Facts of the Case:

In this case, the present appeal was preferred by the Department against the order dated 24.09.2021 passed by the First Appellate Authority, whereby the order imposing tax and penalty under Section 129(3) of the UPGST Act, 2017 had been set aside. The dispute arose from the transportation of iron scrap without the mandatory e-way bill under Rule 138(1) of the UPGST Rules.

On 08.03.2018, vehicle No. UP-25 CT-8554, carrying iron scrap, was intercepted by Mobile Squad Unit III, Bareilly. The goods were accompanied by a tax invoice and other documents. The consignment weighed 55.55 kg and was valued at ₹83,323, but no e-way bill accompanied the goods at the time of interception. Consequently, proceedings under Section 129 were initiated and the Proper Officer, by order dated 09.03.2018, imposed tax of ₹15,000 and an equivalent penalty of ₹15,000, aggregating to ₹30,000.

The First Appellate Authority subsequently set aside the demand on the ground that the e-way bill had been produced by the taxpayer along with its reply during the proceedings before the seizing authority. The Department challenged this finding, contending that the e-way bill was required to be generated before commencement of movement of goods and could not be retrospectively generated or produced after interception so as to cure the statutory violation.

Issue:

Whether transportation of goods without an e-way bill at the time of interception, despite the subsequent production of an e-way bill during the proceedings, constituted a violation warranting action under Section 129 of the UPGST Act. Whether the subsequent production of the e-way bill could establish that the lapse was merely technical and, in the absence of an independently established tax evasion, justify setting aside the tax and penalty imposed under Section 129(3).

Held that:

The Tribunal held that the absence of an e-way bill at the time of transportation was a clear violation of Rule 138(1). The e-way bill requirement forms an integral part of the statutory mechanism for monitoring the movement of taxable goods and is required to be complied with before commencement of movement where the prescribed conditions are satisfied.

The Tribunal distinguished the precedents relied upon by the First Appellate Authority, including Singh Tyres, Harle Foods Products Pvt. Ltd., Modern Traders, Raj Iron & Building Materials and Rai Prexim India (P.) Ltd., observing that the factual circumstances in those cases were different. According to the Tribunal, those decisions could not be mechanically applied to the present case because the present transaction involved an e-way bill that was required to be generated electronically before movement, whereas the tax invoice could be manually issued.

The Tribunal further held that subsequent production of the e-way bill did not cure the statutory breach. In its view, allowing an e-way bill to be generated or produced only after interception would defeat the purpose of the electronic monitoring mechanism. The Tribunal considered that the absence of an e-way bill at the time of interception created a circumstance from which the intention to evade tax could be inferred, particularly when viewed along with the nature of the goods and the place of loading and destination.

The Tribunal specifically relied upon the fact that the goods were being transported from Baheri in Uttar Pradesh to Kichha in Uttarakhand, a relatively short inter-State route, and considered the transportation of iron scrap without an e-way bill to be a circumstance further indicating the taxpayer’s intention to evade tax.

Accordingly, the Tribunal concluded that the First Appellate Authority had erred in treating the absence of an e-way bill as a mere procedural or technical lapse. The original adjudicating authority had correctly invoked Section 129(3) and imposed tax and penalty.

Where goods are transported without the mandatory e-way bill at the time of commencement/interception, subsequent production of an e-way bill during the proceedings may not by itself cure the statutory violation. In the present case, the Tribunal treated the absence of the e-way bill, coupled with the nature of goods and movement circumstances, as sufficient to infer an intention to evade tax and upheld proceedings under Section 129.

Case Name: Om Prakash v. Islam Trading Co. dated 20.08.2026

Citation No. 2026 Taxo.online 2536