GST Tribunal Upholds Setting Aside ₹2.27 Lakh Penalty After Department Failed To Verify Alleged Undeclared Chinhat Warehouse

On 17 May 2024, officers intercepted a vehicle carrying 16,170 kg of iron scrap.

The driver produced a tax invoice, e-way bill and bilty, but stated that the goods had been loaded from an alleged undeclared warehouse at Chinhat, Lucknow, rather than the respondent’s registered place of business.

The Department imposed a penalty of ₹2,27,160 under Section 129(3) of the UPGST/CGST Act.

The First Appellate Authority set the penalty aside, finding that the goods matched the documents and that the driver’s statement was not independently corroborated.

The State Tax Department appealed under Section 112

Section 129(3) of the UPGST/CGST Act provides the basis for imposing a penalty in the circumstances addressed by that provision.

The Department invoked Section 112 to challenge the First Appellate Authority’s order before the Tribunal.

The Tribunal applied the principle that a penalty cannot be sustained solely on an uncorroborated statement where the goods and accompanying documents disclose no established discrepancy and the alleged irregularity has not been independently verified

The Tribunal noted that the invoice, e-way bill and bilty accompanied the consignment, and that no discrepancy in the description, quantity or value of the goods was established.

The Department did not independently verify the alleged Chinhat loading point or otherwise corroborate the driver’s statement.

In those circumstances, the statement alone did not justify the penalty, and the Department’s challenge to the First Appellate Authority’s decision failed

Accordingly, no penalty was determined as payable