Facts of the Case:

In this case, the assessee transported goods from Nayaganj, Kanpur, to Fatehpur in vehicle No. UP-71-B-9301 under tax invoices and valid E-Way Bills dated 01.03.2022. The E-Way Bills were generated in the morning and remained valid up to 02.03.2022. The vehicle was first checked and the E-Way Bills were scanned at Jhakarkatti, Kanpur, at 1:27 p.m. and was again intercepted at 9:52 p.m. at Cooperganj on the same day. On noticing the repeated verification of the E-Way Bills, the Mobile Squad presumed that the documents had already been used for an earlier transportation and were being reused to transport another consignment with an intent to evade tax.

Proceedings under Section 129 were consequently initiated and a demand of Rs. 6,06,844 was raised. The appellant contended that the vehicle had broken down after the first verification and, after repairs, resumed its journey towards Fatehpur. A vehicle-repair bill and an affidavit of the driver were furnished in support of the explanation. The goods, their quantity, value and ownership were not disputed, and the invoices, e-invoices and E-Way Bills were found valid. However, the Mobile Squad rejected the explanation, and the First Appellate Authority upheld the demand, principally on the reasoning that the repeated interception established reuse of the E-Way Bills and consequently an intention to evade tax.

Issue:

Whether the detention of goods and imposition of tax/penalty under Section 129 of the CGST/UPGST Act could be sustained merely on the basis of repeated verification of the E-Way Bills at different locations on the same day, without any independent and cogent evidence establishing that the goods had already been transported/delivered earlier and that the E-Way Bills were being reused for a second transportation?

Held That:

The Tribunal allowed the appeal and set aside both the appellate order dated 11.10.2023 and the original order passed under Section 129. It held that the department had failed to establish any discrepancy in the description, quantity, value or ownership of the goods, which were accompanied by valid tax invoices, e-invoices and E-Way Bills. The mere fact that the E-Way Bills had been verified earlier at Jhakarkatti and the vehicle was again intercepted at Cooperganj several hours later could not, by itself, establish that the goods had already completed an earlier journey or that the documents were being reused.

The Tribunal emphasised that the burden was on the department to establish reuse of the E-Way Bill by positive and cogent evidence. Suspicion, however strong, could not substitute proof. No independent investigation was undertaken to establish that the goods had previously been delivered or transported, nor was there material such as evidence from the purchaser, seller, toll plaza or any other source demonstrating an earlier completed transportation. The explanation regarding vehicle breakdown was supported by a repair bill and driver’s affidavit, and the department failed to establish that the repair bill was false or fabricated.

Following the principles laid down in Shri Surya Traders, B.L. Agro Oils Ltd., Anandeshwar Traders and Asstt. Commissioner (ST) v. Satyam Shivam Papers (P.) Ltd., the Tribunal held that intention to evade tax cannot be automatically inferred from circumstances giving rise only to suspicion. The finding of the First Appellate Authority that reuse of documents and intention to evade tax stood automatically proved was therefore held to be legally unsustainable.

Accordingly, the Tribunal set aside the appellate order as well as the original Section 129 order and directed that the amount of Rs. 6,06,844 deposited by the appellant be refunded in accordance with law.

key Takeaways: Mere repeated verification of a valid E-Way Bill does not establish its reuse. For detention and penalty under Section 129, the department must produce positive and cogent evidence of an earlier transportation/reuse of the documents and cannot sustain the demand merely on suspicion or presumption of tax evasion.

Case Name: Jai Enterprises v. Pankaj Gandhi, Addl. Commissioner, State Tax dated 25.08.2026

Citation No. 2026 Taxo.online 2653