Penalty for "Reuse" of E-way Bill Quashed: Department Failed to Prove Vehicle Returned to Origin.

Penalty for “Reuse” of E-way Bill Quashed: Department Failed to Prove Vehicle Returned to Origin.

Issue

Whether the GST department can impose a penalty under Section 129(3) for the alleged “reuse of documents” (tax invoice and e-way bill) based solely on toll plaza crossing data, without conducting an inquiry to prove that the vehicle physically returned to the origin to reload goods, especially when the taxpayer claims the delay was due to a vehicle breakdown.

Facts

The Transaction: The petitioner (M/S Deepam Packaging And Food Private Ltd.), a manufacturer in Kanpur, dispatched a consignment of printed laminated rolls to a dealer in Varanasi.
Documents: Valid tax invoice and e-way bill were generated, valid up to 03.02.2023.
The Interception: The vehicle was intercepted on 04.02.2023 (one day after the e-way bill expired). The driver stated the movement was from Kanpur to Varanasi.
The Allegation: The Proper Officer detained the goods (Form GST MOV-06) alleging that the documents were being reused. The basis for this was data from the Handia Toll Plaza, showing the vehicle had crossed it on 01.02.2023 and again on 03.02.2023. The officer inferred that the first trip was completed and the documents were being used for a second trip.
The Defense: The petitioner explained that the vehicle had broken down in transit, causing the delay and the expiry of the e-way bill. They denied any reuse of documents.
Lack of Inquiry: The department did not verify if the vehicle had returned to Kanpur (the origin) to pick up a second load, nor did they enquire with the purchasing dealer in Varanasi about the receipt of any prior consignment.

Decision

The Allahabad High Court ruled in favour of the assessee and quashed the detention and demand orders.
Bare Assertion: The Court held that the allegation of “reuse” was a “bare assertion” based on suspicion/presumption derived from toll data, without any corroborative evidence.
Failure to Prove Cycle: To prove document reuse, the department must establish the full cycle: the vehicle delivering the first load and then returning to the factory to reload. The department failed to show any evidence (toll data or otherwise) that the vehicle went back to Kanpur between the two alleged crossings.
Lack of Investigation: The officer failed to conduct a basic inquiry with the purchasing dealer to verify if they had received an earlier consignment on the same invoice.
Breakdown Justification: In the absence of contrary evidence, the petitioner’s explanation of a vehicle breakdown causing the delay and the subsequent movement (after repairs) was plausible and should not have been dismissed summarily.

Key Takeaways

Burden of Proof for “Reuse”: The onus is heavily on the Revenue to prove the “reuse” of an e-way bill. This requires positive evidence that the vehicle completed one full trip and started another (e.g., toll records showing a return journey to the origin).
Toll Data is Not Conclusive: Mere recordings of a vehicle moving in the same direction on different dates do not automatically prove document reuse; they can also indicate a delayed single trip due to breakdown or traffic.
Inquiry is Mandatory: Before alleging fraud or reuse, officers must verify facts with the counterparties (consignor/consignee). A penalty based on assumption without inquiry is legally unsustainable.
Breakdown is a Valid Defense: A genuine vehicle breakdown that leads to the expiry of an e-way bill is a valid explanation, and under judicial precedents, it typically does not warrant a penalty for tax evasion if the goods and invoice match.

HIGH COURT OF ALLAHABAD

Deepam Packaging and Food (P) Ltd.

Additional Commissioner Grade -2

Piyush Agrawal, J.

WRIT TAX No. 885 of 2023

NOVEMBER 4, 2025

Aditya Pandey for the Petitioner.

ORDER

1. Heard Sri Aditya Pandey, learned counsel for the petitioner and learned ACSC for the State respondent.

2. By means of the present writ petition the petitioner has assailed the order dated 4.2.2023 passed in form GST MOV-06 as well as the order dated 31.5.2023 passed by he respondent no.1 in appeal.

3. Learned counsel for the petitioner submits that the petitioner is engaged in the business of manufacturing and sale of packing materials as well as having GSTN. He further submits that in normal course of business the petitioner received order for supply of printed laminated paper roll and printed laminated pouches polyster from one M/s Aaditri Enterprises, Varanasi, which is also a registered dealer. He further submits that the said goods were loaded on Vehicle No. UP 78 FN 5456 and bilties were also issued. He further submits that for the aforesaid transaction the petitioner issued tax invoice and e-way bill which was valid upto 3.2.2023. He further submits that goods were on way journey from Kanpur to Varanasi and the same was intercepted on 4.2.2023 on the expiry of the e-way bill. At the time of interception all documents were produced and the statement of the driver was recorded in Form GST-MOV-01 wherein the driver of the vehicle has specifically stated that the goods were being transported from Kanpur to Varanasi. He further submits that goods in question were detained on the ground that transportation of the goods were made by reusing the same documents. He further submits that notice was issued to petitioner to which a reply was filed clearly stating therein that the vehicle had developed break down and, therefore, after repairing was undertaken, the goods were being transported. He further submits that not being satisfied with the reply submitted by the petitioner, the order of seizure under section 129(3) of the CGST Act was passed against which an appeal was filed which has been dismissed without considering the material on record. He further submits that the allegation of reuse of the documents is without any basis and without making any enquiry from the purchasing dealer or from any toll plaza alleging that the vehicle has already crossed Handia Toll Plaza on 1.2.2023 at 21.23 P.M. but no evidence has been brought as to when the vehicle returned and started its rejourney. He further submits that in absence of such an enquiry no adverse inference can be drawn against the petitioner. In support of his submission he has relied upon the judgment of this Court in Anandeshwar Traders v. State of U.P. [Writ Tax No. 503 of 2020, dated 18-1-2021].

4. Per contra, learned ACSC supports the impugned order. He submits that the petitioner in the garb of the documents in question has reused the same has intention to evade payment of tax and had the goods not been seized the petitioner would have succeeded in its attempt in reuse of the forms-doucuments.

5. After hearing the learned counsel for the parties, the Court has perused the record. It is not in dispute that the goods in question were moving from Kanpur to Varanasi when the same was intercepted on the alleged ground of reuse of documents. It has been alleged that on 1.2.2023 at 21.22 P.M. the vehicle crossed the Handia Toll Plaza moving towards Varanasi and thereafter again on 3.2.2023 at 22.02 P.M. reused the same documents. Record shows that the authorities have neither made any enquiry as to whether as alleged that the vehicle crossed Handia Toll Plaza on 1.2.2023 and upon its return, from which direction it returned to Kanpur and reloaded the goods reusing the same documents nor any enquiry has been made from the purchasing dealer. This Court in Anandeshwar Traders (supra) has held that in absence of such an enquiry to establish reuse of documents, seizure cannot be permitted and quashed the seizure order.

6. The case in hand is squarely covered by the said judgment.

7. In view of the facts and circumstances of the case the impugned orders cannot be sustained in the eyes of law which are hereby quashed. The writ petition is allowed.

8. Any amount deposited may be refunded to the petitioner in accordance with law.