2026-VIL-304-GSTAT-AGR
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SGST Tribunal

GST - Penalty for non-sequential invoice numbering during transit - Section 129 of the CGST Act, 2017 read with Rule 46(b) of the CGST Rules, 2017 - Goods were dispatched by a registered supplier to a registered recipient in another State, and the vehicle was intercepted in transit with a tax invoice, e-way bill and consignment note - On verification, earlier tax invoices of the supplier were found to be not in sequential order as required under Rule 46(b), and the proper officer detained the vehicle and goods and imposed penalty under Section 129(3), which was deposited under protest - Whether non-consecutive issuance of tax invoices detected during transit verification warrants detention, seizure and penalty under Section 129(3) or is a mere technical breach attracting at most the general penalty under Section 125 - HELD - The movement of goods between two registered dealers was genuine and backed by valid documents, and the quantity and description of goods matched perfectly. Section 129 applies only when goods are transported in contravention of the provisions of the Act and the Rules, and it is intended to penalise tax evaders, clandestine removal and movement of goods without proper documentation. Where the e-way bill, quantity and goods match and the transaction is fully recorded in the books of both registered entities, there is no intention to evade tax or mens rea. A clerical or sequential error in invoice numbering is a technical irregularity and does not transform a legitimate transaction into an illegal or untaxed transit movement, and the transaction was revenue neutral. Venial and technical breaches should not be visited with severe financial penalties unless a substantive contravention or loss of revenue is established - If the Department wished to penalise a technical infraction of Rule 46, the appropriate recourse was Section 125 and not detention and seizure under Section 129, and even under Section 125 deliberate non-compliance must be established, which is absent. The authorities of the recipient State also have no jurisdiction to adjudicate a violation of Rule 46(b) by a supplier registered in another State - The order of the FAA quashing the penalty under Section 129(3) is upheld and the appeal of the Department is dismissed
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