BackgroundAfter an audit for July 2017–March 2022, an SCN under Section 74 sought recovery of excess ITC of Rs. 8,56,877 with interest and penalty. The adjudicating authority dropped the demand, finding that the ITC reconciliation had been disclosed through GSTR-9C on the portal and that no non-declaration under Explanation 2 to Section 74 was shown. The Joint Commissioner (Appeals) reversed this on the department’s new plea that the taxpayer had not replied to the audit enquiry or report.Final VerdictThe Tribunal held that the SCN rested on bald assertions with no evidence; every transgression of Sections 16(2)/42(1) cannot attract Section 74 unless fraud, wilful misstatement or suppression with intent to evade is alleged and proved by evidence, and the onus is on the department to show that the taxpayer knowingly took ineligible credit. The failure to reply to the audit enquiry was never a ground in the SCN, so the appellate authority’s reliance on it violated natural justice; it also did not identify what information was sought, when, or under which provision, and never dislodged the finding of disclosure through GSTR-9C. Relying on CBIC Instruction No. 05/2023-GST and Cosmic Dye Chemical and Ballarpur Industries (SC), it answered both questions in the negative: merely taking ineligible self-assessed ITC, or merely failing to reply to an audit enquiry or final audit report, does not by itself amount to suppression under Section 74. The Order-in-Appeal was set aside and the appeals allowed with consequential relief.
SANTHOME LATEX ENTERPRISES v. COMMISSIONER OF CGST, THIRUVANANTHAPURAM 21-08-2026
BackgroundAfter an audit for July 2017–March 2022, an SCN under Section 74 sought recovery of excess ITC of Rs. 8,56,877 with interest and penalty. The adjudicating authority dropped the demand, finding that the ITC reconciliation had been disclosed through GSTR-9C on the portal and that no non-declaration under Explanation 2 to Section 74 was shown. The Joint Commissioner (Appeals) reversed this on the department’s new plea that the taxpayer had not replied to the audit enquiry or report.Final VerdictThe Tribunal held that the SCN rested on bald assertions with no evidence; every transgression of Sections 16(2)/42(1) cannot attract Section 74 unless fraud, wilful misstatement or suppression with intent to evade is alleged and proved by evidence, and the onus is on the department to show that the taxpayer knowingly took ineligible credit. The failure to reply to the audit enquiry was never a ground in the SCN, so the appellate authority’s reliance on it violated natural justice; it also did not identify what information was sought, when, or under which provision, and never dislodged the finding of disclosure through GSTR-9C. Relying on CBIC Instruction No. 05/2023-GST and Cosmic Dye Chemical and Ballarpur Industries (SC), it answered both questions in the negative: merely taking ineligible self-assessed ITC, or merely failing to reply to an audit enquiry or final audit report, does not by itself amount to suppression under Section 74. The Order-in-Appeal was set aside and the appeals allowed with consequential relief.
BackgroundOn 13.06.2022 the appellant, a steel dealer, moved TMT bars under a delivery challan from its own premises to its own godown under the same GSTIN. The vehicle was detained for want of an e-way bill and penalty of Rs. 1,34,640 was imposed under Section 129(3), with no tax demand, and paid to obtain release. The First Appellate Authority dismissed the appeal, calling the transaction “not genuine”. Revenue contended that “tax payable” in Section 129(1)(a) is only a measure for computing penalty and that mens rea is not required.Final VerdictThe Tribunal held that penalty under Section 129(1) is linked to the “tax payable on such goods”. A movement between premises of the same person involves neither a second party nor consideration, so it is not a “supply” under Section 7(1)(a), and therefore not an intra-State supply attracting the charging provision in Section 9. Following Fabricship Pvt. Ltd. (Bom HC), Vacmet India and Goverdhan Oil Mill (All HC), it held that where no tax is payable on the goods, penalty under Section 129, which is measured by that tax, cannot be levied. Revenue’s attempt to distinguish Fabricship because the goods there were exempt was rejected as a misreading of its ratio, and the “not genuine” finding was held to be unsupported by any allegation or evidence. Rule 138(1)(ii) still requires an e-way bill for non-supply movements, but the remedy for such a lapse lies only under Section 122(1)(xiv), not Section 129(3). The question of law was answered in the negative, and the Order-in-Appeal was set aside with consequential relief.
M.S. STEELS v. THE COMMISSIONER OF KERALA STATE GST 14-08-2026
BackgroundOn 13.06.2022 the appellant, a steel dealer, moved TMT bars under a delivery challan from its own premises to its own godown under the same GSTIN. The vehicle was detained for want of an e-way bill and penalty of Rs. 1,34,640 was imposed under Section 129(3), with no tax demand, and paid to obtain release. The First Appellate Authority dismissed the appeal, calling the transaction “not genuine”. Revenue contended that “tax payable” in Section 129(1)(a) is only a measure for computing penalty and that mens rea is not required.Final VerdictThe Tribunal held that penalty under Section 129(1) is linked to the “tax payable on such goods”. A movement between premises of the same person involves neither a second party nor consideration, so it is not a “supply” under Section 7(1)(a), and therefore not an intra-State supply attracting the charging provision in Section 9. Following Fabricship Pvt. Ltd. (Bom HC), Vacmet India and Goverdhan Oil Mill (All HC), it held that where no tax is payable on the goods, penalty under Section 129, which is measured by that tax, cannot be levied. Revenue’s attempt to distinguish Fabricship because the goods there were exempt was rejected as a misreading of its ratio, and the “not genuine” finding was held to be unsupported by any allegation or evidence. Rule 138(1)(ii) still requires an e-way bill for non-supply movements, but the remedy for such a lapse lies only under Section 122(1)(xiv), not Section 129(3). The question of law was answered in the negative, and the Order-in-Appeal was set aside with consequential relief.
BackgroundAuto parts supplied under two e-invoices were intercepted on 18.04.2022 without an e-way bill. MOV-07 was issued the same day and the goods were released on bank guarantee, but the MOV-09 order confirming penalty of Rs. 1,38,706 was passed only on 04.06.2022. The First Appellate Authority upheld the penalty. Before the Tribunal the appellant raised limitation under Section 129(3); the department objected that the ground was new and caused no prejudice.Final VerdictThe Tribunal rejected the department’s objection, holding that the dates of MOV-07 and MOV-09 were undeniable facts on record, noted by the First Appellate Authority itself, so the limitation plea was not a new ground. On merits, it held that the use of “shall” in Section 129(3), both for issuing notice within seven days and for passing the order within seven days of service, shows that the timelines are mandatory; a fiscal statute is strictly construed, and the absence of a stated consequence does not make them directory, following Mohd Hazzak Lohar (J&K & Ladakh HC), Allcargo Logistics and Khatu Enterprises (Guj HC), Deepam Roadways (Mad HC), Pawan Carrying Corporation (Pat HC) and K.P. Sugandh (Ori HC). It also found no mens rea, since the e-invoices auto-populated GSTR-1 and tax was paid in the April 2022 return. Holding that MOV-09 issued 47 days after MOV-07 is illegal and without jurisdiction, the Tribunal set aside the Order-in-Appeal, allowed the appeal with consequential relief and directed immediate release of the bank guarantee.
SIDDHI VINAYAK AUTOMOBILES v. COMMISSIONER OF KERALA STATE GST, THIRUVANANTHAPURAM 14-08-2026
BackgroundAuto parts supplied under two e-invoices were intercepted on 18.04.2022 without an e-way bill. MOV-07 was issued the same day and the goods were released on bank guarantee, but the MOV-09 order confirming penalty of Rs. 1,38,706 was passed only on 04.06.2022. The First Appellate Authority upheld the penalty. Before the Tribunal the appellant raised limitation under Section 129(3); the department objected that the ground was new and caused no prejudice.Final VerdictThe Tribunal rejected the department’s objection, holding that the dates of MOV-07 and MOV-09 were undeniable facts on record, noted by the First Appellate Authority itself, so the limitation plea was not a new ground. On merits, it held that the use of “shall” in Section 129(3), both for issuing notice within seven days and for passing the order within seven days of service, shows that the timelines are mandatory; a fiscal statute is strictly construed, and the absence of a stated consequence does not make them directory, following Mohd Hazzak Lohar (J&K & Ladakh HC), Allcargo Logistics and Khatu Enterprises (Guj HC), Deepam Roadways (Mad HC), Pawan Carrying Corporation (Pat HC) and K.P. Sugandh (Ori HC). It also found no mens rea, since the e-invoices auto-populated GSTR-1 and tax was paid in the April 2022 return. Holding that MOV-09 issued 47 days after MOV-07 is illegal and without jurisdiction, the Tribunal set aside the Order-in-Appeal, allowed the appeal with consequential relief and directed immediate release of the bank guarantee.
