Kerala GSTAT: Cashew Recipient With Invoice And E-Way Bill Cannot Face Section 129 Penalty For Supplier’s Missing E-Invoice

The appellant, registered in Tamil Nadu and Kerala, transferred 4,182 kg of cashew kernels between its two GST registrations on 14 November 2021.

The goods were accompanied by a tax invoice and a valid e-way bill; the quantity, description, and consignment details were not disputed.

The vehicle was detained because the Tamil Nadu unit had not generated an e-invoice under Rule 48(4) of the CGST/KGST Rules.

A penalty of ₹1,01,631 was imposed under Section 129(1), and the first appellate authority upheld the action.

The appellant appealed to the Tribunal and also filed a rectification application, which it stated had been uploaded erroneously.

Section 129(1) of the CGST/KGST Acts applies where goods are transported or stored in transit in contravention of the Act or Rules.

Section 31 and Rules 46 and 48 address the supplier’s obligation to issue a tax invoice and, for notified classes of registered persons, to prepare the invoice in the prescribed e-invoice manner; the Tribunal held that these invoicing obligations rest on the supplier and do not impose the supplier’s e-invoice-generation duty on the recipient.

The Tribunal also relied on Osel Devices Ltd. v. Assistant Enforcement Officer, which applied the principle that Section 129 penalties are not justified for minor discrepancies absent circumstances such as an intention to evade tax, and on Nancy Trading Company v. State of U.P., concerning detention for failure to generate an e-tax invoice where accompanying documents were otherwise in order.

The Tribunal found that the goods were accompanied by a tax invoice and valid e-way bill, and that there was no discrepancy in the goods or the accompanying documents.

Although the movement between the appellant’s Tamil Nadu and Kerala registrations was an inter-State taxable supply between distinct persons, the invoice and the appellant’s returns showed the transaction and IGST.

The omission to generate the e-invoice was attributable to the supplier; the recipient had produced the documents required of it during transit.

The Tribunal therefore held that this omission did not justify detaining the goods or imposing a Section 129(1) penalty on the recipient, and that any action concerning the supplier’s invoicing omission should be taken against the supplier under the applicable GST procedures.

It dismissed the rectification application as erroneously filed and infructuous, set aside the Order-in-Appeal dated 27 April 2022, and allowed the appeal with consequential relief.