Facts of the Case:

The petitioner is a trader transporting goods on 21.12.2021, a tax invoice was issued, but due to a technical glitch, the e-way bill could not be immediately generated. The e-way bill was successfully generated at 10:59 AM on 21.12.2021. The vehicle was intercepted by the GST Mobile Squad at 11:29 AM on the same day.

At the time of interception, the e-way bill was not carried along with the goods; hence a show cause notice was issued. The petitioner submitted a detailed reply along with the e-way bill, generated prior to interception. The appeal was dismissed on 03.12.2022, even though the appellate authority recorded a finding that the e-way bill was generated before interception.

The petitioner relied upon the judgment in OSR Creation (2025), while the State relied upon Aysha Builders (2025).

Issue:

Whether penalty under Section 129 of the CGST/UPGST Act can be imposed when the e-way bill was admittedly generated prior to the interception of the goods, but was not carried at the time of detention, and was subsequently produced along with the reply?

Held that:

The Court noted that the e-way bill was generated at 10:59 AM, which was 30 minutes prior to interception. This establishes that there was no intention to evade tax. The Court reiterated principles from earlier judgments, if valid documents were generated before seizure and no discrepancy is found in such documents, then the defect is merely procedural. Penalty under Section 129 is not justified without proof of intention to evade tax.

The Court distinguished Aysha Builders, noting that in that case, the e-way bill was generated after detention, whereas here it was generated before interception—making penalty unjustified.

Both authorities failed to show any element of mens rea or attempt to evade tax. Once the e-way bill was produced before passing the seizure order, the procedural lapse stood cured.

The Court held that no penalty under Section 129 can be sustained when the e-way bill was generated prior to interception. There is no intention to evade tax. The impugned orders of seizure, detention, and penalty were unsustainable and liable to be quashed. Accordingly, writ petition allowed. Any amount deposited pursuant to the penalty shall be refunded in accordance with law.

Case Name: M/s. Om Enterprises Versus Additional Commissioner, Grade – 2 (Appeal) And Another dated 13.11.2025

To read the complete judgment 2025 Taxo.online 2951