DB DAZZLE MODULAR SYSTEMS vs JCCT (e-Audit), Commissioner of Commercial Taxes

GSTAT
State Bench Bengaluru
Court No. Court II
APL/287/BUR/2026
DB DAZZLE MODULAR SYSTEMS .............Appellant
Versus
COMMISSIONER OF COMMERCIAL TAXES, COMMISSIONER OF
COMMERCIAL TAXES, VANIYA THERIGE KARYALAYA KALIDASA
ROAD GANDHINAGAR BANGALORE â?? 560009 & ORS. .............Respondent
Quorum
Hon’ble Sudha Koka, Member (Technical)
Hon’ble Srikanth Venkatraman, Member(Judicial)
Counsel for Appellant
RAJENDRAN
Counsel for Respondent
SGST AR TEAM
Form GST APL-04A
[See rules 113(1) & 115]
Summary of the order and demand after issue of order by the GST Appellate Tribunal
whether remand order : No
Order reference no. : ZA290171026000145H Date of order : 28/10/2026
1. GSTIN/Temporary ID/UIN - 29AIMPP9203C3Z2
Appeal Case Reference no. -
2. Date - 03/05/2026
APL/287/BUR/2026
Name of the appellant - DB DAZZLE MODULAR SYSTEMS , [email protected] ,
3.
9448370989
Name of the respondant -
1. JCCT (e-Audit) , [email protected] , 9448811330
2. Commissioner of Commercial Taxes
4.
5. Order appealed against -
(5.1) Order Type - Enforcement Order
(5.2) Ref Number - GST.AP.116/22-23 Date - 28/08/2023

6. Personal Hearing - 28/10/2026 30/09/2026
7. Status of Order under Appeal - Reject - Order under Appeal is annulled
Order in brief - 1. Core Dispute & Subject Matter • The Issue: Levying a harsh 200%
penalty under Section 129(1)(a) of the CGST Act for transit without a pre-generated electronic invoice
(IRN/QR code) when goods were accompanied by a manual invoice,delivery note, and valid e-way
bill. • The Cause: Technical portal downtime on the government’s e-Invoice Portal prevented
immediate IRN generation at the time of dispatch on 06.10.2022 (though successfully generated the
next morning). 2. Key Findings of the Tribunal • Absence of Mens Rea (Satyam Shivam Papers):
Citing the Hon’ble Supreme Court ruling in Assistant Commissioner (ST) v. M/s. Satyam Shivam
Papers Pvt. Ltd. [(2022) 14 SCC 157], the Tribunal reiterated that mens rea (intent to evade tax) is a
mandatory prerequisite for invoking Section 129 penalties.Mechanical penalization for minor
reporting/portal lapses absent fraudulent intent is legally unsustainable. • Doctrine of Impossibility
(Lex non cogit ad impossibilia): A taxpayer cannot be penalized for failing to generate an e-invoice
when blockages stem from server congestion or technical glitches on the government portal, especially
when absolute financial and physical transparency is maintained. • Distinction of Case Law: o
TheDepartment'srelianceonM/s.JhansiEnterpriseswasrejectedbecause that case involved a
complete, catastrophic absence of foundational documents. o
ReaffirmedtheratiofromAthiyanExportsv.StateTaxOfficer[[2025]176 taxmann.com 137 (Madras)] and
Nancy Trading Company, confirming that online/portal issues accompanied by valid transit
documents do not constitute tax evasion, and that paying a penalty under economic duress (via DRC-
03) to release a detained vehicle does not estop an assessee from seeking appellate relief. 3. Operative
Tribunal Order 1. AppealAllowed:Theimpugnedappellateorderconfirmingthe200%penaltyisset aside.
2. Refund Mandated: The Respondent authorities are directed to refund the entire penalty amount of ?
5,81,316 paid via DRC-03 under protest, along with statutory interest, within eight weeks of the order.
8.
Summary of Order
9. If demand order then whether demand quantified: Yes
Section-I
Particulars
Central tax State/UT tax Integrated tax Cess Total
Disputed

Amount
Determined
Amount
Disputed
Amount
Determined
Amount
Disputed
Amount
Determined
Amount
Disputed
Amount
Determined
Amount
Disputed
Amount
Determined
Amount
1 2 3 4 5 6 7 8 9 10 11
0 0 0 0 0 0 0 0 0 0
(a) Tax
(b)
0 0 0 0 0 0 0 0 0 0
Interest
290658 0 290658 0 0 0 0 0 581316 0
(c) Penalty
(d) Fees 0 0 0 0 0 0 0 0 0 0
(e) Others 0 0 0 0 0
0 0 0 0 0
(f) Refund
10. For Other orders and Demand orders which are not quantified:

Order by GST
Appellate
Tribunal
Issues as raised
Issues as determined by Appellate/Revisional authority
by proper officer
Penalty leviable since the goods were accompanied by manual tax
invoice, EWB and Delivery Challan, without being accompanied by
E-Invoice.
Penalty
Quashed
Levy of Penalty
Place :BENGALURU
Signature
Date : 28.10.2026
BENGALURU Sudha Koka
Designation : Member
Jurisdiction :Bengaluru

ORDER
Order Per: Sudha Koka, Member Technical (Centre)

TABLE OF CONTENTS
1. Introduction
2. Brief Facts of the Case
3. Chronology of Events (Table of Facts)
4. Findings and Order of the First Appellate Authority
5. Grounds of Appeal Raised by the Appellant
6. Written Counter Filed by the Respondent Department
7. Appellant’s Rejoinder to the Written Counter
8. Tribunal’s Analysis and Reasoning
9. Conclusion
10. Order

1. INTRODUCTION This appeal is instituted under Section 112 of the Central Goods and Services Tax
(CGST) Act, 2017, read with the Karnataka Goods and Services Tax (KGST) Act, 2017 and Integrated
Goods and Services Tax (IGST) Act, 2017, assailing the appellate order passed by the First Appellate
Authority. The said order confirmed a draconian 200% penalty levied under Section 129(1)(a) of the
Act consequent to the interception of a commercial consignment in transit. The core dispute centers
around the non-generation of an electronic invoice (e-invoice) at the exact moment of removal due to a
government portal downtime, despite the physical consignment being accompanied by a valid e-Way
Bill, a commercial Invoice, and a Delivery Note, with zero mismatch in quantity, quality, or tax
payment.

2. BRIEF FACTS OF THE CASE
2.1. The Appellant, M/s. DB Dazzle Modular Systems, is a proprietorship firm engaged in the manufacture
and supply of Raised Access Flooring Tiles. Pursuant to Notification No. 17/2022-Central Tax, e-invoicing
provisions became statutorily applicable to the Appellant firm effective from 01.10.2022 .

2.2. On 06.10.2022 , the Appellant attempted to generate an electronic invoice for an inter-State outward
supply of goods to M/s. Tablespace Construction Private Limited, Maharashtra (covered under Invoice
No.DB/IN/22-23/256). However, the government’s common e-Invoice Portal suffered unforeseen technical
downtime, failing to process the generation of the Invoice Reference Number (IRN) at the hour of dispatch.

2.3. Because the goods were urgently required at the recipient’s project site in Pune, the Appellant generated
e-Way Bill No. 1215 3734 6053 for vehicle No. MH14 GU9252 at 7:20 PM on 06.10.2022 and dispatched
the consignment accompanied by a commercial Invoice and a Delivery Note (DB/DC/22-23/422).

2.4. While the consignment was in transit, the proper officer intercepted the vehicle at NH-04 Bypass,
Davanagere at 7:30 AM on 07.10.2022 . Although the driver produced the e-Way Bill, commercial Invoice,
and Delivery Note, the authorities detained the vehicle solely on the ground that an electronic invoice (with
IRN/QR code) was missing at the precise moment of interception (the IRN was successfully generated and
acknowledged on the portal later that same morning).

2.5. On 09.10.2022 , the Adjudicating Authority issued a Show Cause Notice in Form MOV-07 , proposing a
200% penalty under Section 129(1)(a) of the CGST Act (read with Section 20 of the IGST Act), treating
transit without an e-invoice as transit without any invoice. To stop continued commercial detention and
business disruption, the Appellant paid the 200% penalty (aggregating to ?5,81,316 across CGST and SGST
heads, corresponding to twice the invoice tax of ?2,90,658.01) under protest via DRC-03 , following which

the vehicle and goods were released vide Form MOV-09 (Order No. 14/2022-23) dated 09.10.2022 .

2.6. The statutory appeal filed before the First Appellate Authority challenging the penalty was dismissed,
leading to the institution of the present appeal before this Tribunal.

3. CHRONOLOGY OF EVENTS (TABLE OF FACTS)
Date /
Event Description & Procedural Milestones
Stage
01.10.2022
e-Invoicing provisions became statutorily applicable to the Appellant firm pursuant to

Notification No. 17/2022-Central Tax.
Unforeseen technical downtime on the e-Invoice Portal prevented e-invoice generation for
06.10.2022
Invoice No. DB/IN/22-23/256. The Appellant generated e-Way Bill No. 1215 3734 6053 for

vehicle No. MH14 GU9252 at 7:20 PM and dispatched the goods with a manual Tax Invoice
and Delivery Note.
07.10.2022
Interception and detention of the vehicle at NH-04 Bypass, Davanagere at 7:30 AM, due to

the absence of a pre-generated electronic invoice (IRN generated later on the same day).
09.10.2022
Issuance of Form MOV-07 and MOV-09. Penalty of ?5,81,316 paid under economic duress

via DRC-03 following a letter attributing clerical/portal delay; goods and vehicle released.

28.08.2023
The First Appellate Authority (Joint Commissioner of Commercial Taxes (Appeals)-5,

Bengaluru) dismissed Appeal No. GST.AP.116/22-23 and confirmed the penalty order.
18.04.2026
The Appellant instituted the present appeal before the Tribunal challenging the appellate

order and seeking a setting aside and refund of the penalty.
4. FINDINGS AND ORDER OF THE FIRST APPELLATE AUTHORITY
The First Appellate Authority rejected the Appellant's appeal and confirmed the adjudication order through
Order No. GST.AP.116/22-23 dated 28.08.2023 , based on the following primary findings:

Mandatory E-Invoicing & Rule 48(5): Since the Appellant's turnover exceeded the threshold under
Notification No. 17/2022, e-invoicing was compulsory. Citing Rule 48(5) , it ruled that any invoice
issued in any manner other than via the IRP portal "shall not be treated as an invoice." Consequently,
the manual invoice carried during transit was held to have no legal standing.

Rejection of Rule 55(4) Defense: The lower appellate authority held in paragraph 11 that Rule 55(4)
(transportation under delivery notes/subsequent invoicing) cannot override mandatory e-invoicing
requirements applicable to notified taxpayers.

Exclusion of Mens Rea & Evaluation of Intent: Relying on judicial authorities such as State of
Gujarat v. Saw Pipes Ltd. [(2023) 5 SCC 128] and Assistant Commercial Tax Officer v. Bajaj
Electricals Ltd. [(2008) 18 VST 436 (SC)], paragraphs 12–17 concluded that penalty under Section
129 is a civil liability for breach of statutory obligations, and mens rea need not be proved once a
statutory contravention is established.

Order of the First Appellate Authority: The First Appellate Authority dismissed the appeal in
paragraph 18, upholding the 200% penalty levied under Section 129(1)(a).

5. GROUNDS OF APPEAL RAISED BY THE APPELLANT
The Appellant assails the impugned penalty orders on six substantive grounds:

Rule 55(4) Protection: The adjudicating authority failed to consider Rule 55(4), which permits
transportation without immediate issuance of an invoice under delivery notes, subject to subsequent
invoicing.

Portal Failure ( Force Majeure ): Technical portal issues prevented the pre-generation of the e-invoice
prior to dispatch, while transportation was fully backed by a manual invoice, e-way bill, and delivery
note with absolute transparency.

Absence of Evasion History: The Department cannot arbitrarily presume tax evasion or impose
penalties without any history of tax evasion or evidence of concealed goods.

Lack of Mens Rea : Penalty cannot be imposed under Section 129 without establishing a clear
intention to evade tax, and no evidence of fraudulent intent was produced by the officer.

Illegal Detention Despite Companion Documents: Detention and recovery were illegal because all
necessary documents accompanied the goods, and physical verification confirmed zero quantity or
value discrepancies.

Non-application of Mind: The appellate authority affirmed the penalty mechanically without applying
its mind to the statutory provisions and factual submissions.

6. WRITTEN COUNTER-AFFIDAVIT FILED BY THE RESPONDENT DEPARTMENT
The Respondent Department filed a detailed counter-affidavit contesting all grounds of appeal:

On Rule 55(4): Acknowledged the provision for subsequent invoicing but argued that the taxpayer
must specifically establish why portal generation was impossible; mere possession of a delivery
challan does not dispense with e-invoicing.

On Portal Failure: Emphasized a timing discrepancy (e-way bill generated on 06.10.2022 at 7:20 PM;
IRN acknowledged on 07.10.2022). Highlighted an early letter mentioned in MOV-09 attributing the
lapse to "clerical mistakes," arguing that general assertions of portal difficulty without
contemporaneous error logs are insufficient.

On Tax Evasion History & Intention: Maintained that Section 129 proceedings rest on a clear
documentary contravention at interception, rendering a history of tax evasion or mens rea irrelevant.

On Case Law Distinctions:

Distinguished Athiyan Exports v. State Tax Officer [[2025] 176 taxmann.com 137 (Madras)] ,
arguing that its relief was granted specifically for an established export transaction , which does not
automatically extend to domestic inter-State supplies (Karnataka to Maharashtra).

Distinguished M/s. Jhansi Enterprises v. State of U.P. [2024:AHC:37625], noting that while Jhansi
involved a total lack of documents, the present case involves an e-invoicing failure despite a manual
invoice and e-way bill being present.

7. APPELLANT’S REJOINDER TO THE WRITTEN COUNTER
In response to the Respondent Revenue’s written counter, the Appellant filed a comprehensive Rejoinder
countering the Department's contentions:

Inapplicability of Strict Liability to State-Side Failures: Reasserted the principle that strict liability
cannot be invoked when compliance is physically blocked by portal downtime.

Fallacy of Export vs. Interstate Distinction: Argued that exports are inter-State supplies under
Section 7(5) of the IGST Act, and e-invoice guidelines apply uniformly across all B2B supplies and
ratio of Athiyan Exports applies to their case

Rebuttal on DRC-03 Payment: Reaffirmed that paying a penalty under economic duress to release a
detained commercial vehicle does not estop an assessee from challenging an illegal exaction in
appellate forums, drawing support from the ratio laid down in Athiyan Exports v. State Tax Officer

[[2025] 176 taxmann.com 137 (Madras)].

8. OUR ANALYSIS AND REASONING
We have carefully evaluated the rival contentions, the statutory provisions, the written counter filed by
the Revenue, the rejoinder of the appellant written on the counter of Revenue, and the judicial precedents
cited by both parties and the submissions of both the parties during oral hearings. Our considered legal
findings are as below:
Harmonious Construction of Statutory Provisions and Operational Realities: Section 68 of the
Act read with Rule 138 requires the person in charge of a conveyance to carry the invoice and a valid
e-way bill. Here, the Appellant fully complied with e-way bill requirements (EWB No. 1215 3734
6053 for vehicle MH14 GU9252). Furthermore, Rule 55(4) acts as a statutory safety valve for
situations where tax invoices cannot be issued at removal. While Rule 48(4) and Rule 48(5) mandate e-
invoicing for notified entities and invalidate non-portal invoices for input tax credit matching, they
cannot be interpreted to penalize a taxpayer as a "tax evader" when an electronic generation failure is
triggered by server congestion or downtime on the government's portal—evidenced by the fact that the
IRN was successfully generated and acknowledged the very next morning on 07.10.2022. Section 129
targets clandestine operations and deliberate non-disclosure, not bonafide compliance hampered by
technical glitches.

Paramountcy of Mens Rea under Section 129 — The Landmark Ratio in Satyam Shivam Papers :
Crucially, the Hon’ble Supreme Court of India in Assistant Commissioner (ST) v. M/s. Satyam
Shivam Papers Pvt. Ltd. [(2022) 14 SCC 157] authoritatively established that the presence of mens
rea (a deliberate intent to evade tax) is a sine qua non for the imposition of penalties under Section 129
of the CGST Act. The Apex Court held that mechanical penalization for technical or procedural
reporting lapses—absent any finding or evidence of an intention to defraud the revenue—is completely
unsustainable. In the present case, the physical consignment was accompanied by a valid e-Way Bill, a

commercial Invoice, and a Delivery Note, with zero mismatch in quantity, quality, value, or tax
payment. The absence of the electronic IRN was due to a temporary portal glitch, which was
subsequently rectified the same morning. In the complete absence of any contumacious conduct or
fraudulent intent, invoking Section 129 to levy a crushing 200% penalty runs directly counter to the
binding mandate of Satyam Shivam Papers [(2022) 14 SCC 157].
Invalidity of the Department's Case Law Distinctions:
The Fallacy Regarding Athiyan Exports v. State Tax Officer [[2025] 176 taxmann.com 137
(Madras)]: The Department’s attempt to distinguish Athiyan Exports on the ground that it involved an export
invoice and therefore does not apply to inter-State movement is legally fallacious. Under Section 7(5) of the
IGST Act, exports are inter-State supplies, and the e-invoice notification applies uniformly to all registered
B2B transactions. An e-invoice is not a standalone separate invoice format, but rather the electronic
authentication of commercial invoice data on the IRP. When an original commercial invoice accompanies the
goods and zero mismatch or tax evasion is observed, treating the technical absence of an e-invoice as a
fraudulent offense imposes an onerous and illegal burden under Section 129. Furthermore, the ratio of
Athiyan Exports explicitly affirms that voluntary payment under economic duress via DRC-03 does not estop
an assessee from challenging illegal penalties.

The Misapplication of M/s. Jhansi Enterprises v. State of U.P. [2024:AHC:37625]: The
Department's reliance on Jhansi Enterprises is misplaced. Jhansi dealt with a total, catastrophic absence of
foundational documents (neither an invoice nor an e-way bill accompanied the goods at interception). In
sharp contrast, the Appellant meticulously maintained a valid e-Way Bill, manual Tax Invoice, and Delivery
Note. The factual presumption in Jhansi cannot apply mechanically to a transaction possessing complete
physical and financial transparency. Additionally, ratio from M/s. Nancy Trading Company v. State of U.P.
[Writ Tax No. 892 of 2023] dictate that missing an e-invoice due to portal/human error with accompanying
physical invoices/e-way bills is a venial technical mistake where Section 129 penalties cannot be sustained
without proving mens rea .

Evaluation of the DRC-03 Payment: The Department places heavy reliance on a preliminary letter
mentioned in paragraph 15 of MOV-09 where clerical/portal issues were cited. We find that paying a
penalty under protest via DRC-03 to secure the immediate release of a detained commercial vehicle is
an act performed under severe economic duress to prevent transit delays and project disruption. As
affirmed in settled jurisprudence such as Athiyan Exports v. State Tax Officer [[2025] 176
taxmann.com 137 (Madras)], such deposits do not bar a taxpayer from seeking substantive appellate
redress.
9. CONCLUSION
In summation, this Tribunal finds that the detention of the Appellant's vehicle and the subsequent
imposition of a 200% penalty under Section 129(1)(a) were founded on an over-rigid and legally flawed
interpretation of e-invoicing norms during a period of acknowledged governmental portal downtime. The law
cannot demand the impossible ( lex non cogit ad impossibilia ), nor can a technical delay in electronic IRN
generation—when fully insulated by a valid e-Way Bill, a manual Tax Invoice, and a Delivery Note
demonstrating absolute financial transparency and zero tax evasion intent—be converted into a fraudulent
evasion scheme. In the absence of mens rea as mandated by the Hon'ble Supreme Court in Satyam Shivam
Papers , and supported by the ratios of Athiyan Exports and Nancy Trading Company , the penal action taken
by the revenue authorites is wholly unsustainable in law and hence, we order as below:

ORDER

1. The appeal is allowed .
2. The impugned order passed by the First Appellate Authority ( OrderNo. GST.AP.116/22-23 dated
28.08.2023 ) upholding the penalty under Section 129(1)(a) of the CGST Act / IGST Act is hereby set
aside .
3. The Respondent is directed to refund the 200% penalty amount paid by the Appellant via DRC-03
(aggregating to ?5,81,316) within eight weeks from the date of this order with statutory interest, after
due verification of demand and payment records.

Digitally signed by
Sudha Koka
Date: 2026.10.29
10:54:08 +05'30'
Sudha Koka
(Sudha Koka)
Digitally signed by
Srikanth Venkatraman
Date: 2026.10.29
10:53:01 +05'30'
Srikanth
Venkatraman
(Srikanth Venkatraman)
Dated: 28.10.2026