GSTAT Bengaluru Sets Aside ₹20.13 Lakh Penalty On Valuecart For E-Way Bill Lapse, Imposes ₹25,000 Fine

The Bengaluru Bench of the GST Appellate Tribunal (GSTAT) on 30 September partly allowed an appeal filed by Valuecart Private Limited against a penalty of Rs. 20,13,640 imposed under Section 129 of the Central and Karnataka Goods and Services Tax Acts, and reduced the penalty to Rs. 25,000 under Section 125 of the GST Acts for the procedural lapse.

A Bench comprising Technical Member Sudha Koka and Judicial Member Srikanth Venkatraman held that failure to generate a fresh e-way bill for returning imported goods after a failed delivery does not, by itself, justify a penalty for tax evasion when the authorities find no evidence of such evasion. It held:

“The physical verification report (Form GST MOV-04) confirmed zero discrepancies in goods or quantity. The movement back to the customs bonded warehouse was an involuntary logistical fallback, not a clandestine sale.”

Valuecart imported printers, cameras and cartridges from South Korea. After paying the applicable customs duty and integrated GST, it cleared the goods for home consumption on 23 March 2022 and stored them with its customs handling agent, Dart Global Logistics Private Limited, at Bengaluru International Airport.

On 24 March 2022, Valuecart dispatched the goods to Amazon's additional place of business under a valid e-way bill and import documents. Traffic congestion caused the vehicle to miss its allotted delivery slot, following which Amazon refused entry outside the scheduled window. The vehicle consequently returned the goods to the logistics agent's warehouse.

Valuecart did not generate a fresh e-way bill or delivery challan for the return movement. The Commercial Tax Officer imposed a penalty of Rs. 20,13,640 on 17 April 2022. The first appellate authority upheld the penalty on 6 March 2023.

Before the Tribunal, Valuecart argued that the goods constituted genuine imports supported by Bills of Entry, invoices and customs clearance documents. It submitted that the failed delivery necessitated the return movement and that the transaction involved no sale, suppression of turnover or attempt to evade tax.

The Tribunal noted that Valuecart had paid the applicable duties and taxes and that physical verification had revealed no discrepancy in the nature or quantity of the goods. It held that the return movement resulted from the failed delivery and that the absence of a fresh e-way bill did not, without evidence of tax evasion, justify the substantial penalty. It observed:

“The goods are 100% duty-paid imports, accompanied by authentic Bills of Entry, import invoices, and customs clearance documents. Because the goods were moving backward to a secure customs bonded warehouse (and not toward an unrecorded black-market buyer), there was zero commercial fraud, zero revenue leakage, and zero tax evasion.”

Relying on the Supreme Court's decision in Assistant Commissioner (ST) v. Satyam Shivam Papers Pvt. Ltd. and the Karnataka High Court's decision in Kristna Engineering Works v. State of Karnataka, the Bench emphasised that authorities must assess procedural non-compliance in light of the surrounding facts and circumstances.

Accordingly, the GSTAT set aside the penalty of Rs. 20.13 lakh and reduced it to Rs. 25,000, directing the authorities to refund 25% of the cash deposit through Form GST DRC-03 and release the bank guarantee after adjusting the penalty.

Counsel for Appellant (Valuecart Private Limited): Disha Gursahaney

Counsel for Respondent (Commercial Tax Officer / Revenue): Dr. Ramya, State AR (State Authorised Representative)