Section 129 Penalty Dropped for 9‑Minute E‑Way Bill Delay: GSTAT U.P. Emphasizes Need for Intent to Evade Tax

Overview

The Goods and Services Tax Appellate Tribunal (GSTAT), Court I, Lucknow has ruled that a penalty under Section 129(3) of the CGST/UPGST Act, 2017 cannot be sustained merely because an e-way bill was not available at the precise moment of interception, where the same was generated within minutes and there was no material suggesting an intention to evade tax.

In M/s Lucknow Automotives Vs. Assistant Commissioner (Mobile Squad), Gonda & Ors. – APL/8/LCK/2026 dated 19.08.2026, the Tribunal set aside a penalty of Rs. 2,63,330/- and directed refund of the amount, if already deposited. The Bench comprised Hon’ble Shri Santosh Kumar Srivastava (Judicial) and Hon’ble Shri Arvind Kumar (Technical).

The ruling reiterates that Section 129 is a stringent provision meant to address tax evasion, and not to penalize bona fide, minor procedural irregularities in documentation, particularly where the transaction is fully verifiable and tax-compliant.

Factual Background

Business and Movement of Goods

  • The appellant, M/s Lucknow Automotives, is engaged in the trade of motorcycles.
  • On 20.01.2025 at 7:25 AM, a vehicle bearing No. UP32 DN 2873 transporting motorcycles under Invoices/Challans No. 405 to 408 was intercepted by the Mobile Squad at Gonda.
  • At the moment of interception, the driver did not have an e-way bill accompanying the consignment.

Generation of E‑Way Bill and Subsequent Action

  • E-way Bill No. 471521531708 was generated at 7:34 AM on 20.01.2025, i.e., just nine minutes after the interception.
  • The e-way bill was produced before the Proper Officer immediately after generation.
  • The Proper Officer noted that:
    • The motorcycles were covered by genuine invoices.
    • Details of the goods were clearly identifiable through engine and chassis numbers.
  • Despite there being no mismatch in quantity, value or description, and no adverse material regarding valuation or documentation, the Proper Officer levied a penalty under Section 129(3).

Penalty and First Appeal

  • Penalty of Rs. 2,63,330/- was imposed, comprising:
    • CGST Rs. 1,31,665/-
    • SGST Rs. 1,31,665/-
  • The First Appellate Authority, vide Order No. AD0905250107428/2025 dated 06.06.2025, upheld the penalty.
  • The assessee deposited the penalty amount and preferred an appeal before the GSTAT under Section 112 of the CGST/UPGST Act, 2017.

Grounds Raised by the Appellant

The assessee advanced multiple grounds to challenge the penalty, broadly centered around the genuineness of the transaction and the absence of any attempt to evade tax:

  1. Genuine Registered Transaction

    • The movement of motorcycles was pursuant to bona fide commercial transactions between registered dealers.
    • All sales and purchases were duly reflected in:
      • Tax invoices
      • Books of account and ledgers
      • Bank records

  2. Bona Fide Human Error in E‑Way Bill Timing

    • The e-way bill was generated a mere 9 minutes after the interception.
    • The lapse was characterized as an inadvertent human error in compliance rather than an intentional omission.
    • There was no evidence of any scheme, device or pattern suggesting evasion.

  3. No Discrepancy or Revenue Risk

    • No variation was found in:
      • Quantity of motorcycles transported
      • Value declared on invoices
      • Classification of goods
    • There was no:
      • Fake consignor/consignee
      • Undisclosed or unaccounted stock
      • Suppression of turnover or under-valuation
    • Consequently, there was no loss of revenue or potential revenue risk to the exchequer.

  4. Inherently Traceable Nature of Goods

    • Motorcycles are easily traceable items due to:
      • Unique engine and chassis numbers
      • Requirement of R.T.O. registration
    • The traceable nature of the goods significantly reduces the scope for clandestine movement or diversion to unknown parties.

Judicial Precedents Relied Upon by the Appellant

In support of its stand, the assessee invoked several judicial pronouncements, particularly of the Allahabad High Court and other High Courts, to underscore that Section 129 penalties cannot be levied mechanically for technical lapses in e-way bill compliance:

  1. **M/s Uttam Electric Store v. State of U.P. [Writ Tax No.