GSTAT Sets Aside Section 129 Penalty for Minor E-way Bill Delay: Key Takeaways for Assessees

Background of the Dispute

The Division Bench of the GST Appellate Tribunal, Uttar Pradesh (Lucknow Bench), in Lucknow Automotives vs. Assistant Commissioner (Mobile Squad), Gonda, Raj Kumar & Ors. examined whether a short delay in generating an E-way Bill, in the absence of any other suspicious circumstances, can legally justify penalty under Section 129(3) of the CGST/UPGST Act, 2017.

The appeal was filed under Section 112 of the Central Goods and Services Tax Act, 2017 read with the corresponding provisions of the Uttar Pradesh Goods and Services Tax Act, 2017. The assessee challenged:

• The order dated 04.02.2025 passed under Section 129(3) of the CGST/UPGST Act, 2017, and
• The consequential appellate order in Appeal No. AD0905250107428/2025 confirming the penalty.

By these orders, a penalty aggregating Rs. 2,63,330/- (CGST Rs. 1,31,665/- and SGST Rs. 1,31,665/-) was imposed and had already been deposited by the assessee, M/s Lucknow Automotives.

The legal issue framed was whether transportation of goods without an E-way Bill at the exact time of interception—when the document was generated a few minutes later—constitutes a substantive contravention justifying penalty under Section 129, especially where there is no evidence of tax evasion.

Factual Matrix

Nature of Business and Transaction

• The assessee, M/s Lucknow Automotives, is a registered proprietorship engaged in trading of motorcycles and their spare parts.
• On 20.01.2025, vehicle No. UP32 DN 2873 was transporting motorcycles pursuant to Challan/Invoice Nos. 405, 406, 407 and 408.
• At 7:25 A.M., the Mobile Squad of the State Tax Department, Gonda, intercepted the vehicle.
• At that specific moment, no E-way Bill had been generated.

Generation of E-way Bill and Subsequent Action

• E-way Bill No. 471521531708, dated 20.01.2025, was generated at 7:34 A.M., roughly nine minutes after interception.
• The newly generated E-way Bill was promptly produced before the intercepting officers.
• Proceedings under Section 129 were initiated on the ground that movement of goods had commenced without a valid E-way Bill as required under Rule 138(1).
• Ultimately, penalty of Rs. 2,63,330/- was imposed and upheld by the First Appellate Authority, compelling the assessee to approach the GSTAT.

The Tribunal recorded that:

• The motorcycles were covered by proper tax invoices and challans.
• Both the supplier and recipient were registered dealers.
• The assessee relied upon purchase invoices, sales invoices, challans, ledger extracts and bank statements to show the transaction was fully accounted for.

Grounds Urged by the Assessee

The assessee challenged the penalty on multiple substantive and procedural grounds, broadly summarised as follows:

1. Mere Procedural Irregularity

• The only lapse was non-availability of the E-way Bill at the moment of interception, which was rectified in nine minutes.
• The movement was otherwise supported by valid tax invoices and delivery documents.
• Such a short delay, without any fraudulent element, amounted to a bona fide procedural lapse rather than a deliberate contravention.

2. Absence of Intention to Evade Tax

• No discrepancy was found in:
  • Quantity of motorcycles,
  • Value shown in invoices, or
  • Classification of goods.
• There was no allegation or finding of:
  • Suppression of turnover,
  • Undervaluation,
  • Fake consignor/consignee,
  • Unaccounted goods, or
  • Any revenue loss to the exchequer.
• The transactions stood duly recorded in the books of account and bank records.

3. Nature of Goods: High Identifiability