and imposition of penalty, alleging violation of the provisions of Section 140(2) of the CGST Act, 2017. The Superintendent passed Order-in-Original No. 01/GST/Supdt/R-II/RJP/2022-23 dated 07.11.2022 (“the OIO”) disallowing ITC of Rs. 2,13,593/- availed through TRAN-1, and ordered recovery of interest and imposition of penalty. In the OIO, it was also held that out of the total amount, ITC of Rs. 1,54,400/- was claimed against a single invoice (No. 3500117 dated 11.04.2017) which contained an annexure detailing 81 invoices. It was held that accumulated credit of these 81 invoices had been taken against the single Invoice dated 11.04.2017, as ITC for multiple invoices is not admissible against a single invoice.

5. Aggrieved by the OIO, the Appellant filed an appeal before the Appellate Authority, who vide the Impugned Order rejected the appeal. The Appellant has filed the present appeal before this Tribunal against the Impugned Order.

6. The grounds of appeal advanced by the Appellant are as under:

The Appellant had not availed the CENVAT credit on the capital goods in their Central Excise return (ER-1), due to pending inspection of the materials. By the time the inspection was done and the materials were accepted, the GST regime came into effect. Therefore, the Appellant claimed and availed 100% credit on the capital goods, through TRAN-1. Since CENVAT credit of the capital goods was not at all availed earlier in the pre-GST regime, the Appellant is entitled to take the remaining/full credit (i.e., 100% credit) on the capital goods through TRAN-1, which is within the provisions of Section 140(2) of the CGST Act.

ii.

As per Section 140(2) of the CGST Act, a registered person is entitled to take credit in respect of the duty paid on capital goods that was not carried forward in a return filed under the existing law. The Section has used the words “credit of un-availed CENVAT credit in respect of Capital goods, not carried forward in a return”. That means credit that was not carried forward in a Central Excise return (ER-1) can be transitioned through TRAN-1. The Section does not specify that only 50% credit can be transitioned through TRAN-1. Therefore, credit on capital goods that was not carried forward in a return can be transitioned to electronic credit ledger through TRAN-1, whether it is 50% or 100%, as the Section does not specify the quantum of credit. Therefore, transition of 100% credit on capital goods through TRAN-1 was very well within the provisions of the law, since the credit was not carried forward in the Central Excise return.

iii.

The credit which is restricted to be carried forward through TRAN-1 is the credit which is not admissible under the erstwhile law and also not admissible under the GST law. In the present case there is no dispute whatsoever regarding the admissibility of credit of capital goods under the erstwhile law and also under the GST law and therefore denial of the credit relying upon Section 140(2) is completely misplaced and hence legally unsustainable.

iv.

The Explanation to Section 140(2) defines the expression “un-availed CENVAT credit” as the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods under the existing law from the aggregate amount of CENVAT credit that was eligible under existing law. Since the Appellant has not availed credit on capital goods in a Central Excise return (i.e., under existing law), 100% credit remained un-availed. In other words, “un-availed CENVAT credit” was the entire Central Excise duty or Additional Duty of Customs (reffred to as “CVD”) paid as per the Invoices / Bills of Entry. The Appellant is entitled to take through TRAN-1, the entire un-availed credit i.e., the total amount of Central Excise duty or CVD paid on procurement of capital goods. The aforesaid explanation does not expressly mention the quantum of un-availed credit which is to be called as ‘un-availed CENVAT credit’. Therefore, this credit can be 50% or even 100%, as the case may be.

Section 140(2) further stipulates that to avail credit under the section, the credit should be admissible as CENVAT credit under the existing law and should also be admissible as input tax credit under the CGST Act, 2017. There is no dispute regarding admissibility of the credit on capital goods in the Appellant’s case.

vi.

Therefore, availment of 100% credit on capital goods through TRAN-1 is well within the provisions of Section 140(2) of the CGST Act.

vii.

Further, neither Rule 4 of the CENVAT Credit Rules nor Section 140(2) of the CGST Act, 2017 stipulates that in case an assessee doesn’t avail 50% of credit on capital goods during the year of receipt, he cannot avail credit at all in subsequent years.

viii.

The Appellant had availed credit on the strength of valid duty paying documents. The goods were received in the factory of the Appellant and used in the manufacture of finished taxable goods. The credit cannot be denied on procedural and technical issues, if the receipt of material, their duty paid character and utilization in manufacture of final product is not disputed.

ix.

The Appellant relied upon the following judgements in their reply to DRC-01A, DRC-01 and in the first appeal, which are also relied upon in the present appeal: Dausa Transformer Udyog v. Commissioner of C. Ex. & S.T. 2016 (337) E.L.T. 605 (Tri. – Del.); Pepsico India Holding P. Ltd. v. Commissioner of C. Ex. 2017 (349) E.L.T. 665 (Tri. – Mumbai)]; Raymond Ltd. v. Commissioner of Central Excise, Bhopal 2014 (300) E.L.T. 130 (Tri. – Del.); Rico Auto Industries Ltd. v. Commissioner of C. Ex., Delhi-III 2013 (293) E.L.T. 545 (Tri. – Del.).

The conditions for availing the credit during the pre-GST regime were provided in Rule 4 of CENVAT Credit Rules, 2004. Clause 2(a) of Rule 4 inter-alia provides that: “The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year”.

xi.

The Hon’ble CESTAT has held in the case of Sumangal Glass Industries Pvt Ltd v. Commissioner of Central Excise And Service Tax [2020-TIOL-388-CESTAT-Ahm], that since the assessee had not availed the 50% credit in the year of procurement, availment of 100% credit in a subsequent year was in order and credit cannot be denied. The ratio of the judgement is squarely applicable to the facts of Appellant’s case. Credit cannot be denied merely for the reason that 50% of the credit was not availed in the year of procurement and 100% credit was availed through TRAN-01.

xii.

The observation of the Appellate Authority that the cases relied upon by the Appellant are based on different facts is therefore not correct.

xiii.

The credit was available as per the CENVAT Credit Rules within one year from the date of invoices. Since GST was introduced with effect from 01.07.2017, the company was required to avail the credit through TRAN-1, which was duly complied with. The right which accrued to the company as per the CENVAT Credit Rules cannot be taken away by citing mere procedural or technical formalities. The company is entitled to refund of CENVAT credit, if the credit was not transmitted through TRAN-1, as held by the Hon’ble CESTAT in the case of M/S. Bharat Heavy Electricals Ltd v. Commissioner of GST and Central Excise, Chennai Outer Commissionerate, [2021- TIOL-827-CESTAT-Mad]. In that case the assessee had not availed credit on invoices pertaining to pre-GST period and not transitioned through TRAN-1, but claimed refund of CENVAT credit. The Hon’ble Tribunal allowed refund of CENVAT credit.

xiv.

The entitlement to credit on the purchases made in the pre-GST regime as per then existing CENVAT credit rules is a vested right and, therefore, it cannot be taken away. The right to the credit had become absolute under the Central Excise Act and CENVAT Credit Rules, 2004 and, hence, the credit is indefeasible and the same cannot be taken away. It is legitimate for a going concern to expect that it will be allowed to carry forward and utilize the CENVAT credit after satisfying all the conditions as mentioned in the Central Excise Act or CENVAT Credit Rules, 2004 and, therefore, disallowing such vested right is against Article 14 of the Constitution as it goes against the essence of doctrine of legitimate expectation. The right to carry forward credit is a right or privilege, acquired and accrued under the repealed Central Excise Act, 1944 and it has been saved under section 174(2)(c) of the CGST Act, 2017 and, therefore, it cannot be allowed to lapse.

xv.

In the following cases, it has been held that CENVAT Credit is a vested right: Adfert Technologies (P.) Ltd. v. Union of India [2019] [2020] 32 GSTL 726 (Punjab & Haryana) – SLP filed by the department against the judgement has not been admitted by the Hon’ble Supreme Court;Siddharth Enterprises v. Nodal Officer 29 GSTL 664 (Gujarat)];Brand Equity Treaties Ltd. v. Union of India 38 GSTL 10 (Delhi)].

xvi.

The provisions of Section 140(2) of the CGST Act have been duly complied with and therefore the allegation of non-compliance is totally incorrect and baseless.

xvii.

There is no restriction either under Section 140(2) of the CGST Act or CENVAT credit rules that if the taxpayer has not availed 50% of the CENVAT credit on capital goods in ER-1, he is not entitled to transfer the entire amount as ITC through TRAN-1. The provisions of Section 140(2) specifically permit transition of the credit not availed under existing law, through TRAN-1. Therefore, the Order-in-Original and impugned Order-in-Appeal have been passed ignoring the provisions of the Section 140(2) of the CGST Act, 2017 and the CENVAT Credit Rules, 2004.

xviii.

On the second issue of claiming credit of Rs. 1,54,400/- in the TRAN1, the Adjudicating Authority and Appellate Authority had observed that the Appellant has claimed credit of Rs. 1,54,400/- against a single Invoice No. 3500117 dated 11.04.2017 which contains an Annexure detailing 81 Invoices, whose accumulated credit has been availed against the single invoice dated 11.04.2017, which is not admissible to the Noticee. However, the Appellant has in fact claimed credit of 81 Invoices in the TRAN-1, the total credit of which works out to Rs.1,54,400/-. However, by a clerical oversight, only one invoice number, viz. the first invoice number, has been filled up leaving out details of the remaining 80 Invoices and against which the total credit amount of Rs.1,54,400/- has been claimed. It is admitted that due to such oversight, details of remaining 80 Invoices are not apparent in the TRAN-1 giving an impression of having claimed the entire credit against one single invoice.

xix.

The audit objection and the SCN alleged that none of the invoices in respect of this claim were available with the Appellant. However, all the 81 Invoices in respect of the said claim of Rs.1,54,400/- are available. Copies of all these invoices along with a list of the same indicating the total amount of credit claimed has been attached as ANNEXURE-10.

xx.

Credit in respect of all the 81 Invoices was claimed in the TRAN-1 within the time period specified under CGST laws and none of these invoices were beyond the specified time period of one year. All the conditions for eligibility of CENVAT credit in respect of these 81 Invoices have been satisfied. Since there is no dispute regarding receipt of the material, duty paying character thereof, usage of the material, mere procedural issues such as disclosure in the TRAN-1 return should not come in the way of allowing the substantive benefit of ITC, as per the judgements relied upon by the Appellant.

xxi.

The Order-In-Appeal was passed without any discussion on the judgements relied by the Appellant. The Order-In-Appeal is therefore liable to be set-aside for being a cryptic order.

xxii.

The Appellate Authority has observed that as per the CBIC Circular No.182/14/2022-GST dated 10.11.2022, if no credit was availed earlier, credit of entire amount cannot be availed through this Table. It is not mentioned in the Order-in-Appeal, under which provisions of the CGST Act/Rules, the clarification draws its authority to restrict the right of the Appellant to transmit the credit that was accrued to him. Further, the Board’s Circular cannot override the statutory provisions, as held in a number of the judgements by the Hon’ble Supreme Court including in CCE v. Ratan Melting & Wire Industries [2008] 12 STR 416/[2008] 12 STR 416/[2008] 17 STT 103 (SC) /[2008] 12 STR 416 (SC)].

xxiii.

Levy of penalty of Rs. 2,13,593/-, equivalent to 100% of ITC disallowed, under Section 122(2)(a) of the CGST Act is not tenable, as Section 122(2)(a) prescribes penalty of Rs.10,000/- or 10% of the tax due from the taxpayer whichever is higher.

xxiv.

No penalty is leviable in the instant case, since availment of ITC by way of transfer through TRAN-01 was in order. Therefore, levy of penalty is totally illegal, arbitrary and against the provisions of Section 122(2)(a).

xv.

Since dis-allowance of ITC is illegal, levy of interest also does not stand.

DISCUSSION AND FINDINGS

7. We have heard Sh. Hari Babu Koduri, AVP (Indirect Taxation) of the Appellant company, and Sh. Veer Singh Meena, Authorised Representative for the Respondent CGST Department. We have considered the facts of the case, the documents on record, and the arguments advanced by both sides.

8. In the present case transitional credit availed by the Appellant through TRAN-1 has been disallowed basically on two grounds:

(i)

The first ground is that the Appellant had received capital goods during the pre-GST period i.e., prior to 01.07.2017, but had availed the entire credit of duty paid on the said capital goods amounting Rs. 2,13,593/- in Para 6(a) of TRAN-01, which was not admissible to them. The authorities below took the view that transitional credit admissible under subsection 140(2) of CGST Act, 2017 pertains to those taxpayers who have availed a portion of the CENVAT Credit in respect of the duty paid on capital goods through their Central Excise or Service Tax returns. If no credit was availed earlier, credit of the entire amount could not be availed through this Table, it was held.

(ii)

The second ground was that out of the total amount Rs. 2,13,593/-, ITC of Rs. 1,54,400/- was claimed against a single invoice (No. 3500117 dated 11.04.2017) which contained an annexure detailing 81 invoices. It was held that accumulated credit of these 81 invoices had been taken against the single Invoice dated 11.04.2017, which was not admissible.

9. The first issue involved in the present appeal is whether the entire credit of the duty paid (Central Excise or Additional Duty of Customs) on capital goods can be allowed through TRAN-1 under Section 140(2) of the CGST Act, 2017. This issue has been decided by this bench vide order dated 16.10.2026 passed in Appeal No. APL/28/CHD/2026 in the case of Deltron v. Commissioner Central GST (GSTAT – CHANDIGARH)/2026 (10) TMI 1226 . The relevant extract from that order is reproduced as under:

“10. It is observed that Table 6 is for providing details of capital goods for which unavailed credit has not been carried forward under existing law [Section 140(2)]. Part (a) of the Table provides for giving details of amount of unavailed credit in respect of capital goods.

11. On going through sub-section (2) of Section 140, it is observed that the said sub-section allows credit of the amount of unavailed credit in respect of capital goods not carried forward in the return furnished for the period ending 30.06.2017 under the existing law. The Explanation to sub-section (2) further provides that the expression “unavailed CENVAT credit” means the amount of credit that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled. Further, clause (a) of sub-rule (2) of Rule 117 of the CGST Rules specifically provides as under:

“(2) Every declaration under sub-rule (1) shall-

(a) in the case of a claim under sub-section (2) of section 140, specify separately the following particulars in respect of every item of capital goods as on the appointed day-

(i) the amount of tax or duty availed or utilised by way of input tax credit under each of the existing laws till the appointed day; and

(ii) the amount of tax or duty yet to be availed or utilised by way of input tax credit under each of the existing laws till the appointed day.”

12. It is also relevant to mention that under the existing law, i.e. Central Excise law, CENVAT credit was allowed on capital goods in two parts: while fifty per cent of total credit was allowed to be taken in the year in which the capital goods were received, credit of the remaining fifty per cent was allowed in subsequent year(s).

13. We also find that the issue under consideration has also been clarified in the FAQs on GST (3rd Edition dated 15.12.2018) issued by the Central Board of Indirect Taxes and Customs (“CBIC”), in reply to Q3 under Chapter 24 relating to Transitional Provisions (page 543) as follows:

“Q 3. A registered person, say, purchases capital goods under the existing law (Central Excise) in the June quarter of 2017-18. Though the invoice has been received within 30^th June but the capital goods are received on 5th July, 2017 (i.e. in GST regime). Will such a person get full credit of CENVAT in GST regime?

Ans. Yes, he will be entitled to credit in 2017-18 provided such a credit was admissible as CENVAT credit in the existing law and is also admissible as credit in CGST – section 140(2) of the CGST Act.”

14. We further find that the CBIC has issued Circular No. 182/14/2022 dated 10.11.2022 clarifying various issues consequent to opening of the GSTN portal for availing credit under TRAN-1/TRAN-2, as per the directions of the Hon’ble Supreme Court. As per para 5.3.4 of this Circular, verification of transitional credit claimed through TRAN-1 and TRAN-2 was to be undertaken by the Department as per the guidelines detailed in Annexure I to the Circular. The said Annexure I, titled as “Guidance Note for verification of CGST Transitional Credit claimed by the Applicant in TRAN-1/TRAN-2” gives an “indicative list of nature of credit” under various provisions of the Act. In respect of transitional credit taken under sub-section (2) of Section 140 through Column 11 of Table 6(a), Sl. No. 2 of the Annexure states as under:

“This table captures details of unavailed credit of capital goods in the pre-GST era. Capital Goods credit was allowed to be availed in two installments of 50% each. This table is meant to be used by the taxpayers who have availed a portion of CENVAT credit on capital goods through ER or ST return and now intend to avail remaining credit in respect of capital goods which has not been availed through the ER or ST return. The said amount of credit should have been admissible as input tax credit under GST law as well as under existing law.”

15. We also note that in the Guidance Note it is advised that the full text of law be referred to for better understanding of the issue.

16. On perusal of the provisions of sub-section (2) of Section 140, it is evident that transitional credit of unavailed CENVAT credit on capital goods is allowed under this subsection subject to certain conditions, namely, that the registered person should not be opting to pay tax under section 10; that credit of the unavailed CENVAT credit in respect of capital goods should not have been carried forward in a return furnished under the existing law; and that credit should be admissible as CENVAT credit under the existing law as also as ITC under the GST law.

17. As noted above, the Explanation to the said sub-section further clarifies that:

“Explanation.- For the purposes of this sub-section, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law, from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law.”

18. It is thus evident that while sub-section (2) of Section 140 of the Act admittedly covers cases where capital goods were already received and CENVAT credit was availed in part under the existing law (i.e. the Central Excise Act) and the balance credit was yet to be taken, this sub-section does not create any bar for availing unavailed CENVAT credit on capital goods which were received after the GST Act came into force (that is after 01.07.2017) and on which the duty paid was admissible as CENVAT under the existing law as well as ITC under GST law. Clause (a) of sub-rule 117(2) of the CGST Rules which provides for furnishing information regarding credit availed or utilized and yet to be availed or utilized under the existing law also does not provide that credit availed or utilised cannot be nil.

19. We thus find that as per sub-section 140(2) of the CGST Act, a registered person is entitled to take credit in respect of capital goods that was not carried forward in a return filed under the existing law. The sub-section has used the words “credit of un-availed CENVAT credit in respect of capital goods, not carried forward in a return”. That means credit that was not carried forward in the Central Excise return (ER-1) can be transitioned through TRAN-1. The Section does not specify that only 50% credit can be transitioned through TRAN-1. Therefore, credit on capital goods that was not carried forward in a Central Excise return can be transitioned to electronic credit ledger through TRAN-1, whether it is 50% or 100% of the total quantum of credit. The Appellant has fulfilled all conditions for taking transitional credit under Section 140, as well as filed necessary information in prescribed Form TRAN-1. Accordingly, we find no reason to disallow credit in respect of capital goods availed by the Appellant under sub-section 140(2) of the CGST Act. We hold that the said credit has to be allowed.”

10. In view of our findings in the case of Deltron (supra), we hold that transitional credit through TRAN-1 is allowed in respect of duty paid on capital goods for which no CENVAT credit was taken under the Central Excise regime, and we set aside the Impugned Order to that extent.

11. As regards the second ground on which the ITC has been denied, we find that the original Adjudicating Authority had held in the OIO that out of the total amount, credit of Rs. 1,54,400/- was claimed against a single invoice No. 3500117 dated 11.04.2017 which contained an annexure detailing 81 invoices whose accumulated credit had been taken against the single invoice dated 11.04.2017, which was not admissible. The first appeal filed by the Appellant was also rejected by the Appellate Authority on this count.

12. In the grounds of appeal filed by the Appellant before us, the Appellant has claimed that they had taken credit of 81 Invoices in the TRAN-1, the total credit of which worked out to Rs. 1,54,400/-. However, by a clerical oversight, only one invoice number (viz. the first invoice number) had been filled up leaving out the details of the remaining 80 Invoices and against which the total credit amount of Rs.1,54,400/- was claimed. The Appellant has admitted that due to such oversight, the details of the remaining 80 Invoices are not apparent in the TRAN-1, giving an impression of having claimed the entire credit against one single invoice. The Appellant has further submitted that though the SCN alleged that none of the invoices in respect of this claim were available with the Appellant, all the 81 Invoices in respect of the said claim of Rs.1,54,400/- are available with the Appellant.

13. We have held hereinabove that under sub-section 140(2) of the CGST Act, 2017 the Appellant was entitled to avail as transitional credit, the entire credit in respect of the duty (Central Excise or Additional Duty of Customs) paid on the capital goods amounting Rs. 2,13,593/-. Out of this amount, an amount of Rs. 1,54,400/- was denied by the Adjudicating Authority on the additional ground that credit relating to 81 Invoices had been availed on the basis of a single invoice.

14. The Appellant has submitted that: (i) the credit amount of Rs. 1,54,400/- was the total credit relating to these 81 invoices; (ii) due to a clerical oversight, only one invoice number (viz. the first invoice number) was filled up in the TRAN-1, leaving out details of the remaining 80 Invoices; (iii) due to this oversight, details of the remaining 80 Invoices were not apparent in the TRAN-1 giving an impression that credit had been taken against one single invoice.

15. In this regard, we note that the authorities below have themselves observed that the single invoice (Invoice No. 3500117 dated 11.04.2017) contained an annexure detailing 81 invoices. Furthermore, although in the SCN it was alleged that the invoices in respect of this claim were not available with the Appellant, the Appellant has submitted that all the 81 Invoices in respect of the said claim of Rs. 1,54,400/- are available with them. Copies of all these invoices along with a list of the same indicating the total amount of credit claimed has been attached as Annexure-10 in the Appeal.

16. We see no reason why the Appellant should not be allowed the opportunity to produce these invoices before the original authority. The original authority shall verify these invoices and allow the credit, if otherwise in order. Since the matter relates to transitional credit in respect of duty suffered on capital goods before GST was brought into force, we find it expedient to direct the original authority to complete this exercise expeditiously, and within one month in any case. The matter is referred back to the original adjudicating authority to this extent.

CONCLUSION AND ORDER

17. In view of the discussion and findings recorded hereinabove, we order that:

(i) The Appellant is entitled to avail as transitional credit, the entire credit in respect of the duty paid on the capital goods amounting Rs. 2,13,593/-.

(ii) The Appellant will immediately submit all the 81 Invoices in respect of the claim of credit amounting to Rs. 1,54,400/-, before the original authority. The original authority shall verify these invoices and allow the credit, if otherwise in order. The original authority shall complete this exercise expeditiously, and within one month in any case.

18. The appeal is disposed of accordingly.

Section 129 Penalty for Goods Interception Must Be Confined Exclusively to Undocumented Excess Consignment

Ashwani Kumar — Fri, 06 Nov 2026 11:47:03 +0000

Section 129 Penalty for Goods Interception Must Be Confined Exclusively to Undocumented Excess Consignment

Issue

Whether a penalty under Section 129 of the Central/Uttar Pradesh Goods and Services Tax Act, 2017 should be levied on the entire consignment or restricted strictly to the excess undocumented goods found during transit verification.

Facts

A vehicle (UP33T6106) carrying shuttering plywood was intercepted by tax authorities while in transit.
The driver produced a valid tax invoice and e-way bill covering a declared quantity of 418 pieces.
Upon physical verification of the vehicle, 450 pieces were found, establishing an excess of 32 pieces without supporting documentation.
The original adjudicating officer computed and imposed a Section 129 penalty on the total value of the entire consignment (all 450 pieces).
The First Appellate Authority modified the order and confined the penalty exclusively to the 32 undocumented excess pieces.
The Department filed an appeal seeking to restore the penalty on the entire consignment.

Decision

Coverage of Valid Documents: In favour of assessee; the record conclusively established that 418 pieces were duly covered by valid invoices and e-way bills.
Proportionality of Penalty: In favour of assessee; the existence of excess goods alone does not prove a lack of documentation for the entire consignment. Detention and penalty under Section 129 must strictly match the extent of the proved statutory contravention.
No Fictitious Transaction Established: In favour of assessee; the Department failed to produce any material discrediting the validity of the documents for the 418 pieces or demonstrating a fictitious transaction.
Affirmation of Appellate Order: In favour of assessee; the Departmental appeal was dismissed, and the Order-in-Appeal restricting the penalty to the excess 32 pieces was affirmed.

KeyTakeaways

Proportionality Principle under Section 129: Statutory penalties for goods intercepted in transit attach only to the specific portion of goods found in breach of documentation rules, not to legitimately documented goods in the same vehicle.
Burden of Proof on Revenue: The presence of a partial quantity mismatch does not automatically invalidate valid invoices and e-way bills for the remaining covered consignment unless the Department proves the entire transaction is fictitious.
Legal Attachment of Penalty: Penal remedies under Section 129 are restricted to the valuation and quantum of the undocumented or non-compliant goods alone.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , LUCKNOW BENCH

Ravish Kumar Singh

Mani Ply

Santosh Kumar Srivastava, Judicial Member
and Arvind Kumar, Technical Member

APL/239/LCK/2026

OCTOBER 27, 2026

Ashutosh Mishra, Assistant Commissioner for the Appellant. R.K. Pandey, Adv. for the Respondent.

ORDER

1. BRIEF FACTS OF THE CASE

1.1. The present appeal has been preferred by the Department under Section 112(3) of the CGST/UPGST Act, 2017, against Order-in-Appeal No. 74 dated 28.06.2024, passed by the Additional Commissioner, Grade-II (Appeal)-4th, State Tax, Lucknow, whereby the First Appellate Authority partly allowed the appeal filed by M/s Mani Ply and modified the penalty order dated 19.07.2023 passed by the Assistant Commissioner, Mobile Squad Unit-4, Lucknow, under Section 129(3) of the CGST/UPGST Act, 2017.

1.2. The facts giving rise to the present appeal are that on 18.07.2023, at approximately 03:33 AM, vehicle bearing registration No. UP33T6106 was intercepted by the Mobile Squad Unit-4, Lucknow, at Ring Road, Lucknow. The said vehicle was transporting shuttering plywood from M/s Mani Ply, Raebareli, to M/s Purvanchal Ply, Lucknow. At the time of interception, the person in charge of the vehicle produced Tax Invoice No. MP/23-24/90 dated 17.07.2023 and E-way Bill No. 401353519731 dated 17.07.2023 in support of the transportation of goods.

1.3. Upon verification of the documents accompanying the goods and the physical quantity loaded in the vehicle, the Mobile Squad authorities noticed a difference between the quantity declared in the tax invoice and e-way bill and the quantity actually found during physical verification. The documents reflected 418 pieces of shuttering plywood measuring 1244.3024 square meters, whereas the physical verification revealed 450 pieces measuring approximately 1339.56 square meters. Thus, an excess quantity of 32 pieces, measuring approximately 95.258 square meters, was detected.

1.4. On the basis of the aforesaid discrepancy, the Proper Officer initiated proceedings under Section 129 of the CGST/UPGST Act, 2017, alleging contravention of Section 31 and Rules 46 and 138 of the CGST/UPGST Rules, 2017. Consequently, a notice in Form GST MOV-07 was issued on 19.07.2023, followed by an order in Form GST MOV-09 bearing No. ZD0907231001202 dated 19.07.2023, whereby a penalty amounting to Rs. 57,870/- was imposed by taking into consideration the value of the entire consignment.

1.5. Being aggrieved by the said penalty order, M/s Mani Ply preferred First Appeal No. 101/2023 before the Additional Commissioner, Grade-II (Appcal)-4th, State Tax, Lucknow. It was contended that the consignment was accompanied by a valid tax invoice and e-way bill covering 418 pieces of shuttering plywood and that the transaction was duly recorded in the regular books of account. It was further submitted that the consideration for the supply, including the applicable GST, had been received through banking channels. The principal grievance was that the Proper Officer had imposed penalty on the entire consignment, although the alleged discrepancy related only to 32 excess pieces.

1.6. The First Appellate Authority, after examining the material available on record, observed that the documents accompanying the vehicle duly covered 418 pieces of shuttering plywood measuring 1244.3024 square meters. The discrepancy was confined to the additional 32 pieces measuring approximately 95.258 square meters, which were not covered by the accompanying documents. The First Appellate Authority further observed that the value of the excess goods, calculated at Rs. 120/- per square meter, was approximately Rs. 11,431/-, whereas the Proper Officer had calculated the penalty by taking the entire consignment value of Rs. 1,60,748/-.

1.7. The First Appellate Authority accordingly held that the imposition of penalty with reference to the entire consignment was not justified when the alleged contravention related only to the excess quantity. It was therefore held that the penalty was liable to be confined to the undocumented excess goods. Consequently, the First Appellate Authority partly allowed the appeal and modified the original penalty order by reducing the penalty from Rs. 57,870/-to Rs. 5,3754/-, with consequential benefits to the taxpayer.

1.8. Aggrieved by the aforesaid appellate order, the Department has preferred the present second appeal, contending that transportation of goods in excess of the quantity declared in the invoice and e-way bill constitutes a contravention of the statutory provisions and indicates an intention to evade payment of tax. The Department has accordingly prayed for setting aside the order dated 28.06.2024 and restoration of the original penalty of Rs. 57,870/-imposed by the Proper Officer.

3. GROUNDS OF APPEAL

3.1. The appellant (Department) has challenged the impugned Order-in-Appeal on the ground that the First Appellate Authority failed to appreciate the nature and seriousness of the contravention detected during the course of interception and physical verification of the goods. According to the Department, the transportation of goods in excess of the quantity declared in the tax invoice and e-way bill constitutes a violation of the provisions of the CGST/UPGST Act, 2017 and the Rules framed thereunder.

3.2. The appellant has stated that the vehicle was found carrying 450 pieces of shuttering plywood, whereas the tax invoice and e-way bill disclosed only 418 pieces. The excess quantity of 32 pieces was not supported by the accompanying statutory documents. It is contended that the said discrepancy was duly established through physical verification and was sufficient to justify proceedings under Section 129 of the Act.

3.3. The appellant has further contended that the First Appellate Authority erred in restricting the penalty only to the excess quantity of goods. It is submitted that once a contravention of the statutory provisions governing transportation of goods is detected, the Proper Officer is empowered to initiate proceedings in respect of the goods transported in contravention of the Act and Rules.

3.4. The appellant has also submitted that transportation of goods in excess of the declared quantity indicates an intention to evade payment of tax. According to the Department, the excess quantity would have remained unaccounted for had the vehicle not been intercepted and subjected to physical verification. The Department therefore contends that the discrepancy cannot be treated merely as a minor or technical irregularity.

3.5. The appellant has further contended that Section 129 of the CGST/UPGST Act, 2017 provides for detention, seizure and imposition of penalty in cases involving contravention of the statutory provisions relating to transportation of goods. It has been argued that proof of a separate or independent intention to evade tax is not an indispensable requirement in every case involving contravention of the said provisions.

3.6. The appellant has relied upon certain judicial pronouncements, including Kapil Transport Company v. State of U.P.(Chhattisgarh), in support of its contention that transportation of goods without proper statutory documentation may attract proceedings under Section 129 of the Act.

3.7. The appellant has accordingly submitted that the First Appellate Authority committed an error in modifying the original penalty order and that the order dated 28.06.2024 is liable to be set aside. It has therefore been prayed that the present departmental appeal be allowed and the original penalty of Rs. 57,870/- be restored.

4. SUBMISSION OF THE APPELLANT

4.1. The appellant Department has submitted that the Proper Officer had initiated proceedings under Section 129 of the CGST/UPGST Act, 2017 after detecting a material discrepancy in the quantity of goods being transported. The Department has emphasized that the physical verification clearly established the presence of 450 pieces of shuttering plywood against the declared quantity of 418 pieces.

4.2. It has been contended that the excess quantity of 32 pieces was not supported by any corresponding tax invoice or e-way bill at the time of interception. The appellant has therefore submitted that the goods were being transported in contravention of Section 31 and Rules 46 and 138 of the CGST/UPGST Rules, 2017.

4.3. The appellant has further submitted that the statutory requirements relating to the issuance of tax invoices and generation of e-way bills are intended to ensure transparency and accountability in the movement of taxable goods. Any material discrepancy between the declared quantity and the actual quantity being transported, according to the Department, undermines the statutory mechanism designed to prevent unaccounted movement of goods.

4.4. The appellant has argued that the presence of excess goods in the vehicle creates a reasonable basis for suspecting an attempt to evade payment of tax. It has further been submitted that the First Appellate Authority failed to appreciate that the discrepancy was detected only upon physical verification conducted by the Mobile Squad authorities.

4.5. The appellant has also contended that Section 129 is attracted upon the establishment of contravention of the relevant statutory provisions and that the Department is not required, in every case, to establish an independent intention to evade tax before initiating action under the said provision.

4.6. The appellant has accordingly submitted that the First Appellate Authority was not justified in restricting the penalty to the excess quantity alone and that the original order passed by the Proper Officer was legally sustainable. The Department has therefore prayed for setting aside the impugned Order-in-Appeal and restoring the penalty originally imposed.

SUBMISSION OF THE RESPONDENT

1. That the respondent submitted that the goods in question were being transported under Tax Invoice No. 90 dated 17.07.2023 and E-Way Bill No. 401353519731. The transaction was duly recorded in the regular books of account, and payment was received through banking channels.

2. The respondent contended that the discrepancy in the quantity of goods noticed during physical verification should be considered in the light of the documents and explanation furnished by the respondent. The respondent maintains that the facts and circumstances of the case deserve consideration while determining the applicability of the penalty under Section 129 of the UPGST/CGST Act, 2017.

3. The First Appellate Authority, vide order passed in Appeal No. 101/2023, partly allowed the appeal and reduced the penalty by Rs.53,754.00. The respondent relies upon the findings recorded in the said appellate order and submits that the relief granted therein is justified in the facts and circumstances of the case.

4. In view of the above submissions, the respondent prays that the grounds raised by the Department in the present second appeal be considered on their merits and that the order passed by the First Appellate Authority be maintained to the extent warranted by the facts and applicable provisions of law.

5. FINDINGS AND DISCUSSION

5.1. We have carefully examined the impugned Order-in-Appeal, the original penalty order, the grounds raised in the departmental appeal and the material available on record. The principal issue requiring determination is whether the First Appellate Authority was justified in restricting the penalty to the excess quantity of goods found during physical verification, instead of sustaining the penalty imposed on the entire consignment.

5.2. It is an admitted fact that vehicle No. UP33T6106 was intercepted on 18.07.2023 while transporting shuttering plywood from M/s Mani Ply, Raebarcli, to M/s Purvanchal Ply, Lucknow. It is also undisputed that Tax Invoice No. MP/23-24/90 dated 17.07.2023 and E-way Bill No. 401353519731 dated 17.07.2023 were produced at the time of interception. The said documents covered 418 pieces of shuttering plywood measuring 1244.3024 square meters.

5.3. The physical verification conducted by the Mobile Squad authorities revealed 450 pieces of shuttering plywood measuring approximately 1339.56 square meters. Thus, the discrepancy was confined to 32 additional pieces measuring approximately 95.258 square meters. The existence of the excess quantity is not in dispute. However, the mere existence of such excess quantity does not automatically establish that the entire consignment was being transported without valid statutory documents.

5.4. We find that the First Appellate Authority has correctly distinguished between the quantity duly covered by the accompanying tax invoice and e-way bill and the additional quantity found without corresponding documents. The documentary evidence available on record establishes that 418 pieces were covered by the requisite documents. Therefore, the allegation of non-compliance cannot, without further supporting evidence, be extended to the entire consignment merely because 32 excess pieces were detected.

5.5. Section 129 of the CGST/UPGST Act, 2017 provides for detention, seizure and release of goods and conveyances in transit in cases involving contravention of the provisions of the Act or Rules. However, the exercise of powers under the said provision must be founded upon the nature and extent of the contravention established from the record. The authority imposing penalty is required to examine the relevant facts and determine the goods in respect of which the statutory contravention has actually occurred.

5.6. In the present case, the Appellant has established that 32 pieces of shuttering plywood were found in excess of the quantity declared in the tax invoice and e-way bill. Nevertheless, the Department has not brought any cogent material on record to establish that the remaining 418 pieces were transported without valid documents, that the documents accompanying the said quantity were false or fabricated, or that the declared transaction was fictitious.

5.7. The allegation of intention to evade tax must be considered in the light of the circumstances of each case. Although Section 129 may be attracted upon the establishment of a statutory contravention without proof of a separate dishonest intention in every case, an allegation of deliberate tax evasion cannot be presumed against the entire consignment without adequate factual foundation. In the present matter, the Department has not demonstrated how the discrepancy relating to 32 pieces justified treating all 450 pieces as goods transported in contravention of the statutory requirements.

5.8. We further find that the First Appellate Authority did not completely absolve the taxpayer of liability arising from the discrepancy. On the contrary, the First Appellate Authority specifically acknowledged that 32 pieces of shuttering plywood were found in excess of the declared quantity and held that penalty was warranted in respect of the said excess goods. The appellate interference was therefore confined to correcting the basis on which the original penalty had been calculated.

5.9. The value of the excess quantity was determined by the First Appellate Authority at approximately Rs. 11,431/-, calculated at Rs. 120/- per square meter. On that basis, the First Appellate Authority determined the penalty attributable to the excess goods and reduced the original penalty from Rs. 57,870/- to Rs. 5,3754/-. The Department has not demonstrated any specific error in the identification of the documented and undocumented quantities that would justify restoring the penalty on the entire consignment.

5.10. We are therefore of the considered view that the First Appellate Authority adopted a reasoned approach by distinguishing the documented quantity from the excess quantity. The Department has failed to establish any factual or legal basis sufficient to demonstrate that the First Appellate Authority acted arbitrarily or committed any material error in making such distinction.

5.11. In view of the foregoing discussion, we hold that the Department has failed to establish sufficient grounds for interference with the impugned Order-in-Appeal. The mere detection of 32 excess pieces, without further evidence concerning the remaining documented goods, does not justify restoration of the penalty imposed on the entire consignment. Accordingly, the findings recorded by the First Appellate Authority warrant affirmation.

6. ORDER

6.1. In view of the facts and circumstances of the case, the material available on record and the findings recorded hereinabove, we are of the considered opinion that the appellant Department has failed to establish any legal infirmity, perversity or material irregularity in Order-in-Appeal No. 74 dated 28.06.2024, passed by the Additional Commissioner, Grade-II (Appeal)-4th, State Tax, Lucknow.

6.2. Accordingly, the present departmental appeal is hereby dismissed, and Order-in-Appeal No. 74 dated 28.06.2024, passed in Appeal No. 101/2023, is hereby Upheld and Confirmed.

6.4. The appeal stands disposed of in the above terms.

Penalizing Goods Detention Is Justified as Invoice Mismatches and Multiple E-Way Bills Evince Tax Evading Intent

Ashwani Kumar — Fri, 06 Nov 2026 11:44:33 +0000

Penalizing Goods Detention Is Justified as Invoice Mismatches and Multiple E-Way Bills Evince Tax Evading Intent

Issue

Whether the detention of goods and conveyance under Section 129 is legally justified when goods are accompanied by tax invoices and e-way bills, but surrounding physical discrepancies, supplier-wise mismatches, and multiple generated/cancelled e-way bills establish an intent to evade tax.

Facts

A vehicle carrying lead ingots was intercepted near Sikandra/Akbarpur, Kanpur Dehat, at 03:24 AM on 14.02.2020.
The driver produced a tax invoice and e-way bill indicating a consignment destination of Ghaziabad.
Upon statement under oath, the driver disclosed that loading took place at three different locations in Panki rather than the seller’s declared business premises.
Physical verification recorded in Form GST MOV-04 found 27,537.400 kg of goods against the invoice quantity of 27,839.900 kg, without any contemporaneous weighment slip provided.
Supplier-wise ingot quantities failed to tally with physical counts, and multiple e-way bills were sequentially generated and cancelled by different GSTINs for the same tax invoice.
The proper officer issued a detention and penalty order under Section 129; the First Appellate Authority quashed the order, leading the Department to appeal before the Tribunal.

Decision

Insufficiency of Paper Documents: In favour of revenue; the mere presence of an invoice and e-way bill is insufficient when physical movement and particulars diverge materially from declared records.
Evidentiary Value of Physical Verification: In favour of revenue; weight shortages recorded in Form GST MOV-04 in the presence of the driver without contemporaneous objection carry evidentiary value, and unproven calibration pleas cannot override them.
Establishment of Intent to Evade: In favour of revenue; supplier-wise quantity mismatches and sequential e-way bill generation/cancellation across different GSTINs for a single unique invoice negate clerical errors and evince intentional manipulation to evade tax.
Restoration of Detention Order: In favour of revenue; the appellate order quashing proceedings was set aside, and the original detention and penalty order passed by the proper officer was restored.

KeyTakeaways

Substance Over Form in Transit Inspections: Valid paperwork on face value does not grant immunity from Section 129 detention if physical verification reveals substantial variances in origins, quantities, or supplier breakdowns.
Binding Nature of Form GST MOV-04: Quantity entries and discrepancies recorded in Form GST MOV-04 signed in the presence of the driver hold strong evidentiary weight unless rebutted with immediate, verifiable evidence.
Multi-GSTIN E-Way Bill Manipulation: Generating and cancelling multiple e-way bills across different GSTINs for the same tax invoice serves as strong circumstantial proof of tax evasion.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , LUCKNOW BENCH

Ajendra Kumar Tripathi

Bajaj Enterprises

Santosh Kumar Srivastava, Judicial Member
and Arvind Kumar, Technical Member

APL/118/LCK/2026

OCTOBER 27, 2026

Ashutosh Mishra, Assistant Commissioner for the Appellant. Sangram Singh, Adv. for the Respondent.

ORDER

1. The present appeal has been filed against the impugned Order-in-Appeal dated 29.02.2020, passed by the learned Additional Commissioner, Grade-2 (Appeal), State Tax, Kanpur, whereby the appeal preferred by the respondent against the penalty order passed under Section 129(3) of the UPGST Act, 2017, was accepted and tax and penalty amounting to Rs.47,11,649.14/- was withheld.

2. Brief Facts of the Case

2.1. The facts of the case reveal that vehicle bearing Registration No. UP78DT0497 was intercepted by the proper officer during the intervening night of 13.02.2020 and 14.02.2020 near Pradhan Dhaba on the National Highway at Sikandra, Kanpur Dehat. The interception was recorded at approximately 03:24 AM on 14.02.2020 at Akbarpur, Kanpur Dehat. At the time of interception, the vehicle was carrying lead ingots falling under HSN Code 7801. The person in charge of the vehicle was examined, and his statement was recorded during the course of the proceedings.

2.2. At the time of interception, the driver produced Tax Invoice No. 08 dated 13.02.2020, issued by M/s Bajaj Enterprises, situated at 65-A, Gadarian Purwa, Kanpur, bearing GSTIN 09AFVPB1107R1Z0, along with E-Way Bill No. 491109644721 dated 13.02.2020 and Bilty No. 1001 dated 13.02.2020. The accompanying documents described the goods as lead ingots weighing 27,839.900 kg, having a value of Rs. 47,14,130.27, inclusive of GST. The goods were declared to be transported to M/s Vishal Metal Udyog, Masuri, Uttar Pradesh, bearing GSTIN 09AYYPS6125N1Z9.

2.3. Upon examination of the documents and physical verification of the goods, the proper officer noticed certain discrepancies concerning the actual places of loading, the identity of the suppliers, the particulars of the invoices and E-Way Bills, and the weight of the goods declared in the accompanying documents. The driver, in his statement recorded under oath, stated that the goods had been loaded from three different locations in Panki, Kanpur, namely, a factory situated in the lane near Panki Police Outpost, another factory near the LML factory, and a third location in D Block, Panki, near the jungle. He stated that the loading had been completed by approximately 08:00 PM and that the vehicle had remained parked at the loading location thereafter.

2.4. The driver specifically denied that any goods had been loaded from the declared business premises of M/s Bajaj Enterprises at Gadarian Purwa, Kanpur. He further stated that the transport bilty and invoices had been received at Panki. The proper officer considered these statements inconsistent with the accompanying invoice and E-Way Bill, which indicated M/s Bajaj Enterprises as the supplier and declared its business premises as the dispatch location. On this basis, the department formed the view that the goods had been loaded from locations different from those reflected in the accompanying documents and that the invoices and E-Way Bills had been used to cover the transportation of goods loaded from such locations.

2.5. During physical verification, the proper officer segregated the goods into different portions of the vehicle on the basis of the driver’s statement. The smoke-affected ingots loaded in the front portion were found to weigh 14,864.350 kg against the declared weight of 15,014.900 kg under the E-Way Bill issued by M/s Dheeraj Enterprises. The goods loaded in the middle and rear portions were found to weigh 12,673.050 kg against the aggregate declared weight of 12,825 kg under the E-Way Bills relating to the purchases shown from M/s Raj Traders and M/s Sonu Traders. The difference in the latter portion was recorded as 151.950 kg.

2.6. The total weight of the goods physically verified in the vehicle was recorded as 27,537.400 kg against the declared weight of 27,839.900 kg, resulting in a difference of 302.500 kg. The proper officer also observed that no weighment slip relating to the total loading of the goods had been produced to substantiate the declared weight. The representative of the supplier disputed the physical weighment on the ground that the departmental weighing scale was not properly calibrated. However, as recorded in the detention proceedings, no supporting evidence was furnished to establish that the departmental weighment was inaccurate, and the explanation regarding the difference in weight was not accepted by the proper officer.

2.7. The proper officer further scrutinised the documents relating to the purchases shown by M/s Bajaj Enterprises from M/s Dheeraj Enterprises, M/s Raj Traders and M/s Sonu Traders. It was observed that the goods were stated to have been loaded at Panki, whereas the declared business premises of M/s Raj Traders were situated at Dabouli West, Kanpur. The officer, therefore, questioned whether the goods had actually been supplied by the traders whose invoices and E-Way Bills had been produced during interception.

2.8. Another discrepancy related to E-Way Bill No. 471109631769, which had been generated by M/s Ganpati Enterprises at approximately 07:59 PM on 13.02.2020 and was subsequently cancelled. Thereafter, E-Way Bill No. 411109635903 was generated by M/s Sonu Traders at approximately 08:21 PM on the same date for goods weighing 5,015 kg against Invoice No. 72. The department considered the issuance and subsequent cancellation of the E-Way Bill suspicious, particularly in view of the statement that the goods had already been loaded. The officer also questioned the use of invoices bearing the same serial number in the transactions shown by the two firms. These circumstances were relied upon by the department to doubt the genuineness of the transactions and the correspondence between the goods transported and the documents accompanying them.

2.9 In response to the show-cause notice issued in FORM GST MOV-07, the representative of the respondent submitted explanation and contended that the goods had been purchased from three registered traders and that the purchases were supported by tax invoices and E-Way Bills issued by the respective suppliers. The representative maintained that the goods had been loaded directly from the suppliers’ business premises and were being transported to the purchasing dealer, M/s Vishal Metal Udyog, Ghaziabad. The declared weight of 27,839.900 kg was reiterated, and the weight determined during departmental verification was disputed.

2.10. With regard to the cancellation of the E-Way Bill issued by M/s Ganpati Enterprises, the representative explained that Shri Manoj Kumar Shakya was the accountant of both M/s Ganpati Enterprises and M/s Sonu Enterprises. It was submitted that the E-Way Bill had inadvertently been generated through the login credentials of M/s Ganpati Enterprises and was cancelled upon detection of the mistake, following which a fresh E-Way Bill was generated by M/s Sonu Enterprises. Copies of Invoices Nos. 106 and 107 dated 14.02.2020 issued by M/s Ganpati Enterprises were also stated to have been enclosed with the reply. On the basis of these explanations, the representative requested that the proceedings initiated through FORM GST MOV-06 and FORM GST MOV-07 be dropped, contending that the transportation was supported by valid tax documents and that no irregularity had occurred.

2.11. The proper officer considered the written explanation and the documents available on record but found the explanation unsatisfactory. The officer relied principally upon the driver’s statement that the goods had been loaded from three locations in Panki and that no goods had been loaded from the declared business premises of M/s Bajaj Enterprises at Gadarian Purwa, Kanpur. The officer also relied upon the difference between the declared business premises of M/s Raj Traders and the location from which the goods were stated to have been loaded, and treated the transaction shown between M/s Raj Traders and M/s Bajaj Enterprises as non-genuine in the detention order.

2.12. The explanation concerning the cancellation and subsequent generation of the E-Way Bill was also rejected by the proper officer. The sequence of generation and cancellation of the E-Way Bills, the locations from which the goods were stated to have been loaded, the discrepancies in the declared quantities, and the absence of independent weighment records were considered indicative of an attempt to cover goods loaded from undeclared locations through documents issued by other firms. The officer accordingly concluded that the documents produced at the time of interception did not adequately establish that the goods in the vehicle were covered by the declared transactions. The claim of ownership of the goods was not accepted, and the case was treated as one in which the owner of the goods had not come forward.

2.13. In view of the discrepancies noticed during inspection, the proper officer detained the goods and the vehicle under Section 68(3) of the UPGST Act, 2017, read with the corresponding provisions of the Central Goods and Services Tax Act, 2017, by issuing an order in FORM GST MOV-06 dated 19.02.2020. A show-cause notice in FORM GST MOV-07 was thereafter issued, providing an opportunity to explain why the applicable tax and penalty should not be demanded for the release of the goods and vehicle. Upon consideration and rejection of the explanation submitted on behalf of the supplier, the officer proceeded under Section 129(1)(b) of the GST Act, treating the matter as a case in which the owner of the goods had not come forward to pay the applicable amount.

2.14. The proceedings culminated in the Order-in-Original dated 29.02.2020 under Section 129(3) of the UPGST Act, 2017, whereby the tax and penalty were determined at Rs. 47,11,649.00.

Aggrieved by the said order dated 29.02.2020 and the consequential determination of tax and penalty, the respondent filed an appeal the First Appellate Authority, challenging the action taken by the proper officer and the findings recorded in the detention and adjudication proceedings.The First Appellate Authority, vide Order-in-Appeal dated 12.03.2020, allowed the appeal, set aside the detention and seizure proceedings, and quashed the order dated 29.02.2020 imposing tax and penalty under Section 129(3) of the UPGST Act, 2017.

3. Grounds of Appeal:

3.1 The Appellant challenges the impugned order dated 12.03.2020 passed by the First Appellate Authority on the following grounds:

3.2 The First Appellate Authority fundamentally erred by completely ignoring the sworn statement of the person in charge of the conveyance (the driver). Under Section 68 of the CGST/UPGST Act, read with Rule 138A, documents accompanying the goods must reflect the actual and factual movement of goods.

3.3 The driver explicitly admitted that the goods were loaded from three unnamed, unregistered factory premises in Panki, and not from the declared places of business of the suppliers, nor from the Respondent’s registered address. By loading goods from undeclared premises, the transport documents were rendered invalid and bogus. The First Appellate Authority failed to appreciate that utilizing valid documents to cover illicit goods loaded from unregistered premises constitutes a blatant evasion of tax.

3.4 The First Appellate Authority erred in law and fact by trivializing the physical shortage of 302.50 KGs as a “minor discrepancy” attributable to weighbridge calibration. The physical verification was conducted lawfully under Rule 138C in the presence of the driver, who signed the MOV-04 report without raising any objection regarding the weighing scale’s calibration at that time.

3.5 The discrepancy in weight is not merely a numerical error; it acts as concrete, physical evidence that the goods intercepted in the vehicle were not the specific goods invoiced by the suppliers. The First Appellate Authority ‘s reliance on generic web articles regarding weighbridge calibration to dismiss a statutory physical verification report is arbitrary, perverse, and legally unsustainable.

3.6 The First Appellate Authority demonstrated a flawed understanding of the facts by classifying the generation of E-way bills by two completely different legal entities (M/s Ganpati Traders and M/s Sonu Traders) using the exact same invoice number (72) and exact same weight (5,015 KG) as a mere “clerical error”.

3.7 An invoice is a unique statutory document. Two separate GSTINs cannot legally issue the same invoice number for the same consignment simultaneously. This manipulation, executed post-loading to forcibly reconcile the physical goods with paper documents, is clear evidence of a pre-mediiated design to accommodate bogus purchases. The First Appellate Authority’s acceptance of a shared accountant’s affidavit as gospel truth, without ordering an inquiry into the books of account, severely prejudices the Revenue.

3.8 The First Appellate Authority misdirected itself in law by concluding that the mere presence of an E-way bill and Tax invoice negates the intent to evade tax. The Department asserts that “intent to evade” is established not just by the absence of documents, but by the falsification of documents.

3.9 In the present case, the “intent to evade tax” is conclusively proven through a tripartite test: (a) Loading from unregistered/clandestine locations, (b) Physical mismatch of goods (weight shortage), and (c) Sequential manipulation and cancellation of E-way bills by different entities to fit the cargo. The First Appellate Authority treated the transaction as a bona fide back-to-back trading operation, wholly ignoring that the physical movement of goods actively contradicted the paper trail.

3.10 The First Appellate Authority placed misplaced reliance on judicial pronouncements such as M/s. Raj Iron & Building Materials v. UOI 66 GST 374/12 GSTL 19/54 GSTR 127 (Allahabad), which apply to cases involving minor procedural lapses without revenue implication. The present case does not involve a mere technical breach (like a wrong vehicle number or expired validity by a few hours); it involves substantive evasion where the origin of the goods is unregistered and unverified, and the documents are proven to be an afterthought to cover illicit movement.

4. Respondent Submission

4.1 The respondent submitted that the decision/order dated 12.03.2020 passed by the First Appellate Authority contains a clear and detailed discussion, whereby the seizure/penalty order was set aside and the appeal of the respondent was allowed. Consequently, the decision/order passed by the First Appellate Authority is liable to be upheld.

4.2 That the Investigating Officer detained and seized a valid transaction and, thereafter, passed the penalty order dated 29.02.2020.

4.3 That the transaction in question was covered by the respondent-trader’s Tax Invoice No. 8 dated 13.02.2020 and E-Way Bill No. 491100044721 dated 13.02.2020, and the goods covered by the said documents were being transported from Kanpur to Ghaziabad. The documents produced were valid and genuine. However, the Investigating Officer, disregarding the departmental circulars, detained and seized the goods in transit despite the availability of these valid documents and treated the respondent as an unregistered trader, thereby imposing a penalty equivalent to the value of the goods under Section 129(1)(b). An appeal was filed against the said penalty order dated 29.02.2020. After examining all the facts and circumstances, the First Appellate Authority allowed the appeal. The Department has, thereafter, filed the present appeal before the Hon’ble Tribunal against the order passed by the First Appellate Authority.

4.4 That, pursuant to the decision/order dated 12.03.2020 passed by the First Appellate Authority, the Investigating Officer released the seized goods vide MOV-05 dated 17.03.2020. The Department was not aggrieved by the decision/order dated 12.03.2020. Consequently, the appeal filed by the Department before the Tribunal is liable to be dismissed as having become infructuous.

4.5 The respondent-trader referred to the reply to the show cause notice presented before the Investigating Officer and the grounds of first appeal and stated that the decision/order passed by the First Appellate Authority deserves to be upheld.

4.6 The respondent submitted that the transaction has been questioned on the basis of the statement of the vehicle driver. Despite being requested by the respondent-trader, the alleged statement of the vehicle driver was not provided to the respondent. Therefore, the alleged statement of the vehicle driver would be inadmissible as evidence. In the absence of the same, the seizure/penalty order passed on the basis of the driver’s statement is not sustainable in law, particularly when the respondent-trader’s valid tax invoice and E-Way Bill were available with the goods.

4.7 The respondent referred to the decision of Hon’ble Allahabad High Court in the case of Ravi Timbers v. Commissioner, Commercial Tax U.P. (Allahabad)/Revision No. 230/2019, decided on 10.02.2020.

Moreover, the statement of a truck driver cannot be the basis for initiating penalty proceedings. The statement of the truck driver recorded by the departmental officer is not corroborated by any evidence, and the said statement cannot be relied upon for initiating penalty proceedings. This Court finds that the action of the taxing department was not justified in initiating penalty proceedings in the absence of any material on record. The statement of the driver appears to have been made under duress, as the assessee had specifically raised this ground in its objection as well as in the appeal before the Tribunal, but the Tribunal neither considered the same nor recorded any finding thereon. The statement of a driver cannot be the sole basis for initiating penalty proceedings, and no intention to evade tax can be established from the driver’s statement when all the relevant documents are available on record.

4.8 The respondent submitted that the respondent-trader purchased the goods in question from three registered traders in Kanpur itself against their tax invoices and E-Way Bills and sold the same goods through the same vehicle to a registered trader in Ghaziabad against a tax invoice and E-Way Bill. The documents relating to the sale were available at the time of inspection.

4.9 The respondent submitted that the discrepancy in the weight of the goods has been made the basis of the proceedings. There was no discrepancy in the weight of the goods. As per the seizure order, the Department allegedly weighed the goods on a retail weighing scale and recorded the weight as 27,537.400 kg, whereas, according to the documents accompanying the goods, the weight was 27,839.900 kg.

4.10 In fact, the Department did not get the goods weighed on a weighbridge, nor has any weighment receipt been mentioned in the order. To avoid producing a weighment receipt, the Department repeatedly referred to weighing the goods on a small weighing scale in separate lots and allegedly recorded that the weight of the goods mentioned in the documents was in excess by 302.500 kg.

4.11 By showing 302.500 kg of goods in excess of the weight mentioned in the documents, the respondent-trader has accepted the tax applicable to the excess quantity. No element of tax evasion is discernible from the same. In any event, the difference of 302.500 kg is negligible in comparison with the bulk weight of the goods and the variations that may arise from weighing the goods in separate lots and on different weighing scales.

4.12 Apart from the above, such a minor shortage of goods, when compared with the total bulk weight, would be considered negligible. The respondent referred to the judgment of the Hon’ble Uttarakhand High Court in CCT v. Verma Enterprises (Uttarakhand)/ Tax Revision No. 14 of 2008, decided on 11.07.2013, wherein it was held that:

“Concept of prevalent or non prevalent route—Minor difference of weight and in length of the bill not grounds of seizure of the goods—Seizure of goods illegal—Goods released without surety. “

4.13 The respondent submitted that a clerical error cannot constitute a ground for seizure.

4.14 The respondent submitted that no intention to evade tax is discernible from the transaction in question, and there is a complete absence of any such intention. The goods were being transported from Kanpur to Ghaziabad under the respondent-trader’s Tax Invoice No. 8 dated 13.02.2020 and E-Way Bill No. 491100044721 dated 13.02.2020. No intention to evade tax can be inferred from these circumstances.

4.15 Further, even on the basis of the alleged excess quantity of goods, no conclusion regarding tax evasion can be drawn, particularly when the excess quantity of goods found in the documents was only 302.500 kg.

4.16 The respondent submitted that various judgments of the Hon’ble High Courts and departmental documents provide that goods in transit should not be seized when valid tax invoices and E-Way Bills are available with the goods, particularly when the seizure authority has not alleged tax evasion in the show cause notice or the seizure order.

4.17 The respondent referred to the legal position laid down in Raj Iron & Building Materials(supra), wherein the following observation was made:

“In view of the fact that in the present case there is no allegation of evasion of tax liability established either from the reading of the show cause notice or the seizure order of the penalty order the consequential penalty imposed appear to have been occasioned upon a mere technical breach and not on account of any intention to evade tax. “

4.18 The respondent referred to the legal position laid down in Prostar M Info Systems Ltd. v. State of UP (Allahabad)/Writ Tax No. 1469 of 2024, dated 17.11.2026, Allahabad High Court.

4.19 The respondent submitted that the declared purchases and sales relating to the transaction in question are reflected in the returns, and the payments were made through banking channels. The goods in question were being transported from Kanpur to Ghaziabad under the respondent-trader’s Tax Invoice No. 8 dated 13.02.2020 and E-Way Bill No. 491109644721 dated 13.02.2020. The documents produced were valid and genuine.

5. Discussion and Findings

5.1 We have carefully and meticulously examined the facts of the case, the original order dated 29.02.2020 passed under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017, the appellate order dated 12.03.2020, the grounds of appeal filed by the Department, the submissions of the respondent and the material available on record. The principal issue for determination is whether the First Appellate Authority was justified in setting aside the penalty order despite the discrepancies recorded during interception and physical verification of the goods.

5.2 The record shows that vehicle No. UP78DT0497 was intercepted at approximately 03:24 AM on 14.02.2020 in the area of Sikandra/Akbarpur, District Kanpur Dehat, while transporting lead ingots falling under HSN 7801. The driver produced Tax Invoice No. 08 dated 13.02.2020 issued by M/s Bajaj Enterprises, E-Way Bill No. 491109644721 dated 13.02.2020 and Bilty No. 1001 dated 13.02.2020. The declared quantity of the goods was 27,839.900 kg and their value was stated to be Rs. 47,14,130/, inclusive of tax. The declared destination was M/s Vishal Metal Udyog, Masuri, Ghaziabad.

5.3 We find that the mere production of an invoice, e-way bill and bilty does not render the accompanying goods immune from verification. These documents are important evidence of a transaction and the intended movement of goods; however, their particulars must be consistent with the goods actually transported and the circumstances established during inspection. Where material discrepancies arise, the proper officer is entitled to examine whether the documents satisfactorily account for the identity, source and movement of the goods. The issue is, therefore, not merely whether documents existed, but whether the discrepancies noticed during verification were adequately explained.

5.4 The physical verification also recorded a total weight of 27,537.400 kg against the declared quantity of 27,839.900 kg, resulting in a difference of 302.500 kg. The discrepancy was a relevant circumstance requiring examination, particularly the quantities declared in individual consignments. The evidentiary significance of the weight difference must be assessed cumulatively, and not in isolation.

5.5 We find that the respondent has challenged the accuracy of the physical weighing and questioned whether the weighing equipment was duly calibrated. Such a contention may be relevant if supported by material demonstrating that the recorded weight was unreliable. However, a general objection to the weighing process, without adequate supporting evidence or a convincing reconciliation of the quantities, does not automatically invalidate the verification report. The First Appellate Authority was required to assess the weight discrepancy in the context of the complete inspection record rather than disregard it without a reasoned examination.

5.6 We find that the record further indicates that the quantity declared in the documents of M/s Dheeraj Enterprises was 15,014.90 kg, whereas the physically recorded quantity was 14,864. kg, showing a difference of 150.550 kg. Similarly, the quantity declared in the documents of M/s Sonu Traders/Sonu Enterprises was 5,015 kg, whereas the quantity attributed to that consignment during physical verification was recorded as 5,136.500 kg, showing an excess of 121.50 kg. A variation in the recorded number of ingots was also noted. These differences required a proper reconciliation with the invoices, loading records and other contemporaneous documents. Their relevance lies not in the assumption that every weight difference establishes evasion, but in the failure to satisfactorily explain the discrepancies in the context of the other circumstances of the case.

5.7 We find that the First Appellate Authority has failed to appreciate the weight discrepancy in its proper factual and legal perspective. The issue involved is not merely whether a difference of 302.500 kilograms, by itself, could establish tax evasion, but whether the discrepancy in the declared and physically verified quantity of goods, the inconsistencies in the supplier-wise documents and the absence of contemporaneous weighment evidence, furnished sufficient grounds for the Department to question the genuineness and proper coverage of the goods under the accompanying documents.

5.8 Thus, the quantity physically found in the vehicle was less than the quantity declared in the invoice and E-way bill. This was an objective discrepancy recorded in FORM GST MOV-04 and was not merely an assumption or an allegation unsupported by the departmental record.

5.9 We find that the First Appellate Authority has treated the difference in weight as a minor discrepancy, primarily on the basis of the respondent’s contention that the departmental weighing scale was not properly calibrated and that the weighing operation was conducted on an uneven surface. However, the said explanation was accepted without any independent verification or supporting technical evidence establishing that the departmental weighment was inaccurate. The respondent’s assertion regarding the alleged defective weighing scale, by itself, could not displace the result of the physical verification recorded by the proper officer in the prescribed statutory form.

5.10 We find that it is relevant to note that the physical verification was conducted in the presence of the driver, who was the person in charge of the conveyance. The MOV-04 report specifically records the physical quantity of the goods and the difference between the declared and verified weight. The driver acknowledged the physical verification report. The record does not indicate that any contemporaneous objection regarding calibration of the weighing machine, its placement, the uneven surface or the correctness of the weighment was recorded at the time of verification.

5.11 We find that the contention that the departmental weighing scale was not permanently installed or that it was placed on an uneven surface cannot be accepted as a sufficient ground for invalidating the physical verification, particularly when no contemporaneous objection or independent weighment report was produced to establish that the recorded weight was erroneous. A technical objection concerning the accuracy of a weighing instrument must be supported by relevant material and cannot be accepted merely on the basis of an assertion made after the detection of the discrepancy. \

5.12 Further, the physical verification was not confined to recording the total weight of the consignment. The proper officer examined the goods loaded in different portions of the vehicle and compared the physically verified quantities with the quantities declared in the respective supplier documents. The goods loaded in the front portion of the vehicle, comprising 22 stacks of ingots, were found to weigh 14,864.350 kilograms, whereas the corresponding supplier document declared 15,014.900 kilograms. Similarly, the goods loaded in the middle and rear portions of the vehicle, comprising 17 stacks and 8 loose ingots, were found to weigh 12,673.050 kilograms against the declared quantity of 12,825 kilograms. The aggregate physical weight was accordingly recorded as 27,537.400 kilograms against the declared quantity of 27,839.900 kilograms.

5.13 We find that these supplier-wise differences assume significance because they demonstrate that the discrepancy was not merely an isolated variation in the total weight recorded in the outward invoice of the respondent. The individual quantities claimed to have been purchased from the respective suppliers were also not found to correspond with the physical quantities verified by the Department.

5.14 Thus, the discrepancy of 302.500 kilograms was not the sole circumstance forming the basis of the proceedings. It was one of the material circumstances corroborating the Department’s findings concerning the actual movement and documentary coverage of the goods.

5.15 The respondent has not demonstrated, by producing any contemporaneous weighment slip, independent weighment certificate or other reliable technical evidence, that the quantity recorded in the departmental report was incorrect. The submission that the departmental scale was not properly calibrated remains an allegation unsupported by any material establishing the actual inaccuracy of the recorded weight.

5.16 The respondent subsequently explained that the goods had been purchased from three registered dealers and transported directly to the respondent’s buyer to avoid unnecessary unloading and reloading. However, the respondent’s explanation does not, by itself, establish that the actual quantities loaded from the respective suppliers corresponded with the quantities declared in the supplier-wise invoices. The question was not merely whether the respondent was legally entitled to purchase goods from different registered dealers and arrange direct transportation to its buyer. The question was whether the goods actually found in the vehicle were the same goods, in the same quantities, as declared in the accompanying documents.

5.17 We find that the First Appellate Authority failed to appreciate this distinction. It accepted the appellant’s explanation regarding direct transportation without adequately examining whether the physical quantities found in the vehicle were reconciled with the supplier-wise declarations.

5.18 The appellant also relied upon an article concerning the effect of an uneven surface on weighing accuracy. Such general technical material, even if accepted as explaining the possible effect of an uneven surface, does not establish that the particular departmental weighment in the present case was inaccurate. A general possibility of error cannot substitute for proof of actual error in the specific weighment conducted in the present case.

5.19 Accordingly, the respondent’s explanation was insufficient to negate the evidentiary value of the physical verification report.

5.20 We find that the First Appellate Authority relied upon the judgment of the Hon’ble High Court of Uttarakhand in Verma Enterprises (supra).

5.21 The said judgment was relied upon for the proposition that a minor difference in weight, by itself, may not constitute sufficient ground for seizure of goods.

5.22 However, the applicability of the said principle depends upon the facts and circumstances of the particular case. The judgment cannot be interpreted to mean that every discrepancy in weight must invariably be disregarded, irrespective of the existence of other material irregularities in the transportation documents and the movement of goods.

5.23 In the present case, the weight discrepancy was accompanied by other circumstances, including:

•

The difference between the supplier-wise declared quantities and the physically verified quantities.

•

The generation and cancellation of E-way bills relating to the same invoice number and quantity.

•

The absence of contemporaneous weighment slips supporting the declared aggregate weight.

5.24 We find that the First Appellate Authority failed to examine whether these additional circumstances distinguished the present case from the factual situation considered in Verma Enterprises.

5.25 The impugned appellate order proceeds substantially on the premise that the goods were accompanied by an invoice and E-way bill and that the difference in weight was minor.

5.26 However, the existence of an invoice and E-way bill cannot, by itself, conclusively establish that the actual goods transported were fully covered by those documents when material discrepancies are found during physical verification.

5.27 The purpose of verification under Section 68 of the UPGST/CGST Act is to ascertain whether the goods being transported are accompanied by the prescribed documents and whether the particulars contained therein correspond with the actual movement of goods.

5.28 Another relevant circumstance concerns the e-way bills associated with the consignment documented in the name of M/s Sonu Traders. The record indicates that an earlier e-way bill, No. 471109631769, was generated in the name of M/s Ganpati Traders for the same invoice number and quantity and was subsequently cancelled. A further e-way bill, No. 411109635903, was generated thereafter. The respondent explained that the same accountant, Shri Manoj Kumar Shakya, had inadvertently used the login credentials of M/s Ganpati Traders and that the incorrect e-way bill was cancelled and replaced.

5.29 The generation and cancellation of an e-way bill do not, by themselves, establish an unlawful transaction. Nevertheless, the explanation offered must be examined against the relevant electronic records and the other circumstances of the movement. In the present case, the discrepancy assumes evidentiary significance because the record also contains differences in quantities. We find that the First Appellate Authority failed to determine whether the explanation was adequately supported by contemporaneous records and whether it satisfactorily reconciled the documentary sequence with the actual transportation of the goods.

5.30 The respondent has relied upon judicial decisions concerning minor differences in weight, technical errors in e-way bills and the requirement to establish an intention to evade tax. Those decisions must be applied in the factual context in which they were rendered. A single minor clerical error, in the absence of any other discrepancy and where the goods are otherwise fully accounted for, may not justify a penalty under Section 129. The present matter, however, cannot be determined solely by reference to the percentage of weight variation or the fact that the documents were available. The declared place of dispatch, the differences in the quantities recorded for individual consignments and the sequence of e-way bill generation required a collective assessment.

5.31 We find that the First Appellate Authority placed misplaced reliance on judicial pronouncements, such as Raj Iron and Building Material(supra), which apply to cases involving minor procedural lapses without revenue implication. The present case does not involve a mere technical breach (like a wrong vehicle number or expired validity by a few hours); it involves substantive evasion where the origin of the goods is unregistered and unverified, and the documents are proven to be an afterthought to cover illicit movement.

5.32 On examining the order of the First Appellate Authority, the material discrepancies recorded during interception and the explanations furnished by the respondent, we find that the cumulative effect of the evidence was not adequately addressed before the original order was set aside. The weight differences and the e-way bill sequence constituted additional circumstances requiring reconciliation. The respondent’s explanation of an accounting error and its reliance on commercial records did not, without an adequate factual reconciliation, resolve all the inconsistencies recorded during verification.

5.33 We find that the First Appellate Authority erred in law and fact by trivializing the physical shortage of 302.50 KGs as a “minor discrepancy” attributable to weighbridge calibration. The physical verification was conducted lawfully under Rule 138C in the presence of the driver, who signed the MOV-04 report without raising any objection regarding the weighing scale’s calibration at that time.

5.34 The discrepancy in weight is not merely a numerical error; it acts as concrete, physical evidence that the goods intercepted in the vehicle were not the specific goods invoiced by the suppliers. The First Appellate Authority ‘s reliance on generic web articles regarding weighbridge calibration to dismiss a statutory physical verification report is arbitrary, perverse, and legally unsustainable.

5.35 We find that the First Appellate Authority demonstrated a flawed understanding of the facts by classifying the generation of E-way bills by two completely different legal entities (M/s Ganpati Traders and M/s Sonu Traders) using the exact same invoice number (72) and exact same weight (5,015 KG) as a mere “clerical error”.

5.36 An invoice is a unique statutory document. Two separate GSTINs cannot legally issue the same invoice number for the same consignment simultaneously. This manipulation, executed post-loading to forcibly reconcile the physical goods with paper documents, is clear evidence of a pre-meditated design to accommodate bogus purchases. The First Appellate Authority’s acceptance of a shared accountant’s affidavit as gospel truth, without ordering an inquiry into the books of accounts, severely prejudices the Revenue.

5.37 We find that the First Appellate Authority misdirected itself in law by concluding that the mere presence of an E-way bill and Tax invoice negates the intent to evade tax. The Department asserts that “intent to evade” is established not just by the absence of documents, but by the falsification of documents.

5.38 In the present case, we find that the “intent to evade tax” is conclusively proven through: (a) Physical mismatch of goods (weight shortage), and (b) Sequential manipulation and cancellation of E-way bills by different entities to fit the cargo. The First Appellate Authority treated the transaction as a bona fide back-to-back trading operation, wholly ignoring that the physical movement of goods actively contradicted the paper trail.

5.39 In view of the above, we find merit in the Department’s appeal against the order dated 12.03.2020. The respondent’s contention that the presence of invoices and e-way bills conclusively establishes the legality of the transportation cannot be accepted without considering the material discrepancies identified during interception. The findings recorded above provide sufficient grounds to set aside the impugned appellate order and to uphold the Department’s challenge on the merits of the evidentiary assessment.

Order

6.1. In view of the foregoing discussion and findings, the appeal filed by the Department is allowed. The order dated 12.03.2020 passed by the First Appellate Authority, is hereby set aside. The original order dated 29.02.2020 is restored.

Deletion of Penalties for Issuing Invoices Without Supply and Falsifying Records Is Legally Invalid

Ashwani Kumar — Fri, 06 Nov 2026 11:41:31 +0000

Deletion of Penalties for Issuing Invoices Without Supply and Falsifying Records Is Legally Invalid

Issue

Whether the Commissioner (Appeals) was justified in deleting penalties imposed under Section 122 for issuing tax invoices without actual supply of goods and for falsifying accounts and records to facilitate fraudulent Input Tax Credit (ITC).

Facts

The assessee, a sole proprietor trading in arecanut, was investigated during a dedicated fake-invoice enforcement drive covering the period from July 2017 to January 2021.
Physical inspection revealed that a linked registered premise was completely vacant, and a transport truck carrying arecanut was intercepted without valid supporting tax documents.
Statements recorded under statutory summons indicated a pattern of issuing fake invoices, altering e-way bill vehicle numbers, using duplicate invoices, and operating in collusion with third parties.
A search of the primary registered business premises yielded only consignment notes with no actual books of account or business records.
Investigations further revealed that registrations of several counterparties (suppliers and recipients) were cancelled prior to the invoice dates, and recorded vehicle numbers were non-existent or incompatible for transporting goods.
The Assessing Officer (AO) dropped tax and interest demands under Section 74 but imposed statutory penalties under Section 122 for issuing invoices without supply and for falsifying records to evade tax.
The Commissioner (Appeals) deleted both penalties, citing Circular 171/03/2022, lack of independent corroboration for statements, minor e-way bill error precedents, retrospective registration cancellations, and unverified bank ledgers.

Decision

Validity of Penalties for Falsifying Records: In favour of revenue; the Commissioner (Appeals) erred in holding the offence unspecified, as contradictory admissions, fake accounts, invoices issued after counterparty cancellations, and non-existent vehicle details clearly established falsification of records to evade tax under Section 122.
Non-Curtailment by Circulars: In favour of revenue; administrative circulars cannot curtail statutory penal provisions or restrict the scope of Section 122 beyond its express text.
Admissibility of Statements: In favour of revenue; statements voluntarily recorded under summons are legally admissible and binding without requiring independent corroboration, absent any proof of duress.
Rejection of Unverified Appellate Evidence: In favour of revenue; bank statements and ledgers not produced before the AO could not be entertained by the appellate authority without recording reasons, violating statutory embargoes on fresh evidence.
Failure to Discharge Burden of Proof: In favour of revenue; the assessee failed to discharge the statutory onus of proving actual receipt of goods and genuine tax payment, making the deletion of penalty for issuing invoices without supply legally invalid.

KeyTakeaways

Binding Nature of Statutory Statements: Statements given under summons during investigation carry evidentiary value and do not require external corroboration unless coercion is established.
Scope of Section 122 Penalties: Penalties for fake billing and falsification of records under Section 122 operate independently and apply whenever non-existent vehicles, cancelled counterparty registrations, and fictitious transactions are demonstrated.
Limits of Circulars on Penal Provisions: Executive circulars cannot override or restrict statutory penal remedies provided under the primary Goods and Services Tax legislation.

GOODS AND SERVICE TAX APPELLATE TRIBUNAL , BENGALURU BENCH

Shekhar Basappa Wali

Shrinivasa Traders

Srikanth Venkatraman, Judicial Member
and Sudha Koka, Technical Member

APL/255/BUR/2026

OCTOBER 29, 2026

Mc Venugopal Naidu, AC AR for the Appellant. Prabhat Kumar, AC AR for the Respondent.

ORDER

Srikanth Venkatraman, Judicial Member.- The appellant, the Assistant Commissioner, Uttar Kannada Division, has filed this appeal assailing the order of the Commissioner (Appeals) (“the Appellate Authority”), passed in order-in-appeal No. MLR-CGST-000-APP-AS-003-2024-25 dated 03.05.2024. The Appellate Authority reversed the order of the Additional Commissioner, Mangalore Commissionerate, Mangalore (“the Adjudicating Authority”) passed in order-in-original No. GEXCOM/GST/46/2022-ADJN dated 25.01.2023. The Appellate Authority had set aside the penalty imposed under Section 122(1)(vii) and Section 122(1)(x) of the Central Goods and Services Tax Act (“the Act”), on Suresh Chatroboja Bhanushali, Proprietor, Shrinivas Traders (“the taxpayer”).

Factual matrix

Order-in-original

2. The taxpayer was engaged in the business of trading in arecanuts. Investigations were carried out as part of the drive against the fake invoice racket, which had serious ramifications for GST revenue. A careful analysis of documents/digital returns/e-way bills indicated that one M/s. Unique Trading Co., Sirsi was issuing invoices without actual supply of goods. The registered premises of M/s. Unique Trading Co., Sirsi was searched on 21/11/2020. However, the premises were found completely empty, without any furniture/computers/records, etc.

3. The officers of the Central Tax (GST) Department intercepted and seized a truck bearing No. RJ06 GB3939, belonging to M/s. Unique Trading Company, carrying 18,200 kgs of arecanut, as no valid documents accompanied the transport. One Mr Mohammed Haneef, Proprietor of M/s. Global Trading Company, Mangaluru, appeared before the Central Tax Department along with the taxpayer and claimed that the truck and goods detained by the department belonged to him.

4. During the investigation, the department issued a summons under Section 70 of the Act to the taxpayer to verify the e-way bill and the truck’s detention. On 24.11.20, the taxpayer deposed that he had worked as an agent in arecanut for 20 years; he came with Mr Mohammed Haneef, proprietor of M/S. Global Trading Co. to claim the goods; he called Mr Jabbar, Mangaluru, to send someone to claim ownership of the goods. Once the goods are released upon payment of the penalty, the goods will be sent to M/S. Bhagavati Cold Storage, New Delhi; The goods were procured from farmers near Shimoga for Rs. 45 lakhs and the payment was made in cash; The goods and the truck belonged to Mr. Shariff of Union Cargo; He is the sole proprietor of Shrinivas Traders; His address and the address of Unique Trading Co. are the same; He was aware that Unique Trading Co. was not operating for 2 months and the premises were vacant; he could read, write and speak in Hindi and English; the goods and the truck belonged to Unique Trading Co. which is a proprietorship of Mr. Arun Bhanushali, residing at Ghatkopar, Mumbai; His suppliers were M/s. Tumkos Society, Shimoga, M/s. Roshan Arecanut, Chitradurga, M/s. Shyam Traders, Nagpur, M/s. Shrinivas Enterprises, and M/s. Panduranga Traders, Chitradurga, and the purchasers were M/S. Rajesh Traders, Ahmedabad, M/s. Somnath Traders, Nadiad and M/s. Shree Shyam Traders, Chhattisgarh;

5. Verification of the taxpayer’s PAN on the online portal revealed that the taxpayer was availing a high value of input tax credit [ITC] using invoices issued in the name of his firm. On 04/12/2020, the registered principal place of business of his firm was searched by the officers of Central Tax (GST) under mahazar proceedings, and it was found that only one blue-coloured cupboard was found in the premises of the principal place of business, which contained papers relating to M/S. Union Cargo Movers and M/s. Vigneshwara Transport Co. and various documents relevant to the investigation were recovered and seized. During the search proceedings, the taxpayer stated that he acted as an agent and brought areca nut pertaining to the two entities. Whenever local orders were given, he stored some bags of areca nut in the said premises and later loaded them onto the vehicles of M/S. Union Cargo Movers and M/s. Vigneshwara Transport Co. No records/documents/computers of the taxpayer were stored/located in the registered place of business of the taxpayer.

6. Regarding the consignment note of M/S. Union Cargo Movers, M/s. South India Transport and M/s. Vigneshwara Transport Co. that were seized from the premises, the taxpayer stated that he acted as a commission agent from June 2020 to August 2020 for these three entities and received a commission of Rs. 5/- per bag from the transporter agency, but he had not kept any records of the said commission amount. When the goods moved from Kerala to Delhi/Gujarat, the vehicles were changed at Sirsi, and the goods then moved from Sirsi to Delhi/Gujarat. The original invoices raised by M/S. Sastha Enterprises and M/s. Phoenix Enterprises were in his possession, but he sent duplicate copies with the vehicle. He had used consignment note No. 1001 for all transportation.

7. The taxpayer admitted that the premises were empty and used for fake transactions, and that he provided fake invoices to various traders, who in turn used the said fake invoices to utilise the input tax credit available to them for paying applicable GST on the supplies they made. He had been transporting arecanut purchased from those traders without proper documents and without paying the applicable GST. He confessed that he and Mr Shridhar Hegde used to send vehicles to Delhi without valid invoices and without paying the applicable GST, routing them through Solapur under the cover of invoices issued for vehicles that had already passed. In the e-way bill, they used to enter another vehicle’s details by filing Part B of the eway bill.

8. He confessed that they worked closely with Mr Shridhar Hegde, Mr Praveen Suvarna, Proprietor of M/S. Vigneshwara Transport Co., Mr. Sachin and Mr. Pramod Shetty. These persons used the same set of documents, including the invoice and e-way bill, to transport two consignments and cleared them without paying the appropriate tax. He confessed that M/s. Hanifa Trader, M/s. Sahil Trader, M/s. Sagar Traders, and the taxpayer had registered under his guidance, and he actually ran all these firms. Shri Kalpesh Bhai of Jamnagar created the WhatsApp group known as Supari Gang, and all members of the Supari Gang WhatsApp group are involved in supplying arecanut without paying GST or issuing invoices without actual supply of goods. The actual owner of M/s. Unique Trading Co. is Mr Dinesh Saroj, who is registered under Mr Saish Gavandi, and he conducted all transactions for M/S. Unique Trading Co. under the directions of Mr Dinesh Saroj, residing in Mumbai. Mr. Roshan Talwar, Proprietor of M/s. Hari Om Agency and M/s. South India Transport was also involved in supplying goods without invoices/documents or issuing invoices for the actual supply of goods. He and Shri Shridhar Hegde planned and executed all the illegal transactions together.

9. Mr. Saish Gavandi, proprietor of M/s. Unique Trading Co., deposed on 22.11.20 that he generated invoices without actually supplying goods. The principal place of business of Shyam Traders, Sirsi, was searched on 24.12.20, and the premises were found to be an empty godown measuring 40X50 feet, with no goods/documents/other relevant items found. Shridhar Hegde deposed that he had issued e-way bills for many dealers, including the taxpayer, on their request; he had issued invoices for the taxpayer from his laptop; his firm was actually run by the taxpayer, and most of the transactions were carried out by him; he was generating e-way bills and invoices for both the firms, and the taxpayer paid him for this work; he was generating fake invoices for Mr. Sachin, the taxpayer, Mr. Praveen Suvarna, Mr. Pramod Shetty and others as and when he was told to do so; he was aware that the same set of invoices were used for transporting of 2 consignments so that one of the two consignments was cleared without payment of appropriate GST.

10. The registered place of business of M/s. Vigneshwara Transport Co., was searched on 28.11.20 and it was found that one room on the right side wherein tables/chairs were located and in the adjacent room on the left side wherein the room was filled up with old/used tyres, four extra discs, two diesel tanks, tubes, and other miscellaneous used vehicle parts, were found by the officers. Shri Sachin, staff of Vigneshwara Transport Co., deposed that his uncle was the proprietor of the company; he was generating the e-way bills of many suppliers, including the taxpayer, as he was provided with the user ID and password for generating the e-way bills; he used to sign invoices of many suppliers, including the taxpayer.

11. Mr Praveen Suvarna, proprietor of Vigneshwara Transport Co., deposed that they have been generating e-way bills for many suppliers, including the taxpayer, as the user ID and password were given to him; he was aware that Mr Sachin was signing invoices for many persons, including the taxpayer.

12. Analysis of the Form GST 3B returns filed for the period 2018-19 and 2019-20 revealed that the taxpayer discharged more than 99% of the tax liability through input tax credit (ITC) and more than 95% for the financial year 2020-21. Verification of the Form GSTR-3 B returns filed by the taxpayer revealed that the taxpayer disclosed sales turnover of Rs. 85,66,95,389/- during the tax period from July 2017 to January 2021 and paid GST of Rs. 4,23,01,108/- [i.e. IGST – Rs.2,64,53,501/-, CGST-Rs. 83,14,876/- & SGST-Rs.75,32,731/-] through electronic credit ledgers and only Rs.12,05,126/- [i.e. IGST Rs. 1,76,164/-, CGST-Rs.1,23,411/- & SGST-Rs.9,05,551/-] paid through electronic cash ledgers.

13. A verification of the suppliers’ and recipients’ registration numbers revealed that the registration certificates were cancelled suo motu before the invoices were raised. This indicated no movement of goods and that all transactions related to the fake invoices. The taxpayer had availed total ITC of Rs. 4,28,42,308/-[i.e., IGST- Rs.2,87,74,180/-, CGST Rs. 70,34,064/- & SGST-Rs.70,34,064/-] from the registered persons. Verification of the availed input tax credit (“ITC”) revealed excess availment of ITC amounting to Rs. 24,50,237/- [i.e., IGST – Rs. 19,43,837/-, CGST – Rs. 2,53,200/- & SGST – Rs. 2,53,200/-] in their GSTR-3B returns.

14. Verification of the vehicle details mentioned in the e-way bills and invoices, on the ‘vaahan.nic.in’ website, revealed that the vehicle numbers pertained to vehicles like Scooters, Tankers, Tippers, 3-wheelers, etc., and in most cases the registration numbers showed “Vehicle detail not found,” and so on. This clearly indicated that the suppliers casually selected all these vehicle numbers mentioned in the invoices and e-way bills and that they were not genuine.

15. The taxpayer, having been actively involved in the illegal transportation of goods and generating fake invoices without actual supply of goods, leading to non-payment of GST and wrongful availment and utilisation of input tax credit, was arrested as per section 69(1) of the CGST Act under Arrest Memo vide O.R.Nos. 10/2020-21 and No. 11/2020-21 [Annexure – XVI], on 18.03.2021 at 16:00 Hrs, and was produced before the Hon’ble Principal Senior Civil Judge and CJM Court, Mangaluru, Dakshina Kannada, and was released on bail as per the bail order dated 24.03.2021.

16. Based on the aforesaid investigation and information, a show cause notice was issued to the taxpayer proposing to (i) demand tax of Rs. Rs.4,28,42,308/- under section 74(1) of the Act, (ii) levy interest under Section 50 on the amount demanded, (iii) impose penalty under Section 74(1) read with Section 122(2)(b) of the Act, (iv) impose penalties under Section 122(1)(vii), 122(1)(x), 122(1)(xvi), 122(1)(xi), (v) take action under Section 132 of the Act, (vi) to provisionally attach the bank accounts.

17. After receiving the objections, the Adjudicating Authority held that e-way bills and invoices were issued without the supply of goods. The taxpayer had not submitted any document to prove movement of goods. Verification of outward supply-related vehicle details revealed that, in some cases, the vehicle numbers pertained to tankers, 3-wheeler passenger vans, and delivery vans. In many cases, the ‘vaahan.nic.in’ website showed the registration numbers as ‘vehicle detail not found’. The taxpayer generated e-way bills only to falsely show that the goods were being supplied. The taxpayer submitted no credible evidence to explain the mismatches. The taxpayer had not submitted bank statements to support his claim that he made the purchase considerations through bank instruments.

18. The Adjudicating Authority passed the order dropping the demand of Rs. 4,28,42,308/- on the ground that the taxpayer availed and utilised ITC based only on documents, without supplying the goods. The interest demand was dropped as the tax demand was dropped. No penalty was imposed under Section 74, as the taxpayer had not supplied any goods. A penalty of Rs. 4,28,42,308 under section 122 (1)(vii) of the Act was imposed for taking and utilising input tax credit without actual receipt of goods in contravention of the provisions of the Act and the rules made thereunder. A penalty of Rs. 4,28,42,308 was imposed under section 122 (1)(x) of the Act for falsifying or substituting financial records or producing fake accounts or documents or furnishing any false information or return with an intention to evade payment of tax due under the Act. No penalty was imposed under section 122(1)(xvi) of the Act for failure to keep, maintain, or retain books of account and other documents. No penalty was imposed under section 122(1)(xi) of the Act for his failure to obtain registration in respect of his actual place of business, as he was not supplying any goods or services liable to tax under GST. The taxpayer’s payment of Rs. 22,00,400/- was appropriated against the imposed penalties. The provisional attachment of the Bank accounts initiated as per DRC-22 dated 06.07.2021 and further upheld vide speaking order dated 22.10.2021 was to be enforced, and the amount in the said Bank accounts was ordered to be appropriated against the above-imposed penalties. The authority recommended initiating action under section 132 of the CGST Act, 2017 for committing the offences specified therein.

Order-in-appeal

19. The Appellate Authority held that the adjudicating authority had dropped the demand of GST and the fraudulent ITC availed by the appellant; however, it confirmed the penalties under Section 122(1) (vii) and Section 122(1) (x) of the CGST Act, 2017. The appellate authority set-aside the penalty levied under Section 122(1)(x) of the Act, accepting the contention of the taxpayer that the levy of penalty was not only contrary to the circular of the Board in Circular No. 171/3/2022-GST dated 6.7.2022 but was also imposed casually, without specifying the nature of the offence.

20. Regarding the penalty imposed under Section 122(1)(vii), the Appellate Authority had deleted the penalty for the following reasons:

•

Shri Shridhar Hegde’s statement contained no admission of the offence.

•

Relying on the Supreme Court’s decision in CCE, Customs & Service Tax v. Cera Boards & Doors (SC), it was held that each transaction must be viewed independently, and applying evidence from one transaction horizontally to all others was not acceptable under law.

•

None of the inward suppliers or recipients was confronted or investigated. Neither the taxpayer’s statements nor Mr Shridhar Hedge’s statements led to an admission that no underlying supply existed, either inward or outward.

•

Referring to paras 34 and 46 of the OIO, the Adjudicating Authority was held to be contradicting itself. The adjudicating authority failed to conclude that there were no transactions at all. Even if some statements indicate the creation of fake documents for Bill trading, it is unclear under which GSTIN those transactions occurred.

•

The bank statements and the Purchase account clearly indicate an underlying supply of goods. The order indicated that some transactions were made without paying taxes. The order’s findings were based on mere presumption.

•

The suo motu cancellation of registrations was done with retrospective effect, i.e. from the date of transaction. The Appellate Authority relied on the Kolkata High Court’s decision in Gargo Traders v. Joint Commissioner, Commercial Taxes (State Tax) [2023] 151 98 GST 599/ 75 GSTL 3/7 Centax 136 (Cal) to contend that retrospective cancellation will not deprive the benefit of ITC.

•

The investigating officers found discrepancies in the vehicle numbers carrying goods in a few countable transactions. CBIC, vide circular No. 64/38/2018-GST dated 14.09.2018, clarified that an error in one or two digits/characters of the vehicle number is a minor error and is liable for a minor penalty of Rs. 500/- each under CGST and SGST, and it does not invite action under Section 129 of the Act. Because of an error in the vehicle number in the E-way bills, not all transactions can be treated as fake.

•

Without corroborative evidence, the statements cannot form the basis for an allegation of availment and utilisation of entire ITC without the underlying supply of goods, whether inward or outward. The taxpayer had not admitted that he had issued bills without underlying supply of goods. The Appellate Authority relied on the Tribunal’s decision in Habib Uz Zaman v. Commissioner of Customs [2021] 376 ELT 666 (Tri.-Del) and J.P. Iscon (P) Ltd v. CCE [2022] 63 GSTL 64 (Tri.-Ahd).

•

Penalty under Section 122(1)(vii) of the GST Act cannot be imposed in the absence of clear grounds/corroborative evidence.

21. The revenue has filed the present appeal before this Tribunal, assailing the Appellate Authority’s order.

Submissions of the appellant and the respondent

22. The learned authorised representative for the appellant reiterated the contentions raised in the grounds of appeal and would submit as under:

(a)

The Adjudicating Authority has recorded his findings in detail from paras 25 to 42 of the impugned OIO, to come to the conclusion that M/s Srinivas Traders is only an intermediary unit existing for the purpose of creating and passing on fake ITC. The Adjudicating Authority examined the taxpayer’s inward suppliers and recorded that they were non-existent and that the department cancelled their registrations suo motu.

(b)

The Adjudicating Authority, in para 37 of the impugned OIO, has examined and recorded that the recipients of outward invoices issued by the taxpayer are also non-existent.

(c)

In para 46 of the impugned OIO, the Adjudicating Authority has recorded findings to impose a penalty under Section 122 (1)(x) and Section 122(1)(vii) of the Act, 2017.

(d)

The Appellate Authority had erred in not following the clarification issued by CBIC vide Circular No. 171/3 / 2022 – GST dated 06.07.2022. As per the above Circular, the taxpayer is liable for penalty under Section 122(1)(vii) of the Act, 2017. As the appellate authority is part of the Department, the CBIC Circular binds it.

(e)

The Adjudicating Authority, in para 40 of the impugned OIO, has verified the details of vehicles mentioned in the e-way bills on the website ‘vaahan.nic.in’ and recorded the findings in detail.

(f)

Reliance was placed on the decisions of the Tribunal in Windson Chem Industries v. CCE [Order No. A/1393-1394/WZB/AHD/2012, dated 21-9-2012]/2012 (12) TMI 706, Tulip Lamcraft (P.) Ltd. v. CCE & Service Tax 50 GST 275 (Ahd -CESTAT)/2014 (8) TMI 86 and CCE & ST v. Paras Steel Industries) [ORDER No. A/11709-11710/2014, dated 26-9-2014]/2014 (11) TMI 203 wherein it was held that further corroboration of clandestine removal is not necessary if the proprietor admits clandestine removal in his statement.

(g)

The statements given were voluntary. The revenue cannot be expected to investigate for alternate evidence when the taxpayer did not retract the statements during investigation/adjudications. The records also show that no purchase bills were found for the purchase of Arecanut. Voluntary statements made by the persons containing all the details about the functioning of a unit, which can be only with the personal knowledge of the taxpayer, could not have been obtained through coercion or duress or through dictation, and there is no reason as to why such statements cannot be looked into and relied upon.

23. The respondent did not appear before the Tribunal on 8.9.2026, 22.9.2026, 6.10.2026, and 15.10.2026, when the appeal was posted for hearing. Notice of hearing was served online through the portal and also was served by affixing it at the registered premises in the presence of 2 witnesses, and the same was recorded in a panchanama dated 28.09.2026 and 29.09.2026.

Findings

24. The respondent being absent, we heard the appellant’s submissions and perused the connected records. The following issues arise for our consideration:

(a)

Whether the deletion of the penalty imposed under Section 122(1)(x) of the Central Goods and Services Tax Act, 2017, was just and valid?

(b)

Whether the deletion of the penalty imposed under Section 122(1)(vii) of the Central Goods and Services Tax Act, 2017, was just and valid?

(a)

Whether the deletion of the penalty imposed under Section 122(1)(x) of the Central Goods and Services Tax Act, 2017, was just and valid?

25. Section 122(1)(x) of the Act is applicable where a taxable person falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax under this Act, then the taxable person shall be liable to pay a penalty of Rs. 10000/- or the amount of tax evaded, whichever is higher.

26. The Appellate Authority would state that, as per serial no. 3 of the Board’s circular in 171/3/2022-GST dated 6.7.2022, penalty can be levied only under section 122(1)(ii) and Section 122(1)(vii) of the Act but penalty was levied under Section 122(1)(vii) and Section 122(1)(x) of the Act. The appellate authority accepted the contention of the taxpayer that the levy of penalty under Section 122(1)(x) of the Act was contrary to the Board’s circular and also was imposed without specifying the nature of the offence.

27. Circular No. 171/03/2022-GST dated 6.7.2022 was issued in respect of transactions involving fake invoices. Serial No. 3 of the circular states that where a taxpayer claims ITC on the basis of invoices without actual receipt of goods or services or both and issues invoices without actual supply of goods or services or both, then no demand can be made from the taxpayer under Section 73 or Section 74, as the case may be. However, the taxpayer shall be liable for penal action under Section 122(1)(ii) and Section 122(1)(vii) of the Act. The circular also states that Actual action to be taken against a person will depend upon the specific facts and circumstances of the case which may involve complex mixture of above scenarios or even may not be covered by any of the above scenarios. Any person who has retained the benefit of transactions specified under sub-section (1A) of section 122 of CGST Act, and at whose instance such transactions are conducted, shall also be liable for penal action under the provisions of the said sub-Section. The Adjudicating Authority has acted in accordance with the circular when he dropped the proceedings to impose tax under Section 74. The Appellate Authority ought to have considered the circular in its entirety before accepting the taxpayer’s submissions. A Board circular cannot be interpreted contrary to a statutory provision. Serial no. 3 of Circular No. 171/03/2022-GST dated 6.7.2022 does not state that penalty can be levied only under Section 122(1)(ii) and Section 122(1)(vii) of the Act. A restrictive interpretation of the circular that curtails the proper officer’s power to invoke the various subclauses in Section 122(1) is not correct.

28. Section 122(1)(x) can be invoked if the taxpayer falsifies or substitutes the financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax. The taxpayer gave contradictory statements during the investigation. Initially, he denied any connection with Shrinivasa Traders, but later admitted he was its proprietor. Again, he initially stated that he purchased arecanut for cash from farmers, but later stated that he purchased it from traders. The taxpayer admitted to issuing and receiving bills without supplying goods. The invoices reflected in the returns were dated after the supplier’s and the recipient’s registration certificates were cancelled. The ITC was claimed and utilised on the basis of invoices without underlying receipt or supply of goods; the vehicle numbers found in the invoices and e-way bills pertained to tankers, 3-wheeler passenger vans, and delivery vans; and, in many cases, the ‘vaahan.nic.in’ website showed the registration numbers as ‘vehicle detail not found’. The Adjudicating Authority stated in para 46 that the taxpayer created fake accounts and documents without any underlying supply of goods and filed GST returns without any underlying supply of goods.

29. Therefore, the reasoning of the Appellate Authority that penalty under section 122(1)(x) was levied without specifying the nature of offence is not correct. The order under Section 74 was not passed against the taxpayer in view of the Board’s circular (cited supra). We hold that the deletion of penalty under section 122(1)(x) of the Act is improper and unjustified.

(b) Whether the deletion of the penalty imposed under Section 122(1)(vii) of the Central Goods and Services Tax Act, 2017, was just and valid?

30. Section 122(1)(vii) of the Act states that where a taxable person takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of the Act or the rules made there under, then the taxable person shall be liable to a penalty of Rs.10000/- or the tax evaded, whichever is higher.

31. The taxpayer gave statements to the authorities under section 70 of the Act, which empowers a proper officer to summon persons to give evidence and produce documents. The Section states that a proper officer may summon a person whose attendance he considers necessary to give evidence or produce a document or any other thing in any inquiry. The persons summoned shall be bound to attend in person or by an authorised representative and the person shall state the truth during examination or make statements or produce such documents or other things as may be required. Every such inquiry shall be deemed to be a “judicial proceeding”.

32. Pursuant to the proper officer’s summons, the taxpayer appeared before the authorities on 24.11.20, 18.12.20, 19.12.20, 22.12.20, 23.12.20, and 17.3.21 and gave statements relating to their business transactions. The statements given by the appellant on various dates, under Section 70 of the Act, are binding on the taxpayer as per the principles stated by the Supreme Court in Commissioner of Customs (Imports) v. Ganpati Overseas (2023) 11 Centax 101 (Centax – S.C.) 2023 (386) Centax – E.L.T. 802, wherein the Supreme Court interpreted Section 108 of the Customs Act. The Court held that a customs officer is not a police officer and that a statement made before a customs officer is admissible in evidence and can be used against the person. Section 108 aims to elicit the truth from the person being examined regarding the customs infringement. Since the objective is to ascertain the truth, the customs officer must ensure the truthfulness of the statement so recorded. The Court further held that the adjudicating authority must determine whether it used any duress or coercion in recording such a statement, since it exercises quasi-judicial powers.

33. The Karnataka High Court, in Commissioner of Customs v. Imtiaz Ahmed (2023) 8 Centax 2 (Centax – Kar.), held that a statement made before a customs officer under Section 70 of the Customs Act is not barred by Section 25 of the Evidence Act. It further held that statements of third parties cannot be treated as statements of co-accused but as independent evidence, for which no other independent evidence was required. The decisions of the Tribunal in Windson Chem Industries(Supra), and Paras Steel Industries (Supra) and of the Gujarat High Court in Tulip Lamcraft (P.) Ltd. (Supra) are also authorities for the view that further corroboration of clandestine removal was not necessary if the proprietor admits clandestine removal in his statement.

34. Section 70 of the Act is similar to Section 108 of the Customs Act; hence, the principles stated by the Supreme Court (cited supra) and the Karnataka High Court (cited supra) apply to the case at hand. The taxpayer’s statement under Section 70 before a proper officer is binding on him, as the proper officer was not a police officer. The taxpayer has full and complete knowledge of his business transactions and can be relied upon by the proper officer. The Appellate Authority did not find that the statement was obtained by duress or coercion; it only stated that it required further corroborative evidence. The Appellate Authority’s reasoning that it required further corroborative evidence before fastening liability on the taxpayer must be rejected in light of the principles laid down in the aforesaid cases. Courts and tribunals have categorically held that corroborative evidence is not necessary when liability is fixed based on an admission statement made before the proper officer under the Act. Hence, the statement can be relied on for determining the validity of the penalty imposed under Section 122(1)(x) and Section 122(1)(vii) of the Act.

35. The Tribunal’s decision in Habib Uz Zaman (Supra), relied upon by the Appellate Authority, is not relevant, as in that case third parties gave statements against the appellant, which the Tribunal rejected on the ground of lack of corroborative evidence. In the present case, the appellant gave a statement under Section 70, admitting that it carried on business without actually receiving and supplying goods.

36. The decision of the Tribunal in J.P. Iscon (P) Ltd (Supra), relied upon by the appellate authority, is not relevant to the case, as in the case before the Tribunal, the department had relied only on Excel sheets furnished by an employee, and hence the Tribunal held that the same cannot be accepted in the absence of corroborative evidence with any other evidence. The decision was not rendered in the context of section 14 of the Central Excise Act and hence not relevant. Section 14 of the Central Excise Act is similar to Section 108 of the Customs Act.

37. The Appellate Authority relied on the Kolkata High Court decision Gargo Traders(Supra) to contend that retrospective cancellation will not deprive the benefit of ITC. In the case before the Court, it was found that the supplier was a registered taxable person and the petitioner had paid the sale price, including tax, through the bank. The Court noted that the petitioner did not allege collusion with the supplier. The Court set-aside the order and directed the proper officer to pass a fresh order after considering the documents filed by the petitioner. The Appellate Authority’s finding that the registration certificates of the suppliers and the recipients were cancelled retrospectively is not supported by the materials on record. The adjudicating authority had held that the registration certificates were cancelled suo motu before the invoice dates. The Kolkata High Court’s decision (supra) does not support the taxpayer’s case. In the case under appeal, the proper officer passed the order after considering the taxpayer’s objections.

38. One other reason the Appellate Authority gave for deleting the penalty was that Shri Shridhar Hegde had not given any statement admitting to any offence. Shri Shridhar Hegde is the proprietor of M/S Shyam Traders, Sirsi, and he gave statements on issues relating to his business. He would state that he had issued eway bills for many suppliers, including the taxpayer; that he had issued invoices for the taxpayer; that this business of generating e-way bills and invoices was generating income for him. Shri Shridhar Hegde categorically stated that he issued e-way bills and invoices for the taxpayer. The taxpayer failed to explain why he received e-way bills and invoices from a third person instead of generating them himself, given his huge business volume.

39. The Appellate Authority had relied on the decision of the Supreme Court in Cera Boards & Doors (Supra) in support of his reasoning that every transaction has to be viewed independently and any horizontal application of any evidence of a transaction to all other transactions was not acceptable under law. The Supreme Court had not laid down such a proposition. The question before the Supreme Court concerned the valuation of excisable goods only for the purpose of charging duty, as the assessees had not challenged the Tribunal’s order on the existence of undervaluation and consequent evasion of duty. The Court found that, for that purpose, it was necessary to consider the period of assessment, as the method of determining value before 1.7.2000 differed from the method of valuation after 1.7.2000, since Section 4 of the Central Excise Act was amended with effect from 1.7.2000. The Court directed the authorities to follow the prescribed procedure for ascertaining value before and after 1.7.2000. The decision contains nothing to support the Appellate Authority’s finding that the Supreme Court’s directions apply universally, irrespective of the facts and circumstances of each case. Reliance placed on the decision is therefore misplaced.

40. The Appellate Authority would state that the taxpayer did not admit that no underlying supply of goods, either inward or outward, existed. This is not correct. The taxpayer deposed on 17.3.2021 that he was using the premises for fake transactions; that goods were not stored in his premises; that the name and GSTIN was not displayed in the premises; that he had not maintained any accounts in the premises; that he had been providing fake invoices to various traders who used the fake invoices for payment of applicable GST on the supplies made by them; that goods were sent to Solapur under the cover of invoices issued in respect of vehicles which had already passed; details of another vehicle was entered in part B of the e-way bill; that he was working with Shridhar Hegde and others who were using the same set of invoices and e-way bills for transportation of two consignments cleared without payment of GST. The taxpayer had not furnished details of the supplies on which he had paid tax and on which his suppliers had paid tax.

41. The Appellate Authority would rely on bank statements and the Purchase account to show an underlying supply of goods and conclude that the order-in-original’s findings were based on presumptions only. We find that the Adjudicating Authority was not presented with the bank statements. This finding is present on pages 210 and 211 of the order-in-original. Rule 112 of the CGST Rules states that the taxpayer shall not be allowed to produce before the Appellate Authority any evidence other than the evidence produced before the Adjudicating Authority. On page 15 of the order-in-appeal, the Commissioner, Mangaluru, while commenting on the appeal filed by the taxpayer, stated that the taxpayer had not submitted documents, such as the weighment slip and toll receipt, indicating the actual movement of goods. The taxpayer had not submitted a bank statement to support its claim that it transacted only through banks. In fact, the document submitted before the appellate authority is not a bank statement but a ledger copy. The taxpayer has not furnished any reasons for non-production of the records before the Adjudicating Authority. The Appellate Authority ought not to have accepted the bank statements, given the embargo imposed by Rule 112 of the CGST Rules. If the Appellate Authority had decided to accept the documents, he ought to have given reasons for accepting documents not furnished to the Adjudicating Authority.

42. The Adjudicating Authority did not base his order solely on the statements. The order-in-original would disclose that the registration certificates of the suppliers and the recipients of the taxpayer were cancelled prior to the date of the invoice issued to and by the taxpayer. The show cause notice contained the allegation. The taxpayer had not furnished any material to disprove the allegation. Instead, the appellate authority would state that the authorities should have conducted further investigation before fastening liability on the taxpayer. This is incorrect. Further investigation would have been required only if the taxpayer had furnished concrete material to disprove the allegations made in the show cause notice. The burden shifted to the taxpayer to prove the genuineness of his dealings. The taxpayer’s contention was that the supplier and the recipients were genuine and hence the burden was on the taxpayer under Section 155 and Section 16(2)(b) & (c) to prove the genuineness of the transaction. The taxpayer had to prove that he received the goods and that the supplier had paid tax. This is what the taxpayer had to do and failed to do.

43. The order-in-original also disclosed that verification of the vehicle numbers on the online portal “vaahan.nic.in” revealed that the vehicle numbers related to scooters, tankers, tippers, 3-wheelers, etc., and, in many cases, the registration numbers showed “vehicle detail not found”. The adjudicating authority also conducted this verification after the taxpayer received objections. After receiving the objections, the adjudicating authority again verified the online portal and uploaded screenshots of the verification. On page 160 of the order-in-original, the taxpayer stated that, due to a mismatch, the vehicle numbers were not available on the portal. The taxpayer blamed the transporter for the mismatch. The taxpayer furnished no evidence in this regard.

44. The Appellate Authority would reject the findings relating to the vehicle mismatch, relying on the Board’s clarification in Circular No. 64/38/2018-GST dated 14.9.2018. The said circular was issued in the context of detention of conveyance to determine violation of Section 129 and 130 of the Act. Under Sections 129 and 130, the existence of a vehicle for transportation is not disputed; however, in the present case, the existence of the vehicle involved in the transportation of goods is disputed. Reliance placed on the circular is therefore misplaced.

45. The Appellate Authority would allege that the Adjudicating Authority made contrary findings in para 34 and para 46; therefore, the Adjudicating Authority failed to categorically conclude that no transactions occurred. In para 34 of the order-in-original, the Adjudicating Authority states that it is clear that Shri Suresh Bhanushali, Shri Praveen Suvarna, Shri Sachin, Shri Prabhkar Hegde, and many others were members of a racket dealing in fake GST invoices without supply of goods. In many cases, multiple consignments were transported under the strength of one set of invoices and e-way bill where goods moved to one destination and recipient but the documents were used for passing on input tax credit to persons who did not receive the supplies. In para 46 of the order, the Adjudicating Authority states that the Noticee has taken fraudulent ITC and passed on the same without actual supply of goods either on inward end or outward end. The Noticee has created fake books of accounts and documents without underlying supply of goods, has filed GST returns without underlying supply of goods. There is no contradiction in the Adjudicating Authority’s findings when comparing the said 2 paras. In para 34, the Adjudicating Authority referred not only to the taxpayer but also to others, whereas in para 46, the Adjudicating Authority referred only to the taxpayer.

46. Under the Act, the burden is on the taxpayer to prove eligibility for input tax credit. The taxpayer was required to prove that he had received the goods under Section 16(2)(b) and the supplier had paid tax under Section 16(2)(c), to claim the benefit of ITC. The authorities had furnished information in the show cause notice in support of their plea that the taxpayer was claiming the benefit of ITC without actual receipt of goods or services or both. The authorities stated that the suppliers’ and the taxpayer’s recipients’ registration certificates were cancelled before the invoice date. The authorities stated that the vehicle numbers mentioned in the e-way bills were either unavailable or linked to other vehicles that cannot be used to transport goods. The taxpayer did not prove that he received the goods. He also has not proved that the suppliers paid tax to the Government. The taxpayer did not furnish documents to prove the genuineness of his dealings. The taxpayer admitted that he had provided fake invoices to various traders, who used them to pay GST liability. The taxpayer did not retract the statement at the earliest opportunity. We hold that deleting the penalty under Section 122(1)(vii) is invalid and unjustified.

Order

(1)

The appeal is allowed.

(2)

Order-in-appeal No. MLR-CGST-000-APP-AS-003-2024-25 dated 03.05.2024 is set aside.

(3)

The penalties under Section 122(1)(vii) and 122(1)(x) imposed in order-in-original No. GEXCOM/GST/46/2022-ADJN dated 25.01.2023 are restored.

(4)

The appropriation of Rs.22,00,400 and the attached bank balances stand.