The GST Appellate Tribunal, Bengaluru set aside a 200% penalty on goods moving with an e-way bill, invoice and delivery note, ordering refund of ₹5,81,316 paid through DRC‑03 under protest with interest.

A missing invoice reference number (IRN) at the time of interception, caused by downtime on the e-invoice portal, does not justify a penalty under Section 129(1)(a) of the CGST Act when the goods carry a valid e-way bill, commercial invoice and delivery note [DB Dazzle Modular Systems v. Commissioner of Commercial Taxes, Bangalore, 2026-juristway.com-3194-GSTAT(Bengaluru)-GST].

The appeal was heard by Sudha Koka, Member (Technical), who wrote the order, and Srikanth Venkatraman, Member (Judicial).

The appellant, a maker of raised access flooring tiles, became subject to e-invoicing from 1 Oct 2022 under Notification No. 17/2022-Central Tax. On 6 Oct 2022, it could not generate an IRN for an inter-State supply to Maharashtra because of portal downtime. It dispatched the goods at 7:20 PM with an e-way bill, invoice and delivery note.

The vehicle was intercepted at Davanagere at 7:30 AM on 7 Oct 2022, and the IRN was generated later that morning. The appellant paid ₹5,81,316 under protest through DRC‑03 to secure release. The first appellate authority upheld the penalty on 28 Aug 2023. It reasoned that under Rule 48(5) a non-portal invoice is not an invoice and that mens rea is irrelevant, relying on State of Gujarat v. Saw Pipes Ltd. ((2023) 5 SCC 128).

Before the Tribunal, the department argued that no contemporaneous error logs proved the outage and pointed to an early letter blaming clerical mistakes. It sought to distinguish Athiyan Exports v. State Tax Officer ([2025] 176 taxmann.com 137 (Madras)) as an export case.

The Tribunal held that Rule 55(4) acts as a safety valve where invoices cannot be issued at removal. Rules 48(4) and 48(5) cannot be read to brand a taxpayer an evader for a failure caused by the government portal, particularly when the IRN followed within hours. Section 129, it said, targets clandestine operations, not bona fide compliance hampered by technical glitches.

Relying on Assistant Commissioner (ST) v. Satyam Shivam Papers Pvt. Ltd. ((2022) 14 SCC 157), the Tribunal treated intent to evade as essential for a Section 129 penalty. It found none, as there was no mismatch in quantity, quality, value or tax.

The export distinction failed because exports are inter-State supplies under Section 7(5) of the IGST Act. Jhansi Enterprises v. State of U.P. ([2024:AHC:37625]) involved a total absence of documents, and the Tribunal also cited Nancy Trading Company v. State of U.P. on portal and human error. Payment through DRC‑03 under economic duress did not bar the appeal. The law, the Tribunal noted, does not compel the impossible: lex non cogit ad impossibilia.

The appeal was allowed. The department must refund the penalty of ₹5,81,316 with statutory interest within eight weeks, after verifying the demand and payment records.

2026-juristway.com-3194-GSTAT(Bengaluru)-GST