(2026) 1 GSTAT E- Journal 140 (Lucknow)Section 129Decision: In Favour of Assessee
GSTAT on Alleged Reuse of E-Way Bill: Earlier Verification Without Proof of Prior Delivery Cannot Justify Section 129 Penalty
The GSTAT Lucknow Bench held that detention of goods on an assumption of E-way bill reuse is legally unsustainable where the vehicle suffered a bona fide breakdown supported by repair bills and driver affidavits. Suspicion cannot take the place of evidence.
Case Name / Parties
M/s Jai Enterprises v. Pankaj Gandhi, Additional Commissioner Gr-2 Appeal IV, State Tax Kanpur & Ors.
Appeal Number
APL/38/LCK/2026
Tribunal Bench
Lucknow Bench
Date of Judgment / Order
25/08/2026
Coram
Hon'ble Santosh Kumar Srivastava, Member (Judicial) • Hon'ble Arvind Kumar, Member (Technical)
For Appellant: Mr. Alekh Agrawal, Advocate
For Respondent: Mr. Mahendra Pratap Singh, Assistant Commissioner, SGST
Facts of the Case
The Appellant was transporting goods in vehicle UP-71-B-9301 from Nayaganj, Kanpur to Fatehpur covered by Invoice Nos. 14259 and 14260 dated 01.03.2022 and E-Way Bill Nos. 431234391202 and 481234390936 generated at 06:17 AM and 06:19 AM (valid up to 02.03.2022). The Mobile Squad checked and scanned the vehicle at Jhakarkatti, Kanpur at 01:27 PM. Approximately 8.5 hours later, at 09:52 PM, the vehicle was checked again at Cooperganj, Kanpur. The officer presumed that the goods had already been delivered in the afternoon and that the vehicle was being reused for an unrecorded second trip. The Appellant submitted that the vehicle had broken down on the bridge between Jhakarkatti and Cooperganj, and produced a garage repair bill and a driver's affidavit. The Proper Officer rejected the explanation, fixed valuation at ₹2,65,650/- and imposed a total demand of ₹6,06,844/- as penalty under Section 129(3) (comprising penalty of ₹74,382/- and Cess penalty of ₹4,58,080/-). The First Appellate Authority affirmed the order.
Issues Before GSTAT
- 1Whether the Department established by positive and independent evidence that the goods were being re-transported on a reused E-way bill.
- 2Whether the earlier verification or scanning of an E-way bill on the same day can automatically justify a presumption of tax evasion under Section 129.
- 3Whether the Department established that the vehicle repair bill and driver's affidavit produced by the taxpayer were fabricated or false.
Relevant Statutory Provisions & Rules
Statutory Sections
Section 112 of CGST Act, 2017Section 129 of CGST/UPGST Act, 2017Section 129(3) of CGST/UPGST Act, 2017
GST Rules
Rule 138 of CGST/UPGST Rules, 2017
Contentions of the Parties
Appellant / Taxpayer Contentions
- •The consignment was fully accompanied by valid tax invoices, e-invoices, and unexpired E-way bills valid till 02.03.2022.
- •The physical goods tallied perfectly with invoice descriptions, quantities, and values; no discrepancy of any kind was recorded upon physical inspection.
- •The vehicle suffered a mechanical breakdown, directly evidenced by the contemporaneous garage repair bill and driver's sworn affidavit.
- •Under settled Supreme Court law in Umacharan Shaw and Allahabad HC in Anandeshwar Traders and B.L. Agro Oils, the initial burden of proving actual prior delivery rests on the Revenue; suspicion and presumption cannot substitute legal proof.
Respondent / Revenue Contentions
- •The vehicle was intercepted twice on the same day with an 8.5-hour gap in the same city, which naturally indicates completed delivery and re-transportation.
- •The vehicle breakdown story was an afterthought devised to evade detention consequences.
- •Section 129 is a strict transit compliance measure where unexplained movement on previously verified documents attracts penalty.
Findings of GSTAT
The material on record established zero discrepancy in the description, quantity, value, or ownership of the goods. The consignment was accompanied by regular invoices, e-invoices, and valid E-way bills.
The Department's conclusion that the goods were being 're-transported' rested exclusively on an inference drawn from the earlier 1:27 PM verification. The Department failed to lead any independent evidence—such as toll crossing logs, destination inquiries, or consignee verification—to prove that an earlier delivery had taken place.
Suspicion, however grave or strong, cannot take the place of legal proof. The Supreme Court in Umacharan Shaw & Bros. v. CIT and State of Kerala v. M.M. Mathew firmly established that presumption cannot substitute evidence.
The taxpayer produced contemporaneous evidence explaining the delay: a garage repair bill and a driver's affidavit. The Department produced no evidence whatsoever to prove that the repair bill was forged or false.
Following Allahabad High Court decisions in Anandeshwar Traders and B.L. Agro Oils Ltd., the initial burden of proving double use of an E-way bill lies strictly on the seizing authority. The First Appellate Authority erred in presuming tax evasion automatically.
Ratio Decidendi
Key Legal Principle
“Proceedings under Section 129 of the CGST/UPGST Act cannot be founded upon a mere presumption of E-way bill reuse. Where goods are covered by valid invoices and unexpired E-way bills, the seizing authority must produce positive, independent evidence of a completed prior journey; earlier verification and transit delays explained by mechanical repair bills cannot be treated as tax evasion.”
Final Decision & Relief Granted
Outcome: The appeal was allowed. The appellate order dated 11.10.2023 and the original order dated 08.03.2022 imposing penalty under Section 129 were set aside. The amount of ₹6,06,844/- deposited pursuant to the proceedings was directed to be refunded in accordance with law.
Relief Granted: Setting aside of Section 129 penalty order; complete refund of ₹6,06,844/- deposited by the taxpayer.
Operative relief was verified against the Tribunal's order and accurately summarized without altering its legal effect.
Practical Implications for Taxpayers
- In the event of a vehicle breakdown during transit, instruct the driver to immediately secure a stamped bill/cash memo from the mechanic and photograph the broken vehicle.
- If the breakdown causes transit to extend past normal travel hours, execute a sworn driver affidavit detailing the breakdown location and repair timeline.
- If the mobile squad alleges 'reuse', demand that the officer verify the recipient's premises or toll logs before submitting to Section 129 penalties.
Practical Takeaways for Tax Professionals
- Always rely on the Allahabad High Court's ruling in Anandeshwar Traders (2021 UPTC 421) and B.L. Agro Oils (2023): the initial legal onus is on the officer to prove the negative fact of non-delivery or duplicate delivery.
- Emphasize that the E-way bill was unexpired at the time of the second interception; so long as the document is temporally valid, the trader has the legal right to transport the goods to the destination.
- Use driver affidavits and repair invoices proactively in the initial reply to MOV-07 to force the officer to either dislodge them with evidence or drop the penalty.
SKM
Editorial Commentary
SKM Laws Professional Analysis
The Jai Enterprises case addresses a very common trap in GST road transit enforcement. When mobile squad officers notice that an E-way bill was scanned earlier in the day by a colleague, they frequently leap to the conclusion that the goods were unloaded and that the vehicle returned to reload a second batch of clandestine goods on the same paperwork. GSTAT Lucknow dismantled this speculative practice. Reaffirming classic evidence jurisprudence from Umacharan Shaw and M.M. Mathew, the Tribunal held that Revenue cannot substitute speculation for forensic proof. If the Department alleges a completed prior trip, it must demonstrate it through toll barriers, weighbridges, or consignee audits—not by brushing aside valid mechanic repair bills.
Related Cases & Precedents
(2026) 1 GSTAT E-Journal 170
Companion ruling quashing reuse allegations based on vehicle location.
(2026) 1 GSTAT E-Journal 75
Relief for bona fide timing delays.
Related GST Tools & Utilities
Source Citation & Forensic References:
Official Citation: (2026) 1 GSTAT E- Journal 140 (Lucknow)
Source Publication: GSTAT E-Journal, Volume I (Till 31.08.2026), Published by Goods and Services Tax Appellate Tribunal
Journal Pages: 140-149
Legal Information Disclaimer
This case law analysis is published strictly for informational, educational, and research purposes. It does not constitute legal, tax, or professional advice. The ratio decidendi and commentary reflect professional editorial interpretations of the Goods and Services Tax Appellate Tribunal's reported judgment. Readers must refer to the full certified order of the Tribunal before initiating or defending litigation.