Excess Plywood No Ground To Penalise Entire Consignment If Rest Of Goods Are Documented: GSTAT Lucknow

The State Bench of the GST Appellate Tribunal (GSTAT) at Lucknow, on 27 October held that a penalty for excess goods found during transportation cannot be imposed on the entire consignment when the remaining goods are covered by valid documents.

A Bench comprising Judicial Member Santosh Kumar Srivastava and Technical Member Arvind Kumar dismissed the Department's appeal against the First Appellate Authority's decision to reduce the penalty imposed on Mani Ply from Rs. 57,870 to Rs. 5,375.40 under Section 129(3) of the Central Goods and Services Tax (CGST)/Uttar Pradesh Goods and Services Tax (UPGST) Act, 2017. The Tribunal observed:

“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.”

The case arose when a Mobile Squad intercepted a vehicle transporting shuttering plywood from Mani Ply, Raebareli, to Purvanchal Ply, Lucknow, on 18 July 2023. The tax invoice and e-way bill, both dated 17 July 2023, covered 418 pieces measuring approximately 1,244.3024 square metres. Physical verification revealed 450 pieces measuring approximately 1,339.56 square metres, leaving 32 pieces in excess of the documented quantity.

The Proper Officer initiated proceedings under Section 129 of the CGST/UPGST Act, 2017, and imposed a penalty of Rs. 57,870 based on the value of the entire consignment. The First Appellate Authority found that only the additional 32 pieces were not covered by the accompanying documents and reduced the penalty to Rs. 5,375.40.

The Department challenged the reduction, arguing that transporting goods in excess of the quantity declared in the tax invoice and e-way bill constituted a statutory violation warranting a penalty on the entire consignment. It contended that the discrepancy detected during physical verification justified proceedings under Section 129 and that the First Appellate Authority had wrongly restricted the penalty to the excess quantity.

Mani Ply submitted that the tax invoice and e-way bill covered 418 pieces and that the transaction was recorded in its regular books of account. It further stated that the consideration, including applicable GST, had been received through banking channels and that the discrepancy concerned only the additional 32 pieces.

Rejecting the Department's contention, the Tribunal observed that the detection of excess goods did not, by itself, establish that the entire consignment was being transported without valid documents. It noted that the Department had produced no cogent material to establish that the remaining 418 pieces lacked valid documents or that the accompanying documents were false or fabricated.

It also observed that deliberate tax evasion could not be presumed in respect of the entire consignment without an adequate factual basis. It held that the exercise of powers under Section 129, which provides for the detention, seizure and release of goods and conveyances in transit in cases of statutory contravention, must reflect the nature and extent of the contravention established by the record. It observed:

“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.”

Accordingly, the GSTAT dismissed the Department's appeal and upheld the penalty of Rs. 5,375.40.

Counsel for Appellant: Ashutosh Mishra, Assistant Commissioner, SGST

Counsel for Respondent: R.K. Pandey, Advocate