No Penalty if Goods Have Proper Tax Invoice & E-Way Bill, Even with Registration Suspension

No Penalty if Goods Have Proper Tax Invoice & E-Way Bill, Even with Registration Suspension

The Allahabad High Court ruled in M/s Lakhdatar Traders v. State of Uttar Pradesh that no penalty can be imposed if goods in transit are accompanied by a valid tax invoice and e-way bill, even if the owner's GST registration is suspended. 

The Hon’ble Allahabad High Court in M/s Lakhdatar Traders v. State of Uttar Pradesh [Writ Tax No. 1852 of 2024, dated December 11, 2024], dismissed a writ petition where goods in transit were detained despite being accompanied by proper tax invoices and e-way bills. The Court ruled that imposing a penalty solely on account of the owner's suspended GST registration was unjustified.

Case Overview

M/s Lakhdatar Traders (Petitioner) was transporting goods from Patna, Bihar, to Gurugram, Haryana. On October 4, 2024, the vehicle was intercepted by GST authorities in Mathura, Uttar Pradesh. After conducting a physical verification and recording the driver's statement in Form GST MOV-01, no discrepancies were found. Despite this, the goods were detained, citing the Petitioner's GST registration suspension.

A notice was issued in Form GST MOV-07 on October 8, 2024, highlighting the suspended registration. Subsequently, an order dated October 16, 2024, demanded a penalty of ₹14,81,490 under Section 129(1)(b) of the CGST Act.

Petitioner’s Arguments

The Petitioner argued that:

All requisite documents, including a valid tax invoice and e-way bill, were present during transit.

The suspension of GST registration by Bihar authorities on October 3, 2024, was unrelated to the transport.

The penalty imposed under Section 129(1)(b) was baseless, as there was no claim of improper documentation.

Key Issue

Can a penalty be imposed if goods are found with proper tax invoices and e-way bills, even when the owner's GST registration is suspended?

Court’s Ruling

The Court observed

In the current case, all necessary documents were present during the interception on October 4, 2024.

The registration suspension occurred on October 3, 2024, but this did not affect the validity of the accompanying documents.

The penalty imposed by the authorities in Uttar Pradesh was based solely on the suspended registration, which was outside their jurisdiction.

The Court concluded that the detention and penalty were unwarranted. The writ petition was allowed, and the goods were ordered to be released.

Concludes all as in few words for following "No Penalty if Goods Have Proper Tax Invoice & E-Way Bill, Even with Registration Suspension"

In simple terms, the Allahabad High Court decided that no penalty can be charged if goods being transported have valid documents like a tax invoice and e-way bill, even if the owner’s GST registration is suspended. In this case, M/s Lakhdatar Traders had all the proper paperwork while moving goods from Bihar to Haryana. However, the GST authorities in Uttar Pradesh detained the goods and imposed a penalty, citing the suspended GST registration. The Court ruled this penalty was unfair because the suspension did not affect the documents' validity. It ordered the release of the goods and dismissed the penalty.."