GSTAT U.P. Sets Aside Section 129 Penalty for 9-Minute Delay in E-Way Bill – Intent to Evade Tax is Essential
Summary: GSTAT, Court I, Lucknow, in M/s Lucknow Automotives Vs. Assistant Commissioner (Mobile Squad), Gonda & Ors., set aside a penalty of Rs. 2,63,330/- imposed under Section 129(3) where the vehicle carrying motorcycles was intercepted without an e-way bill, but the e-way bill was generated and produced within nine minutes. The Tribunal noted that the goods were covered by genuine invoices, fully identifiable through engine and chassis numbers, and there was no discrepancy, suppression, undervaluation, fake documentation, unaccounted goods or material indicating intent to evade tax. Holding that a bona fide procedural lapse cannot by itself justify penalty under Section 129, GSTAT allowed the appeal, set aside the adjudication and appellate orders, and directed refund of the penalty amount, if already deposited.
Introduction
In a significant relief for genuine taxpayers, the Goods and Services Tax Appellate Tribunal (GSTAT), Court I, Lucknow, has held that a mere procedural lapse of generating an E-way Bill 9 minutes after interception cannot attract the harsh penalty under Section 129(3) of the CGST/UPGST Act, 2017, when there is no intent to evade tax.
The order was passed in M/s Lucknow Automotives Vs. Assistant Commissioner (Mobile Squad), Gonda & Ors. – APL/8/LCK/2026 dated 19.08.2026 by Hon’ble Shri Santosh Kumar Srivastava (Judicial) and Hon’ble Shri Arvind Kumar (Technical).
Brief Facts of the Case
– The appellant, M/s Lucknow Automotives, is engaged in the business of motorcycles.
– On 20.01.2025 at 7:25 AM, Vehicle No. UP32 DN 2873 carrying motorcycles under Invoices/Challans No. 405 to 408 was intercepted by Mobile Squad, Gonda.
– At the time of interception, the E-way Bill was not available with the driver.
– The E-way Bill No. 471521531708 was generated at 7:34 AM on 20.01.2025, i.e., within 9 minutes of interception, and was immediately produced before the Proper Officer.
– The Proper Officer, despite noting that the goods were covered by genuine invoices and were fully identifiable by Engine & Chassis Numbers, imposed a penalty of Rs. 2,63,330/- (CGST Rs. 1,31,665 + SGST Rs. 1,31,665) under Section 129(3).
– The First Appellate Authority vide Order No. AD0905250107428/2025 dated 06.06.2025 confirmed the penalty.
– The appellant deposited the penalty and filed an appeal under Section 112 before GSTAT.
Grounds of Appeal
The appellant contended that:
a) The transaction was genuine, between registered dealers, duly recorded in purchase/sale invoices, ledgers, bank statements.
b) The 9-minute delay was a bona fide human error, without any intention to evade tax.
c) There was no discrepancy in quantity, value, classification, no fake consignee, no suppression, no unaccounted goods, and no loss of revenue.
d) Motorcycles are highly identifiable goods traceable through R.T.O. registration, ruling out any clandestine movement.
4. Judicial Precedents Relied Upon by the Appellant
The appellant relied on a series of recent judgments where High Courts have quashed Section 129 penalties for technical lapses:
– M/s Uttam Electric Store v. State of U.P. [Writ Tax No. 153 of 2021, dt 26.07.2024 – All HC] – Bona fide human error in E-way Bill cannot lead to mechanical invocation of Section 129 proceedings. The case is also discussed in GST case-law coverage.
– M/s Osr Creation v. State of U.P. [Writ Tax No. 1914 of 2024, dt 27.01.2025 – All HC] – Lapse to be seen on facts of each case, especially when document is produced subsequently.
– M/s Vishnu Singh v. State of U.P. [Writ Tax No. 599 of 2024, dt 20.02.2025 – All HC]
– Kunal Aluminum Company v. State of Himachal Pradesh, (2025) 16 GSTJ Online 373 (HP) – Section 129 penalty requires intent to evade tax; quashed penalty for technical e-way bill lapse.
– Shyam Sel and Power Ltd. V. State of U.P., (2024) 13 GSTJ Online 147 (All) and Falguni Steels v. State of U.P., (2024) 13 GSTJ Online 150 (All) – Technical violations without intent to evade tax cannot warrant punishment.
Stand of the Department
The Department argued that:
a) Admittedly, there was no E-way Bill at the time of interception, so statutory requirement was not complied with.
b) Subsequent generation cannot retrospectively validate the movement.
c) Relied on M/s M.B. Computers v. Uttar Pradesh (Writ No. 1559 of 2024).
Discussion and Finding by GSTAT
The Tribunal, after perusing the record, made crucial observations:
“It is undisputed that the E-Way Bill was generated approximately nine minutes after interception. Thus, there was a procedural lapse at the time of interception. The goods were motorcycles, fully identifiable through their invoice particulars and engine and chassis numbers as well as subject to R.T.O. Registration. No discrepancy in quantity, value or classification has been found, and there is no material on record indicating suppression, undervaluation, fake documentation, unaccounted goods or any intention to evade tax.”
The Tribunal distinguished the Department’s reliance on M.B. Computers, stating that in that case Part-B of E-way Bill was unfilled and goods were being transported to a different destination, whereas the present case is only related to submission of E-way bill after interception.
It held that the facts are squarely covered by M/s OSR Creation, where penalty was quashed even though E-way Bill was generated at 4:59 P.M. and goods were intercepted at 6 P.M., due to lack of intention to evade tax.
Final Order
1. Appeal is ALLOWED.
2. The order dated 04.02.2025 passed by the Proper Officer under Section 129(3) imposing penalty of Rs. 2,63,330/- is SET ASIDE. Consequently, the order of the First Appellate Authority is also SET ASIDE.
3. The amount of Rs. 2,63,330/-, if deposited, shall be refunded to the appellant in accordance with law.
Conclusion & Takeaway
This order reaffirms the settled legal principle that has emerged from the Allahabad High Court and other High Courts:
“Intent to evade tax is the touchstone for imposing penalty under Section 129, not the mere existence of a technical or procedural lapse.”
The Tribunal has sent a clear message that Section 129 is not a tool for revenue augmentation through hyper-technical interpretations. When:
– Goods are fully identifiable and covered by genuine invoices,
– The transaction is recorded in books of account,
– E-way Bill is generated immediately after interception and produced before the authority,
– And there is no material to show suppression, undervaluation, or clandestine movement,
…then the lapse must be treated as a bona fide procedural lapse and not as an attempt to evade tax.
This ruling will be highly useful for taxpayers who face penalties for minor delays of a few minutes or hours in E-way Bill generation, provided they can prove the genuineness of the transaction.
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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Stakeholders should refer to the official GSTN Advisory and consult their tax advisor for specific situations.
