Oxino Peb Pvt Ltd, Palakkad

(1) Whether any penalty under Section 129(1) of the CGST Act can be proposed without specifying the provisions of the Act or Rules that have been contravened.

(2) Whether penalty under Section 129(1) is leviable on goods that have been sent for job work.

Natural justice and the notice (paras 5.1–5.2). Section 129(1) is attracted only where goods are transported or stored in transit "in contravention of the provisions of this Act or the rules". The MOV-07 named no provision of the Act or Rules said to have been contravened. Applying Armour Security, which affirmed that the show cause notice delineates the scope of proceedings and that grounds or rules not invoked in it cannot be used against the noticee (citing Champdany Industries and Ballarpur Industries), the Tribunal held that in the absence of any recital of the contravention Section 129(1) was not invokable and the proceedings were void ab initio. The OIO's reliance on Sections 31, 138 and 143 and Rules 45(1), 46 and 55, none of which figured in the notice, left the appellant defending charges never intimated, a glaring breach of natural justice.

Merits (paras 6.1–6.2). The OIO itself recorded that evidence of transfer of the steel to Vera Display for job work had been furnished and that the job-work e-way bill had been generated, without questioning the authenticity of the documents. Its further reasoning that a taxable sale "cannot be ruled out" because Vera Display was also a trader contradicted that finding and rested on conjecture without evidence. Once a transaction is accepted as job work, its nature cannot be denied merely because of a discrepancy in the time of generation of the e-way bill.

Measure of penalty (paras 7.1–7.5). Section 129(1)(a) fixes the penalty by reference to "the tax payable on such goods". Section 143(1) permits a principal to send inputs or capital goods to a job worker without payment of tax. No tax being payable on goods sent for job work, a penalty computed on tax payable is not leviable.

Proportionality (para 9). Quoting the Kerala High Court in T.P. Metals & Roofings, the Tribunal observed that where a plausible explanation shows no attempt to evade tax, the officer should resort to the general penalty under Section 122 rather than the maximum penalty under Section 129, and that any other reading would render Section 129 arbitrary. A technical mistake by the consignor's billing staff had resulted in a heavy penalty without analysis of a documented defence.