E-Way Bill Value Alone Cannot Establish Taxable Turnover Of Job Worker: GSTAT Chandigarh

The Chandigarh Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) on 30 October held that the value of goods reflected in e-way bills cannot be treated as a job worker's taxable turnover without evidence establishing that the goods were actually supplied by the job worker or that tax was evaded.

A Bench comprising Judicial Member Jatinder Pal Singh and Technical Member Pradeep Kumar Goel allowed the appeal filed by Mittal Cutters & Allied Works (P) Ltd. and set aside the order passed by the first appellate authority. The Tribunal observed:

“..it has been clearly established by the Appellant that the e-way bills were generated for movement of goods sent by the principal manufacturer to the Appellant for job work and for receiving back the goods from the Appellant after job work. The documents for the sample case submitted by the Appellant clearly show the trail of movement of goods and confirm the nature of activities undertaken by the Appellant...”

The case arose from a mismatch noticed during scrutiny of the Mittal Cutters & Allied Works's returns for FY 2020-21. While it had declared a tax liability of Rs. 1,10,069 in GSTR-3B, the department calculated its liability at Rs. 38,03,254 on the basis of e-way bill data and alleged a short payment of Rs. 36,93,185. It also imposed a penalty of Rs. 3,69,319.

Mittal Cutters submitted that it was exclusively engaged in job work involving the cutting of HR sheets and did not independently supply goods. The goods belonged to principal manufacturers and were transported to its premises for processing, with the e-way bills generated by the principal manufacturers.

It also submitted that it had raised invoices only for job work charges and duly declared those amounts in GSTR-1 and GSTR-3B. The values reflected in the e-way bills represented goods belonging to the principal manufacturers and could not be treated as its taxable turnover.

To examine the nature of the transactions, the Tribunal considered the documents relating to a sample transaction involving Shankar Cylinders Pvt. Ltd. These included a delivery challan describing the movement as exclusively for job work, an e-way bill, a transporter's consignment note and an invoice raised by the taxpayer for job work charges of Rs. 16,842, including IGST of Rs. 2,569.

It found that the documents established that the principal manufacturer had sent the goods to the taxpayer for job work and that the processed goods were subsequently returned.

Further, the Bench clarified that under Rule 138 of the Central Goods and Services Tax (CGST) Rules, an e-way bill could be generated either by the principal manufacturer or the registered job worker, as the provision refers to the registered person causing the movement of goods. The identity of the person generating the e-way bill was not material, provided the consignor and consignee details were correctly declared.

Examining the demand, it noted that the show cause notice relied on DGARM data reflecting a difference between the tax liability calculated from e-way bills and the tax declared in GSTR-3B. However, the department had neither conducted an investigation nor produced evidence establishing that the goods covered by the e-way bills had actually been supplied by the taxpayer.

The Tribunal also held that the department could not establish any taxable supply of goods by the taxpayer or raise a demand merely on the basis of the consignment value reflected in e-way bills. It observed:

“We therefore hold that in the absence of any other evidence which clearly establishes evasion / non-payment of tax, there is no legal basis for demanding duty merely on the basis of the value of goods declared in the e-way bills...”

Accordingly, the GSTAT set aside the demand of tax, interest and penalty, along with the order passed by the first appellate authority.

For Appellant: Advocate Amit Parsad

For Respondent: Veer Singh Meena, authorised representative