GST Tribunal Orders ₹2.17 Lakh Refund After Job-Work Goods Detained For No IGST Despite Valid E-Way Bill And Delivery Challan

The appellant, a registered job worker, processed PP granules received from its Solapur unit and returned PP woven fabric, wastage and scrap to that unit.

The consignment, intercepted on 24 January 2024, was accompanied by an e-way bill identifying the movement as job work and a delivery challan.

The proper officer detained the goods under Section 129, asserting that the goods were not capital goods and that IGST had not been charged on the inter-State movement.

The appellant paid tax and penalty of ₹1,08,882 each to secure release.

The Appellate Authority dismissed the appeal and upheld the demand; the appellant then appealed to the Tribunal.

Before the Tribunal, the appellant also raised a legal challenge to the use of the pre-amended version of Section 129.

Section 129 of the CGST Act empowers detention or seizure of goods and conveyances in transit where the Act or rules have been contravened; its amendment, effective 1 January 2022, changed the amount payable for release from tax and penalty to a penalty equal to 200% of the tax payable, but did not remove the power to detain goods.

Section 143 permits a registered person to send inputs or capital goods to a job worker without payment of tax, subject to the statutory conditions; Rule 55 governs the relevant delivery-challan documentation, and Rule 138 governs e-way bills.

Under National Thermal Power Co. Ltd. v. CIT, a pure question of law arising from facts on record may be raised before the Tribunal where necessary to determine tax liability.

The Tribunal held that K. Sashidhar v. Indian Overseas Bank, on the non-retrospective operation of substituted provisions, did not establish that the proper officer’s error in applying the former release-payment regime nullified the entire proceeding.

The additional ground was a pure question of law based on the record and was therefore admissible under the principle in National Thermal Power Co.

However, the change to Section 129 altered the amount payable for release, not the officer’s underlying power to detain goods; applying the former provision was an error in the amount demanded, but did not render the proceedings void ab initio.

On the merits, the e-way bill and delivery challan identified the movement as job work and contained the information required by Rules 55 and 138.

The officer’s reliance on the absence of IGST did not establish a contravention warranting detention, particularly without identifying a taxable supply; Section 143 applied to inputs as well as capital goods.

The Appellate Authority’s inconsistent findings about whether the movement was treated as intra-State or whether IGST was omitted, and its failure to consider Section 143 and Rule 55, further undermined its decision.

It held that the appellant’s movement documents complied with the applicable rules and that no violation warranting detention had been established.

The respondent was directed to refund ₹1,08,882 in tax and ₹1,08,882 in penalty, totalling ₹2,17,764, within eight weeks, with statutory interest, subject to verification of the demand and payment records.