Saraswati Motors Vs Mohammad Yahiya Ansari (GSTAT Prayagraj)
When Section 129 Falls, Nothing Survives: The Limits Of A Liberty To Penalize Under Sections 122 And 125 Of The GST Act
Summary: The GST Appellate Tribunal, Prayagraj State Bench, in M/s Saraswati Motors v. Mohammad Yahiya Ansari & Ors. (APL/6/ALB/2026; 09.10.2026), quashed a demand arising from the transportation of six motorcycles without an e-way bill. The Tribunal found that the consignment was accompanied by a valid e-invoice, the motorcycles were individually identifiable, the transaction was reflected in GST returns, and no intention to evade tax was established under the statutory framework applicable in November 2021. It also held that passing the penalty order within fifty-seven minutes of the show-cause notice violated the opportunity-of-hearing requirement. Although the Tribunal directed a refund with applicable interest, paragraph 23 granted the Department liberty to consider a procedural penalty under Section 122 or Section 125. This article critically examines that liberty against Sections 127, 129(1), 125 and 113 of the GST Act. It advances the author’s position that, once the same transportation lapse has been adjudicated under Section 129, the Department cannot initiate a fresh penalty proceeding for that identical act through the residuary mechanism. The article also considers the distinction between alternative remedies and successive penalties, the effect of annulment, the limits of appellate powers, and the jurisdictional objections available against any subsequent notice. The contention that paragraph 23 cannot support a fresh penalty is the author’s legal analysis and not a finding expressly made by the Tribunal.
The Question
When a penalty under Section 129 for moving goods without an e-way bill is set aside, can the Department come back for the same omission under Section 122 or Section 125? Our answer is no. Once the Revenue has chosen the Section 129 route for an act committed in transit, and that route has failed, the Act leaves no other door open for the same act.
The question is no longer academic. On 09.10.2026 the Prayagraj State Bench of the GST Appellate Tribunal allowed M/s Saraswati Motors v. Mohammad Yahiya Ansari & Ors., APL/6/ALB/2026, quashed a Section 129 penalty in full, and then, in para 23, granted the Department liberty to proceed under Section 122 or Section 125 for the same lapse. This article examines whether that liberty can stand within the four corners of the Act.
The Order In Brief
An authorised Hero dealer was moving six motorcycles to a sub dealer in Prayagraj on 23.11.2021. The driver carried a valid e-invoice with IRN, QR code and the engine and chassis number of every unit, but no e-way bill. The Mobile Squad issued MOV-07 and passed the final order under Section 129(3) in MOV-09 fifty seven minutes later, demanding tax and equal penalty of Rs. 1,77,248. The first appellate authority upheld it on a strict liability reading.
The Tribunal reversed on three findings:
Under the unamended Section 129(6), in force until 01.01.2022, Section 129 led into Section 130, and intent to evade tax was therefore a necessary condition for penalty (paras 16.3 to 16.10).
Registered two wheelers, traceable by engine and chassis number and reported in GSTR-1 and GSTR-3B, left no realistic scope for evasion (paras 15 to 17).
An order passed within an hour of the show cause notice violated Section 75(4) and was a jurisdictional nullity (para 18.1).
The impugned orders were set aside, the penalty quashed and refund with interest directed. Then came para 23: because the non generation of the e-way bill was an undisputed procedural breach, the Department was given liberty to proceed, in due course of law, under provisions such as Section 122 or Section 125, for the documentation lapse.
Section 127: The Bar Written Into The Act
Section 122 states what penalty attaches to an offence. It does not, by itself, say how that penalty is to be imposed. Where no other proceeding is pending or concluded, the machinery is Section 127, which permits the proper officer to levy a penalty only where the matter is not covered under any proceedings under Sections 62, 63, 64, 73, 74, 74A, 129 or 130.
The list is deliberate. Parliament identified the proceedings that carry their own penalty and withdrew those matters from the residuary power. Transporting goods without an e-way bill, detected in transit, is precisely the matter that Section 129 governs. Once proceedings under Section 129 were initiated for that act, the matter stood covered, and Section 127 ceased to be available for it.
The consequence is simple. A penalty under Section 122(1)(xiv) for the same transport cannot be imposed after Section 129 proceedings have been taken, whatever their outcome. The liberty in para 23 points the officer towards a power the Act itself says he does not have.
Section 129(1): The Special Code For Goods In Transit
Section 129(1) opens with the words Notwithstanding anything contained in this Act. Where goods are transported in contravention of the Act or the Rules, it is Section 129, and not the general penalty clauses, that governs the consequence. Section 122(1)(xiv) and Section 129 describe the same act: moving taxable goods without the prescribed documents. When two provisions cover the same ground, the special one with a non obstante clause prevails, and Section 127 confirms that choice by excluding matters covered under Section 129.
The non obstante clause also answers the argument that movement is now complete. Section 122 does not acquire a fresh life once the goods reach the buyer. The contravention was detected in transit, dealt with in transit, and adjudicated under the provision meant for transit. Completion of the journey ends the Section 129 jurisdiction; it does not hand the matter over to Section 122.
Section 125: A Residuary Clause With Nothing Left To Cover
Section 125 applies only to a contravention for which no penalty is separately provided in the Act. Transport without an e-way bill has two separate penalty provisions, Section 129 and Section 122(1)(xiv). The general penalty therefore never reaches this act, with or without a liberty from the Tribunal.
Circular No. 64/38/2018-GST dated 14.09.2018, which prescribes Rs. 500 under each Act for minor errors, does not change this. It speaks of errors in an e-way bill that was generated, such as a mistake in the PIN code or a digit of the vehicle number. It cannot be stretched into a separate head of penalty for an e-way bill that was not generated at all, and a circular cannot enlarge Section 125 in any case.
What Section 113 Allows The Tribunal To Do
Under Section 113(1) the Tribunal, after hearing the parties, may pass such orders as it thinks fit, confirming, modifying or annulling the order appealed against, or may refer the case back. The words “as it thinks fit” govern the choice among those outcomes; they do not create a further power to set fresh penal proceedings in motion under a different provision.
In Saraswati Motors the Tribunal chose to annul. The APL-04A records in terms that the order is not a remand. A liberty to start new proceedings for the very act on which the annulled order rested is, in substance, a remand under another name, and one the Tribunal had expressly declined to make.
Two further features weaken the liberty. First, the Department filed no appeal and no memorandum of cross objections under Section 112(5), and its oral case was only to support the orders below (para 10). The liberty was relief nobody prayed for. Second, it was granted in the assessee’s own appeal. An appellant who succeeds on every point should not leave the Tribunal exposed to a proceeding that did not exist when it filed.
A liberty cannot confer jurisdiction. The phrase in due course of law in para 23 is itself an acknowledgment of that. If the course of law, read through Sections 127, 129(1) and 125, leads nowhere, the liberty leads nowhere too.
Analysis Of The Proposition
The statutory reading set out above rests on four connected propositions. Each deserves to be tested on its own, because the strength of the conclusion depends on each of them holding.
First: An Annulled Order Still Leaves The Matter Covered
The Tribunal described the Section 129 order as a jurisdictional nullity in para 18.1. It may be said that a void order leaves nothing behind, so that the matter was never covered under Section 129 at all. That reading does not survive a close look at the language of Section 127.
Section 127 does not ask whether an order survives. It asks whether the matter is covered under any proceedings under the listed sections. A proceeding is a course of action, not its end product. Under Section 129 it begins with detention and the notice in MOV-07, passes through adjudication in MOV-09, and runs through the first appeal under Section 107 and the second appeal under Section 112. In Saraswati Motors every one of those stages took place. The matter was not merely touched by Section 129; it was carried through the entire statutory hierarchy under that section.
The doctrine of merger points the same way. Once an appellate authority decides the matter, the order of the lower authority merges into the appellate order, and it is the appellate order that governs. The Section 129 proceedings in this case did not vanish when the MOV-09 was set aside. They culminated in a final decision of the Tribunal that no penalty is leviable for this act under Section 129. That decision is itself the conclusion of the proceeding which covers the matter.
The contrary reading would also lead to an absurd result. If every successful appeal against a Section 129 order reopened the residuary power under Section 127, an assessee who wins would be in a worse position than one who loses, since the loser’s matter is at least closed. Worse, an officer could pass a hasty order under Section 129, and when it is struck down for want of a hearing, start afresh under Section 122. The statute cannot be read to reward the very haste the Tribunal condemned in para 18.1.
Second: An Alternative Plea Cannot Create Jurisdiction
Para 19 records that the appellant argued, in the alternative, that at most a penalty of Rs. 10,000 under Section 122(xiv) could be justified. It may appear that the liberty in para 23 simply grants what the appellant itself conceded.
An alternative submission is, by its nature, hypothetical. It says: even if the primary argument fails, the exposure cannot exceed a certain limit. The primary argument did not fail. The Tribunal accepted it on every count, and the alternative plea was never reached. Para 23 therefore does not rest on a concession the Tribunal had to act upon.
More fundamentally, a concession on a question of law does not bind the party making it, and there is no estoppel against a statute. Jurisdiction is conferred by the Act and cannot be created by agreement, acquiescence or a pleading made to limit risk. If Sections 127 and 129(1) withdraw the matter from Section 122, no submission at the Bar can restore it. It is also telling that the Tribunal did not itself impose Rs. 10,000, as the Madras High Court did in Tvl. R.K. Motors v. State Tax Officer. It left the question to a future proceeding, which is exactly what the statutory bar forbids.
Third: The Choice Is Between Routes, Not A Licence To Take Both
In M/s Shyam Sel and Power Ltd. v. State of U.P. (Allahabad High Court, 2023), quoted in para 19, the Court observed that the authority could have initiated proceedings under Section 122 instead of Section 129. The observation is sometimes read as authority for a fresh Section 122 penalty once the Section 129 penalty falls.
The words chosen by the Court do not bear that reading. Instead of describes alternatives. The Court was identifying the route that ought to have been chosen at the threshold, not reserving a second route to be pursued after the first failed. That is the ordinary principle of election: where the law offers two remedies for the same wrong, a party who elects one and pursues it to a conclusion cannot later turn to the other for the same cause.
The structure of the Act reflects that principle. Section 127 is drafted as a residuary provision, available only where none of the specific proceedings has been taken. Section 75(13) expressly the same policy for Sections 73, 74 and 74A by forbidding a second penalty for the same act or omission under any other provision. Section 129 is not named in Section 75(13), but it does not need to be: Section 127 achieves the same result for it by withdrawing the matter from the residuary power altogether. Read together, the two provisions show a consistent legislative design. One act, one proceeding, one penalty.
Fourth: The Bar Is One Of Jurisdiction, Not Of Merit
Section 122(1)(xiv) does not require intent to evade tax. It may therefore be thought that the Tribunal’s finding of no mens rea leaves Section 122 untouched, and that para 23 is consistent with the rest of the order.
That is correct as far as it goes, but it answers a question no one is asking. The objection to a fresh penalty is not that the assessee lacked intent. It is that the officer lacks jurisdiction to levy any second penalty for the same act. A defect of jurisdiction is anterior to merit. Where it exists, the absence or presence of intent is never reached.
Two further considerations reinforce the bar. The first is time. The transport took place on 23.11.2021. Section 127 prescribes no period of limitation, but it is settled that a power conferred without a fixed period must still be exercised within a reasonable time. Fresh proceedings initiated about five years after the event, and only after the assessee succeeded before the Tribunal, would be difficult to defend on that test alone.
The second is fairness. The assessee has already borne the consequences of the same omission: detention of six motorcycles and the vehicle, an order passed without a hearing, and the deprivation of Rs. 1,77,248 from November 2021 until refund. To subject the same act to a further penalty, after all of that has been held unlawful, would punish the assessee twice for one lapse. The Act, read as a whole, does not permit that result.
Conclusion
The Act gives the Revenue a choice when goods move without an e-way bill: proceed under Section 129 while the goods are in transit, or, where no such proceeding is taken, under Section 122 through Section 127. It does not give both. Once the Section 129 route is chosen and the penalty under it is annulled, Section 127 shuts the residuary door, Section 129(1) overrides the general clauses, and Section 125 has nothing left to cover.
Para 23 of Saraswati Motors is therefore a liberty without a power behind it. It is open to challenge under Section 117 as a substantial question of law, and, even if left alone, it furnishes no answer to these objections when a notice is issued under it. The principle deserves a clear statement from the High Court: when Section 129 falls, nothing survives for the same act.
FULL TEXT OF THE JUDGMENT/ORDER OF GSTAT, PRAYAGRAJ
1. This appeal has been filed under Section 112 of the Central Goods and Services Tax Act, 2017 and the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to jointly as “the Act”) by M/s Saraswati Motors against the Order-in-Appeal dated 16/01/2024 passed by the First Appellate Authority (Additional Commissioner Grade-II (Appeal)-II, State Tax, Prayagraj) in Form GST APL-04 (Appeal Case Ref. No. AD090522019221J), upholding the demand order dated 25/11/2021 passed under Section 129(3) of the Act in Form GST MOV-09 by the Assistant Commissioner, Mobile Squad-3, State Tax, Prayagraj.
FACTS OF THE CASE
2. The appellant is an authorised dealer for M/s Hero MotoCorp Ltd. On 23.11.2021, the appellant was transporting six (6) motorcycles to M/s Prakash Motors, Mauaima, Prayagraj, through Vehicle No. UP70HT4103. The vehicle was intercepted on the Soraon–Pratapgarh Road, Soraon, Prayagraj, by the Assistant Commissioner, Mobile Squad- 3, State Tax, Prayagraj. The consignment, comprising six Hero motorcycles valued at ₹4,05,138.00 (taxable value ₹3,16,514.04), was being transported from the appellant, M/s Saraswati Motors, Muir Road, Rajapur, Prayagraj, to the purchaser, M/s Prakash Motors. Upon inspection, the driver produced a valid e-Invoice (No. SM-MC/21- 22/1924 dated 22.11.2021) listing the specific engine and chassis numbers of all six units, but was unable to produce an e-way bill.
3. The e-Invoice reflected a total consignment value of ₹4,05,138.00, comprising a taxable value of ₹3,16,514.04 and CGST and SGST of ₹44,311.98 each. The invoice carried complete digital authentication features, including the e-Invoice QR Code, the Acknowledgement Number and Date, and the unique Invoice Reference Number (IRN). Crucially, to establish physical traceability, the document also recorded the individual Engine Number and Chassis (Frame) Number of each of the six motorcycles.
4. The only document missing at the time of interception was the GST E- Way Bill (Form GST EWB-01). In his recorded statement, the driver explained that 22.11.2021 had been a business holiday and that the dealership’s computer operator was in home isolation owing to COVID- 19, which prompted him to move the consignment early, before regular office hours, to meet an urgent delivery request. The vehicle and consignment were thereafter taken into custody.
5. Enforcement proceedings moved rapidly over the following two days. On 25.11.2021, at 14:39:55 hrs, the inspecting officer ordered physical verification (Form GST MOV-02), and the physical verification report (Form GST MOV-04), completed at 14:40:17 hrs, revealed no discrepancy beyond the missing e-way bill. At 14:47:51 hrs, the officer served a Detention Order (Form GST MOV-06) together with a Show Cause Notice (Form GST MOV-07), demanding tax of ₹88,623.94 and an equal penalty of ₹88,623.94 (total ₹1,77,248.00), and directed the appellant to appear on 30.11.2021.
6. To secure immediate release of the seized motorcycles, M/s Saraswati Motors deposited the full amount of ₹1,77,248.00 under protest through internet banking at 15:39:55 hrs (CPIN 21110900396215). Five minutes later, and merely fifty-seven minutes after the Show Cause Notice was issued, the officer passed the final demand order under Section 129(3) of the Act (Form GST MOV-09) at 15:44:41 hrs, along with a summary order in Form GST DRC-07. The vehicle and consignment were released from detention later that day upon verification of the deposit, concluding the proceedings under Section 129 of the Act.
7. M/s Saraswati Motors challenged this determination before the First Appellate Authority in Form GST APL-01 on five principal grounds:
i. Procedural Nullity — passing the final penalty order within fifty-seven minutes violated Section 75(4) of the Act and the principles of natural justice;
ii. Absence of Mens Rea — penalty under Section 129 requires intent to evade tax, which was impossible here as the motorcycles were uniquely identifiable by engine and chassis numbers recorded on a valid e-invoice;
iii. Pre-Taxed Status and Zero Revenue Loss — the goods were purchased pre-taxed from the manufacturer, M/s Hero MotoCorp Ltd., and the outward sale was duly declared in the appellant’s GSTR-1 and GSTR- 3B returns for November 2021;
iv. Force Majeure — the delay was caused by the computer operator’s COVID-19 isolation; and
v. Alternative Penalty — at most, the omission could attract a residual procedural penalty capped at ₹10,000 under Section 122(xiv) of the Act, rather than the penalty under Section 129.
8. The First Appellate Authority, by its Order-in-Appeal dated 16.01.2024 (Form GST APL-04), dismissed the appeal and upheld the tax and penalty demand in full. It held that Section 129 creates a strict statutory liability under which the mere physical absence of an e-way bill during transit mandates penalty, irrespective of intent to evade tax. Relying on the Supreme Court’s ruling in M/s Guljag Industries v. Commercial Taxes Officer (2007) and the Calcutta High Court’s judgment in Pushpa Devi Jain (2023), the Authority held that transport contraventions are civil liabilities admitting of no administrative discretion. Applying the rule of strict statutory interpretation from Mathuram Agrawal (2000), East India Cotton (1981) and M.S. Steel and Pipes(2020), it concluded that fiscal provisions must be enforced as per their plain text. It also rejected the natural justice argument, holding that the appellant had approximately two days between the interception on 23.11.2021 and the order on 25.11.2021 within which to generate the missing e-way bill on the portal.
9. In its appeal before this Tribunal in Form GST APL-05, M/s Saraswati Motors submitted that the First Appellate Authority erred in applying Guljag Industries — a legacy sales tax precedent —, and other cited judgements, while disregarding the binding rulings of the Allahabad High Court in M/s Falguni Steels v. State of U.P. (2024), M/s J.K. Cement Ltd. v. State of U.P. (2023), and M/s Shyam Sel and Power Ltd. v. State of U.P. (2023), which hold that mens rea is an indispensable prerequisite for penalty under Section 129. The appellant reiterated that the unique chassis numbers, full GSTR return matching, and manufacturer invoice integration rule out any clandestine removal, and that the fifty-seven-minute adjudication window was a fatal jurisdictional defect. The appellant prayed that both the Order-in-Appeal dated 16.01.2024 and the original order dated 25.11.2021 be set aside, and for a full refund of ₹1,77,248.00 deposited under protest, together with statutory interest.
10. During the hearings, the learned Authorised Representative for the Respondent Revenue submitted that the Revenue was unable to access the GSTAT portal and could not upload its reply to the appeal memo. On 24.09.2026, when a further adjournment was sought, the Tribunal noted that sufficient opportunity had already been afforded to the Revenue — including one month granted on 25.08.2026, at its own request, to upload its reply — and that the Revenue could not be permitted to stall proceedings indefinitely; the request for adjournment was accordingly rejected. The Revenue’s representative then submitted that the Revenue was prepared to argue the appeal on oral submissions, to which learned counsel for the appellant did not object, and the appeal was accordingly heard and argued on merits by both sides. The Revenue reiterated the impugned orders and submitted that the e-way bill was never generated even after the interception on 23.11.2021, indicating mala fide on the part of the appellant.
DISCUSSIONS AND FINDINGS
11. We have heard the learned Authorised Representative for the Revenue and learned counsel for the appellant at length, and have gone through the Show Cause Notice, the Order-in-Original, the Order-in-Appeal, the appeal memo with annexures, the statutory provisions and case law relied upon by both sides, and the other oral and documentary evidence on record.
12. We note, at the outset, that the appellant has for the first time, with its appeal before the Tribunal, formally annexed a ledger account of M/s Prakash Motors, which was not produced before either the adjudicating authority or the First Appellate Authority. Learned counsel for the appellant submitted that this document has been placed on record merely to substantiate references to M/s Prakash Motors already made before the authorities below. Having regard to the facts of the case, and in terms of Rule 112 of the GST Rules, 2017 read with Rule 45 of the GSTAT (Procedure) Rules, 2025, the Tribunal considers the introduction of this additional evidence to be justified and permits the same as necessary to meet the ends of justice.
Questions for Determination
13. The following questions of law arise for determination:
i. whether mens rea (intent to evade tax) is a mandatory prerequisite for levying penalty under Section 129 of the Act;
ii. whether a penalty under Section 129 can be sustained for the sole omission of an e-way bill where the transaction is accompanied by a genuine e-invoice and there is no evidence of tax evasion; and
iii. whether passing a penalty order within fifty-seven minutes of the Show Cause Notice constitutes a fatal defect to the order.
14. Before addressing these questions, we note that, in order to discharge the burden of proof under Section 155 of the Act, the appellant has placed on record its tax returns for November 2021, establishing that the transaction was fully and accurately reported. Form GSTR-1 records the e-Invoice SM-MC/21-22/1924 under the B2B section of the appellant’s outward return, reflecting the Input Tax Credit of ₹88,623.96 passed on to M/s Prakash Motors; and Form GSTR-3B shows that the aggregate monthly tax liability, inclusive of tax on these six units, was duly paid and debited from the appellant’s cash and credit ledgers.
15. On the question of possible tax evasion arising from the omission of the e-way bill during the transport of duty-paid motor-cycles, we find merit in the appellant’s submission that each of the six motorcycles is a duly identifiable product, such that no tax evasion could realistically occur. The appellant links the physical nature of two-wheelers, and the requirement of registration with the Regional Transport Office, to the impossibility of tax evasion, relying on the judgment of the Madras High Court in Tvl. R.K. Motors v. State Tax Officer (W.P. (MD) No. 1287 of 2019), where it was held, at Paragraph 12, that:
“As rightly pointed out by the learned counsel appearing for the writ petitioner, the goods in question are two wheelers. They cannot be sold without proper registration with the Motor Vehicle Authorities. That would require proper documentation. Therefore, in a case of this nature, the writ petitioner could not have evaded his statutory obligations in any manner. This aspect of the matter ought to have been taken note by the respondent.”
15.1. This Tribunal agrees that each vehicle is uniquely identifiable by its Engine and Chassis numbers, and that the Motor Vehicles Act requires a valid tax invoice and Forms 21 and 22 for RTO registration and insurance, so that a clandestine sale without payment of tax is virtually impossible. We also note that the appellate authority, despite confirming the demand, in effect accepted this position, while maintaining that it was not for the Revenue to prove intent to evade tax, since penalty under Section 129(1) of the Act is triggered purely by procedural contravention.
Findings on Mens Rea
16. Turning to the principal issue — whether mens rea is a mandatory prerequisite for levying penalty under Section 129 of the Act — we find that the First Appellate Authority, in its Order-in-Appeal dated 16.01.2024, held that penalty under Section 129(1) of the Act is triggered purely by procedural contravention, rendering the presence or absence of intent to evade tax legally irrelevant. The Authority took the view that Section 129 applies automatically upon any technical breach, irrespective of intent, noting that the expression “intent to evade” does not appear in Section 129(1), unlike the corresponding provision of the former UP VAT Act. To support this strict-liability approach, it relied on Guljag Industries, and on Pushpa Devi Jain for the proposition that a missing e-way bill leaves no administrative discretion, invoking Mathuram Agrawal and East India Cotton for the principle that tax statutes must be applied as written.
16.1. The appellant, in its appeal memo (Form GST APL-05), relied on a series of decisions of the Allahabad High Court establishing that intent to evade tax is an indispensable prerequisite (sine qua non) for invoking Section 129 — principally M/s J.K. Cement Ltd. v. State of U.P. (Writ Tax No. 44 of 2023), holding that a Section 129 penalty cannot be sustained over a minor technical fault, such as a missing e- way bill, where the accompanying documents disclose no discrepancy and no intent to evade tax; M/s Shyam Sel and Power Ltd. v. State of U.P. (Writ Tax No. 603 of 2023), holding that Section 129 must be read with Section 130, making intent to evade tax a mandatory condition for penalty; and M/s Falguni Steels v. State of U.P. (WTAX No. 146 of 2023, decided 25.01.2024), which followed both of the above rulings to set aside penalty orders passed in the absence of fraudulent intent.
16.2. The question before us is a narrow one: does penalty under Section 129 require the Revenue to establish that the taxpayer actually intended to evade tax, or may it be imposed for a mere lapse, irrespective of intent? This must be answered first by reference to the statute as it stood on the date of interception, rather than by reference to case laws alone.
16.3. The interception (23.11.2021), the Show Cause Notice (25.11.2021), and the order under Section 129(3) (25.11.2021), in the present case, all are of November 2021. Prior to its amendment by the Finance Act, 2021 (with effect from 01.01.2022), Section 129(6) provided that, where tax and penalty were not paid within the prescribed time, “further proceedings shall be initiated in accordance with the provisions of section 130”. Section 130, in turn, confines confiscation and penalty under that section to goods dealt with “with intent to evade payment of tax”. Section 129, as it then stood, was therefore not a stand- alone provision; it was the first step of a process that, if carried further, led into a section built around intent. It is this statutory link — rather than any judicial gloss — that explains why intent came to be read into Section 129 as it then stood.
16.4. This was the law before the Allahabad High Court in the three decisions principally relied upon by the appellant. In M/s Falguni Steels (Writ Tax No. 146 of 2023), concerning an interception in February 2019, the Court held that mere failure to generate an e-way bill in time does not establish intent to evade tax, particularly where the tax invoice already carried the vehicle number and tax had already been paid by the supplier, following its earlier rulings in VSL Alloys, Modern Traders, Axpress Logistics, and Roli Enterprises. In M/s Shyam Sel and Power Ltd. (Writ Tax No. 603 of 2023), concerning a November 2021 transaction, the Court again read Sections 129 and 130 together and held that penalty could not stand, in the absence of a finding of intent to evade tax, where an e-way bill had been cancelled by the buyer without the seller’s knowledge and the transaction was otherwise genuine. In M/s J.K. Cement Ltd. (Writ Tax No. 44 of 2023), concerning a shipment prior to 01.01.2022, the Court found no violation at all, since the goods moved between two points within Madhya Pradesh and were exempt from carrying an e-way bill under a state notification; its observations on intent were, in that case, not essential to the decision. All three decisions were rendered under the unamended Section 129, then linked by statute to the intent requirement in Section 130, which gives their reasoning direct application to the present case.
16.5. We have also examined the authorities relied upon by the Revenue. The Supreme Court’s ruling in Guljag Industries v. Commercial Taxes Officer arose under Section 78(5) of the Rajasthan Sales Tax Act, 1994, which contained no equivalent link to a separate intent-to-evade provision, unlike the unamended Section 129. On facts, too, the Supreme Court found that the blank declaration forms in that case were part of a deliberate scheme, so that intent was, if anything, present rather than dispensed with. Guljag Industries is accordingly distinguishable both in the statute it applied and in its own findings, and cannot be read as a general rule that the unamended Section 129 ignored intent altogether. Mathuram Agrawal and East India Cotton, cited for the principle that words must not be read into a taxing statute, are sound as general propositions but do not concern intent to evade tax. The Division Bench decision in M/s Enershell Alloys and Steels upheld a seizure for a documentary discrepancy, but the question of intent was neither raised nor argued in that case, and a point never argued cannot be a binding precedent on that point. The Kerala High Court’s ruling in M/s M.S. Steel and Pipes, though not binding on this Tribunal, points in the same direction, holding that detention under Section 129 requires an actual breach of law rather than a technical shortfall not required by the Rules.
16.6. We also derive guidance from the order of the Lucknow Bench of this Tribunal dated 19.08.2026 in M/s Lucknow Automotives, which dealt with closely comparable facts — motorcycles identified by engine and chassis numbers, no mismatch in quantity, value, or classification, and an e-way bill generated within minutes of interception. The Bench held that a genuine, bona fide lapse, unaccompanied by any indication of actual evasion, does not attract penalty under Section 129, and distinguished judgment in Writ Tax No. – 1559 of 2024 in the Allahabad High Court in M/S B M Computers v. Commissioner Commercial Taxes And 2 Others, relied upon by the Revenue, since that case involved an unfiled Part-B of the e-way bill combined with diversion of goods to a different destination — an indication of evasion absent both in Lucknow Automotives and in the present appeal.
16.7. On the facts of the present case, the vehicle was intercepted on 23.11.2021, the Show Cause Notice was issued on 25.11.2021, and the final order under Section 129(3) was passed the same day — all prior to 01.01.2022, the date on which the Finance Act, 2021 amended Section 129(6) and severed its link to Section 130. The unamended Section 129, tied by statute to the intent requirement in Section 130, therefore governs this appeal, placing it in the same legal setting as M/s Falguni Steels and M/s Shyam Sel, both of which arose around the same time and interpret the very statutory provision applicable here.
16.8. On facts, the appellant’s e-invoice recorded the engine and chassis number of each of the six motorcycles separately, carried a valid IRN, acknowledgment number, and QR code, and matched the figures declared in the appellant’s GSTR-1 and GSTR-3B returns. Tax on the goods had already been paid at the time of purchase from the manufacturer, well before the goods were transported. Physical verification found no mismatch in quantity, description, or destination; the sole lapse was the non-generation of the e-way bill, which the driver explained was on account of the dealership’s computer operator being under COVID-19 isolation on what was otherwise a holiday. These facts arguably present an even stronger case than M/s Falguni Steels, where the e-way bill, though delayed, was at least produced before the final order; here, no e-way bill was produced at any stage before the penalty order, which followed the Show Cause Notice by only fifty- seven minutes. This distinction — complete non-production, rather than delayed production — brings the case somewhat closer to Guljag Industries and M/s Enershell Alloys and Steels. What tips the balance back in the appellant’s favour, however, is that, unlike in Guljag Industries, there is nothing on record suggesting any attempt to conceal the goods, their value, or their destination; if anything, the engine- and chassis-linked invoice made the shipment easier, not harder, to trace. The explanation for the delay is specific and verifiable, not a vague excuse, and neither authority below recorded any finding that the appellant intended to evade tax. On balance, these facts fall within the reasoning of M/s Falguni Steels, M/s Shyam Sel, M/s J.K. Cement, and the GSTAT Lucknow Bench’s order in M/s Lucknow Automotives, rather than within the strict-liability approach in Guljag Industries.
16.9. In Pushpa Devi Jain, the taxpayer transported goods under an expired or invalid e-way bill, supported only by unsubstantiated oral claims of vehicle breakdown and no corroborating documents. By contrast, the present case involves an authorised dealer transporting goods accompanied by a valid, IRN/QR-embedded e-invoice, complete engine/chassis traceability, and full GSTR return compliance, where the delay was attributable to COVID-19 isolation. We also note that the First Appellate Authority misquoted and misapplied M/s M.S. Steel and Pipes against the appellant: in that case, the Kerala High Court ruled in favour of the taxpayer, holding that non-mention of tax details in an e- way bill format that lacked a specific tax field was not a statutory breach.
16.10. We accordingly hold that intent to evade tax was, and remains, a necessary condition for imposing penalty under Section 129 as it applied to the appellant’s transaction in November 2021, both on the wording of the law as it then stood and on the consistent reading of that wording by the jurisdictional High Court. The First Appellate Authority erred in relying on Guljag Industries and on the later, amended version of Section 129, which treats the provision as one of strict liability, and which did not apply to this transaction. Its order, together with the original penalty order under Section 129(3), cannot be sustained to the extent it treats intent to evade tax as irrelevant to the appellant’s case.
17. The second question is answered by the findings above. Once it is held that the physical nature of two-wheelers and their regulatory requirements indicate the impossibility of tax evasion, and that intent to evade tax was a necessary condition for penalty under Section 129 as it applied to the appellant’s transaction in November 2021, the question whether a Section 129 penalty can be sustained for the sole omission of an e-way bill, where the transaction is accompanied by a genuine e- invoice and there is no evidence of tax evasion, stands answered in the negative.
Findings on the Fifty-Seven-Minute Adjudication
18. On the third question, concerning the passing of the final order within fifty-seven minutes of the Show Cause Notice and whether this violates the principles of natural justice and Section 75(4) of the Act, we turn to the relevant statutory provisions. Section 129(3) of the Act, as it stood prior to 01.01.2022, provided as follows:
“The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).”
Section 75(4) of the Act provides as follows:
“An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.”
18.1. While Section 129(3), as it then stood, did not prescribe any time constraint upon the proper officer for issuing a Show Cause Notice or passing an order, the use of the word “shall” in Section 75(4) makes it mandatory to grant an opportunity of hearing where an adverse decision is contemplated. In the present case, an adverse decision was taken against the appellant, yet effectively no time was afforded to respond to the Show Cause Notice. The failure to provide a reasonable opportunity of hearing is a fatal defect that vitiates the original order. It was neither physically nor legally possible for the Adjudicating Authority to have applied its mind to the appellant’s COVID-19 explanation, or to the traceability of six motorcycles, within fifty-seven minutes; this haste renders the order a jurisdictional nullity. This Tribunal is fortified in this view by the decision in M/s Falguni Steels v. State of U.P. (Allahabad High Court, 2024), where the Show Cause Notice (MOV-07) and the penalty order (MOV-09) were both issued on 21.02.2019, immediately after the trader deposited the demanded sum under protest to secure release of the consignment; the Court held that passing summary orders on the same day, without evaluating the e-way bills presented or establishing intent to evade tax, was legally unsustainable, and quashed the penalty order.
19. The appellant has submitted, that if any penalty is warranted, it should be limited to a procedural penalty of ₹10,000 under Section 122(xiv) of the Act for a documentation lapse, rather than the penalty under Section 129. In M/s Shyam Sel and Power Ltd. v. State of U.P. (Allahabad High Court, 2023), the Court held that where a documentation error, such as a cancelled e-way bill, constitutes a minor procedural breach without intent to evade tax, Section 129 proceedings cannot be sustained, observing that:
“The authority could have initiated proceedings under section 122 of the CGST Act instead of proceedings under section 129 of the CGST Act. Section 129 of the CGST Act must be read with section 130 of the said Act, which mandate the intention to evade payment of tax………… proceedings under section 129 of the CGST Act ought not to have been initiated, but it could be done under section 122 of the CGST Act.”
Similarly, in Tvl. R.K. Motors v. State Tax Officer (Madras High Court, 2019), concerning two-wheeler consignments where the vehicle had taken a wrong route, the Court quashed the Section 129 detention and penalty orders as disproportionate and unreasonable, and, having regard to the Central Government Circular dated 14.09.2018 providing for condonation of minor documentation lapses with nominal fines, substituted the Section 129 penalty with a token procedural fine of ₹5,000 and ordered immediate release of the motorcycles.
20. We further note that, in addition to discharging its regular monthly output tax liability of ₹88,623.96 through its returns (Form GSTR-3B for November 2021), the appellant was forced to deposit a total sum of ₹1,77,248.00 under protest on 25.11.2021 (Challan reference CPIN 21110900396215, Punjab National Bank) to secure the release of the vehicle and goods. This deposit comprised ₹88,624.00 towards tax and ₹88,624.00 towards penalty. Demanding and extracting tax of ₹88,624.00 a second time under Section 129(1)(a) for the exact same consignment amounts, in substance, to unconstitutional double taxation, while levying an additional penalty of ₹88,624.00 is contrary to the statutory scheme of the Act.
ORDER
21. In view of the above findings, the impugned orders dated 25.11.2021 and 16.01.2024 are hereby set aside.
22. The penalty of ₹1,77,248/- is quashed, and the appellant is entitled to refund of the amount deposited under protest, along with applicable interest in accordance with law.
23. However, having regard to the undisputed procedural breach of Rule 138A(1) in the non-generation of the e-way bill, the Department is granted liberty to proceed, in due course of law, for imposition of a procedural penalty under the appropriate provisions (such as Section 122 or Section 125 of the Act) specifically in respect of the documentation lapse.
24. The appeal is allowed in the above terms.
