Automated Portal Warning Can't Override E-Way Bill Exemption For Short-Distance Movement: GSTAT Lucknow

The Lucknow Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) on 2 November observed that an automated portal warning cannot override the statutory exemption under Rule 138(3) of the Central Goods and Services Tax (CGST) Rules, 2017, which permits certain short-distance movements of goods without Part-B vehicle details in an e-way bill.

A Bench comprising Judicial Member Santosh Kumar Srivastava and Technical Member Arvind Kumar dismissed the Revenue's appeal and upheld the order quashing a penalty of Rs. 2,55,792 imposed on Prabhu Aastha Enterprise Pvt. Ltd. The Tribunal held:

“An automated system stamp on a portal cannot override explicit, codified rules enacted by the legislature. Under Explanation 2 to Rule 138(3), the E-Way bill remains valid without Part-B details if the trip fits within the scope of the Third Proviso.”

The dispute arose after a mobile squad intercepted a vehicle carrying Pan Masala and Zarda Tobacco from Prabhu Aastha Enterprise in Kanpur to Mohit Agency in Gorakhpur on 7 May 2022. The department imposed a penalty under Section 129(3) of the CGST Act, 2017, alleging that the e-way bills did not contain the vehicle details in Part-B.

The taxpayer submitted that the vehicle had transported the goods only about five kilometres from its premises to a local transporter's depot in Kanpur for onward transportation to Gorakhpur. It argued that the initial movement fell within the Third Proviso to Rule 138(3), which permits the transportation of goods for up to 50 kilometres within the State without furnishing Part-B details in specified circumstances.

The Tribunal noted that the goods matched the tax invoices and that physical verification revealed no discrepancy in their description, quantity or value. It also noted that the transaction was supported by pre-generated e-invoices and that the physical verification report recorded no variance.

Rejecting the Revenue's contention that a deviation from the vehicle's expected route indicated an intention to evade tax, the Bench found no tangible evidence of tax evasion. The physical verification and documentary records did not establish any fraudulent intent. It added:

“A mere deviation in the physical transit path cannot be mechanically equated with a fraudulent intention to evade tax or divert cargo under Section 129(3). The burden of proof rests strictly upon the Revenue to produce concrete, corroborative evidence showing that the alternative route was part of a clandestine, off-the-books operation.”

Accordingly, the GSTAT dismissed the Revenue's appeal and upheld the order quashing the penalty under Section 129(3) of the CGST Act, 2017.

Counsel for Appellant: Mahendra Pratap Singh, Assistant Commissioner, SGST

Counsel for Respondent(s): Dinesh Shukla, Advocate