Background

The appellant, a dealer in motorcycles and spares, had its vehicle carrying motorcycles under four invoices intercepted by the Mobile Squad, Gonda at 7:25 A.M. on 20.01.2025; the e-way bill was generated at 7:34 A.M. and produced immediately. Penalty of Rs. 2,63,330 (CGST + SGST) was imposed under Section 129(3) and confirmed by the First Appellate Authority. The question referred to the Division Bench was whether movement without an e-way bill (mandatory under Rule 138(1)) justified penalty on these facts.

Final Verdict

The Tribunal accepted that generation of the e-way bill after interception was a procedural lapse, but found that it occurred in a genuine and fully identifiable transaction: the motorcycles carried engine and chassis numbers and were subject to RTO registration, the movement was backed by purchase/sale invoices, challans, ledgers and bank records, and no discrepancy in quantity, value or classification, nor any suppression, undervaluation, fake documentation or clandestine movement, was found. Relying on the Allahabad High Court in M/s OSR Creation (and Uttam Electric Store, Vishnu Singh), the Tribunal held that the lapse was a bona fide procedural one and not part of an attempt to evade tax, so penalty under Section 129(3) could not be sustained; the department’s reliance on M.B. Computers was distinguished as involving unfilled Part-B and a different destination. The order under Section 129(3) and the appellate order were set aside and the deposited Rs. 2,63,330 was directed to be refunded subject to verification.