Kerala GSTAT Says Section 129 Penalty Cannot Rest Solely On Missing Supplier E-Invoice When Goods Carry Tax Invoice And E-Way Bill

The appellant, a Tamil Nadu GST-registered business, transported 200 open-well pumps to a buyer in Kochi under a tax invoice and a valid e-way bill dated 10 February 2021.

On interception the next day, physical verification disclosed no discrepancy in the goods or their accompanying documents; the e-invoice had not been generated.

The appellant generated it on 11 February 2021.

The Kerala State Tax authorities detained the goods, issued notices in Forms MOV-07 and MOV-09, and imposed a demand under Section 129.

The Joint Commissioner (Appeals) rejected the appellant’s appeal.

The appellant then challenged that decision before the Tribunal.

Section 31 of the CGST/KGST Acts requires a registered supplier to issue a tax invoice before or at the time of removal of goods involving movement; Rules 46 and 48 address invoice particulars and the e-invoicing procedure for notified persons.

Section 129 concerns detention, seizure and release of goods transported in contravention of the Act or Rules.

The Tribunal reasoned that the supplier bears the obligation to prepare the e-invoice and that the recipient does not contravene Section 31 or Rules 46 and 48 merely because the supplier has not generated one.

It also relied on OSEL Devices Ltd. v. Assistant Enforcement Officer, which applied T.P. Metal Roofings to distinguish minor discrepancies from violations warranting Section 129 proceedings, and on Nancy Trading Company v. State of U.P., concerning the absence of a finding of intent to evade tax.

The Tribunal further referred to Circular No. 160/16/2021-GST on the absence of a requirement to physically carry an e-invoice.

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 quantity or description of the goods.

It noted that the e-invoice was generated the following day and that the transaction was reflected in the appellant’s GST returns.

It held that the e-invoice obligation rested on the supplier, and that its non-generation did not, on these facts, justify detaining the goods or penalising the recipient under Section 129; any omission could instead be addressed through scrutiny, audit or assessment of the supplier.

On jurisdiction, it held that the notices and order had been issued before a TEMP ID was generated and treated the later generation of that ID as insufficient to validate the earlier proceedings.

It set aside the Order-in-Appeal and allowed the appeal with consequential relief; it also declared MOV-07 and MOV-09 null and void ab initio.