E-way Bill Requirements for Job Work Returns: Key Ruling in Metalloids India Vs Commissioner of State Tax Keralam State

Introduction

The decision in Metalloids India Vs Commissioner of State Tax Keralam State (GSTAT Thiruvananthapuram) delivers an important clarification on how e-way bill value must be determined when goods are sent back by a job worker to the principal after completion of job work.

The Tribunal examined whether the value of the principal’s goods (on which job work was performed) needs to be included in the consignment value in the e-way bill generated for the return movement, and whether failure to do so can trigger detention and penalty under Section 129 of the CGST/SGST Acts.

The order also scrutinizes the legality of penalty proceedings where the show-cause notice proceeds on incorrect factual assumptions, and later authorities attempt to sustain the action on new and unpleaded grounds.

Issue for Determination

The Tribunal framed the primary question of law as follows:

When finished goods are moved by a job worker back to the principal after completing job work, should the value of the principal’s underlying goods be included in the consignment value reported in the e-way bill?

The answer to this question directly affected the validity of the detention and penalty imposed under Section 129 of the CGST/SGST Acts.

Factual Background

Interception and Detention

  • The assessee, M/s Metalloids India, holding GSTIN 32AHDPA6016G1Z3 and located at Pathanamthitta, Kerala, had sent “Aluminium Colour Coated Coils” and “G.I. Sheets” for job work to M/s Roofstyle Industries, Thripunithura.
  • On 04.05.2023, while the processed goods were being transported back from the job worker to the principal in vehicle No. KL03 AG 2784, SGST authorities intercepted the vehicle.
  • The department alleged that:
    • The consignment was not covered by valid GST documents; and
    • No e-way bill was available for that movement.

Penalty Proceedings under Section 129

  • The assessee was charged with violation of:
    • Section 31 of the GST law
    • Rule 46, Rule 55 and Rule 138(1) of the GST Rules
  • By Order No. ZD320523011895K dated 18.05.2023, penalty of Rs. 1,25,442/- under CGST and Rs. 1,25,442/- under SGST (aggregating Rs. 2,50,884/-) was imposed under Section 129(3) of the CGST/SGST Act.
  • The assessee paid the entire penalty amount to secure release of the goods and the vehicle and then filed an appeal.
  • The Joint Commissioner (Appeals), SGST, Kottayam rejected the appeal and upheld the penalty, leading to the present second appeal before GSTAT Thiruvananthapuram.

Assessee’s Contentions Before GSTAT

The assessee challenged the penalty and the appellate order on multiple legal and factual grounds.

1. Nature of Movement – Job Work Scheme

  • The assessee argued that the transaction was governed by the special job work mechanism under Section 143 of the CGST Act read with Rule 45 of the CGST Rules.
  • Movement of goods from job worker to principal, after job work, is a statutorily recognised job work return and cannot be equated with an independent outward supply of goods by the job worker.
  • The taxable supply in such a situation is the job work service, not a supply of goods whose ownership remains with the principal.

2. Valuation for E-way Bill – Consignment Value

  • The department proceeded on the assumption that the value of the principal’s goods, Rs. 6,96,900/-, ought to have been reflected in the e-way bill.
  • The assessee contended this view contradicts Rule 138 read with Section 15 of the CGST Act because:
    • For e-way bill purposes, “consignment value” is the value of the taxable supply shown in the accompanying tax invoice; and
    • The value of goods owned by the principal and merely returned after job work cannot be added to the job work service value.

3. Complete Documentation was in Place

According to the assessee, the following documents accompanied the goods during interception:

  • Tax invoice issued by the job worker for job work charges (tax paid invoice)
  • E-way bill generated on the invoice value of job work
  • Receipt note
  • Original delivery challan issued by the principal when sending goods for job work
  • E-way bill generated for the outward movement from principal to job worker

Thus, the assessee argued that the movement was entirely traceable through GST documents and no attempt at suppression or evasion was involved.

4. Misinterpretation of Rule 138

The assessee maintained that:

  • Neither Rule 138 nor any other provision requires the job worker to include the principal’s material value in the invoice when returning the processed goods.
  • The department’s approach effectively rewrote the rule and ignored the statutory linkage between consignment value and Section 15 transaction value.

5. Ignoring CBIC Circular on Job Work

  • The assessee referred to **CBIC Circular No.