Facts of the Case:

In this case, the Revenue filed a second appeal under Section 112(1) of the CGST/UPGST Act against the order of the First Appellate Authority setting aside the penalty imposed under Section 129.

The respondent’s consignment of old and used iron, valued at ₹5.11 lakh, was transported from Raipur, Chhattisgarh to Jhansi, Uttar Pradesh and intercepted on 24.11.2017. The driver produced a valid tax invoice and bilty, and the goods were found to tally with the accompanying documents; however, no e-way bill was available. The proper officer detained the goods and imposed tax of ₹91,180 and an equal penalty under Section 129. The goods were subsequently released against a bank guarantee.

The First Appellate Authority set aside the proceedings, holding that non-production of the e-way bill was a bona fide/inadvertent lapse and that there was no allegation of intention to evade tax.

Issue:

Whether, on 24.11.2017, an e-way bill was mandatory for inter-State movement of goods under Rule 138 of the CGST Rules and, consequently, whether detention and penalty under Section 129 were sustainable for non-production of such e-way bill.

Held That:

The Tribunal dismissed the Revenue’s appeal, holding that the goods could not have been detained or subjected to penalty under Section 129 merely for non-generation/non-production of an e-way bill on 24.11.2017, since the statutory e-way bill mechanism had not yet been brought into force for inter-State movement of goods.

The Tribunal examined the legislative chronology and drew a distinction between notification of the amended Rule 138 and its coming into force. Although Notification No. 27/2017-Central Tax dated 30.08.2017 substituted Rule 138 and prescribed the requirement of furnishing information and generation of an e-way bill for movement of goods exceeding ₹50,000, the notification itself provided that the amendments would come into force on a date to be separately appointed by the Central Government.

That date was subsequently appointed as 01.02.2018 by Notification No. 74/2017-Central Tax dated 29.12.2017. Thus, on the material date of interception, i.e. 24.11.2017, the amended Rule 138 prescribing the operative e-way bill requirement was not in force. The contemporaneous GST Council material also records that the e-way bill provisions notified through Notification No. 27/2017 were to come into force only from a date to be notified.

Consequently, the Tribunal held that non-generation or non-production of an e-way bill could not constitute a statutory contravention on 24.11.2017. The subsequent statutory requirement could not be applied retrospectively to create a liability for an earlier movement of goods.

The Tribunal further found that the Department had not established any independent contravention warranting action under Section 129. The goods were accompanied by a valid tax invoice and transport documents; the description, quantity and value of the goods corresponded with the documents; and there was no allegation or evidence of clandestine movement, misdeclaration, undervaluation or attempted evasion of tax. Therefore, the essential factual basis for treating the transportation as a contravention attracting Section 129 was also absent.

Accordingly, the Tribunal concluded that detention of the goods and imposition of tax and an equivalent penalty under Section 129 solely on the ground of absence of an e-way bill were without statutory basis. The order of the First Appellate Authority setting aside the demand was therefore upheld and the Revenue’s appeal was dismissed.

Keytakeaway

Where, on the date of interception, the amended Rule 138 requiring an e-way bill had been notified but had not yet been brought into force, non-possession of an e-way bill could not constitute a contravention of the GST law so as to invoke Section 129; in the absence of any other established discrepancy or tax-evasion contravention, detention and penalty were unsustainable.

Case name:Commissioner, State Tax, through-Neeraj Shukla, Assistant Commissioner, Mobile Squad, Masoura, Lalitpur (U.P) Versus M/s. Jay Steels, Proprietor. dated 25.09.2026