GST Tribunal Sets Aside Penalty On Steel Sent For Job Work Despite Post-Interception E-Way Bill, As Notice Failed To Specify Breached Provisions

On 17 July 2020, officers intercepted a vehicle carrying HR sheets while the goods were being unloaded at the premises of Vera Display and Storage Products Pvt. Ltd.

The accompanying invoice and e-way bill showed movement from the supplier to Oxino PEB; no document authorising delivery to Vera Display was available at interception.

Oxino maintained that the goods were sent to Vera Display for job work.

An e-way bill for that movement was generated at 7:20 p.m., after the vehicle had been intercepted at 4:15 p.m.

The adjudicating authority confirmed tax and penalty under Section 129, and the first appellate authority dismissed Oxino’s appeal. Oxino appealed to the Tribunal.

Section 129(1) of the CGST Act applies to goods transported or stored in transit in contravention of the Act or Rules, and the applicable penalty is calculated by reference to the tax payable on the goods.

Section 143(1) permits a registered principal to send inputs or capital goods to a job worker without payment of tax, subject to the prescribed conditions.

The Tribunal relied on the Supreme Court’s decision in M/s Armour Security (India) Ltd v. Commissioner, CGST, Delhi East Commissionerate, which affirmed that the case made in a show-cause notice defines the proceedings: the authority cannot later rely on grounds or provisions not specified in that notice.

It also referred to the Kerala High Court’s decision in T.P. Metals & Roofings v. Assistant Tax Officer (INT), Malappuram on the treatment of transport violations where an explanation is provided and no attempt to evade tax is found.

The show-cause notice alleged only that the driver had failed to produce documents for unloading at Vera Display; it did not identify the particular statutory provisions or Rules said to have been breached.

The adjudicating authority later relied on provisions concerning job work and documentation that had not been specified in the notice. The Tribunal held that this deprived Oxino of proper notice of the case it had to meet and vitiated the proceedings.

On the merits, the adjudicating authority had recorded that Oxino produced evidence of a job-work movement and an e-way bill for that movement, although the bill was generated after interception. The Tribunal found that the delayed generation did not alter the accepted nature of the transaction.

Since Section 143(1) permits qualifying job-work movements without payment of tax, the Tribunal concluded that no tax was payable on these goods and that the Section 129 penalty, calculated by reference to tax payable, was unsustainable.

It held the proceedings vitiated by breach of natural justice and the demand unsustainable on the merits.

The appeal was allowed, the order-in-appeal was set aside, and consequential relief was granted.