E WAY BILL PANELTY PAYMENT

[Shaan Jain]

Hi,

In February 2025, we have generated penalty challan due to wrong e way bill. However the amount is still lying in cash ledger and we have not paid through DRC 03. No penalty order is received from department. So, now is it required to pay without any penalty order. If not, then how can we utilize the amount lying in penalty section of cash ledger.

[YAGAY andSUN]

In your case — where a penalty challan was generated due to a wrong e-Way Bill in February 2025, but no DRC-07 penalty order has been issued by the department, and you paid the amount via challan which is now lying in the cash ledger under the “penalty” section — here’s how it works under GST:

🔍 Key Facts Recap:

• Penalty was self-assessed (voluntary payment), not demanded by department.
• No DRC-07 (final demand order) received.
• You haven’t paid through DRC-03 (used for voluntary payments).
• Amount is lying in electronic cash ledger under "penalty."

✅ Is payment mandatory without any penalty order?

No, payment is not mandatory until you receive a formal demand (like DRC-07) or you choose to voluntarily pay using DRC-03.

Without a DRC-07 or voluntary admission through DRC-03, the department cannot appropriate the amount. So, you’re not obligated to pay yet — unless you want to close the matter voluntarily.

🔁 Can you use or refund the amount lying under the "penalty" head?

👉 Options Available:

1. Use it to pay an actual penalty if order is issued

If the department later issues a penalty order (DRC-07), you can use the cash balance in the penalty ledger to pay it.

2. Use it for voluntary payment through DRC-03

If you want to settle the issue voluntarily (e.g., to avoid further proceedings), you can file DRC-03 for "penalty" and utilize the balance in your cash ledger.

3. Claim refund of excess balance

If the department never issues a penalty order, and you don’t want to pay voluntarily, then after a reasonable period, you can file RFD-01 to claim a refund of excess balance in cash ledger under "Other" category (specifically citing wrongly paid penalty).

⚠️ Note: GST rules don’t allow cross-utilization between different heads (tax, interest, penalty, fee). So you can’t use the “penalty” balance to pay tax, for example.

📌 Suggested Next Steps:

• Wait for a DRC-07 if you believe the penalty may not be pursued.
• Or file DRC-03 voluntarily if you want to settle.
• If no penalty is issued after a few months and you don’t want to pay, file refund via RFD-01 under "excess balance in cash ledger."

[GAGAN KEDIA]

Dear Queriest,

Your case is very common is some part of the country / regions, where the proper officer stops a vehicle for inspection and insists on payment of penalty for release of goods and vehicle.

The proper procedure is to pay against any demand created by the proper officer. Mere adding money in cash ledger is not sufficient.  However, some officers, based on incomplete knowledge, releases the vehicle based on cash added to cash ledger itself. (when you show them the challan of adding money).

Remember, adding money in cash ledger is not payment of tax.

Having said that, when the proper officer has released the vehicle (before payment of demand), there is no demand ID standing and no payment (adjustment) is required.

Things to keep in mind:

1) Whether detention or seizure order was issued during interception? [sec. 129(1) read with proviso]

2) Whether SCN was issued during detention (within 7 days of detention) specifying the amount of penalty payable [Sec. 129(3)]

3) After SCN, an order is a must to be passed withing another 7 days. If No order is passed within 7 days of SCN, it itself can be challenged that it cannot be issued now. Check for manual order [Sec. 129(3)]

3) Whether an opportunity of being heard was given at the time of SCN? If not, demand doesn’t stand now [Sec. 129(4)].

Considering the above - you may contend that demand doesn’t stand now. Then you are free to use the money lying in Cash ledger under penalty sub-head. To transfer it to other sub-heads, use PMT-09. (It can be transferred to 'Tax' head also').

Trust the above clarifies. 

[Shaan Jain]

Thank you so very much for clarifications.

[Sadanand Bulbule]

My supplementary query:

How the authority has issued the "release order" without actual receipt of penalty amount? Normally it does not happen the way it is queried.

Payment of penalty amount is always in pursuance of demand by way of levy and not voluntary.

[Shilpi Jain]

If there is no order then no penalty payable. You can use your cash ledger balance to pay any other liability.

However, pls check how did you get the release order.

[Shaan Jain]

I inquired and found that goods were released on the basis of penalty challan.

AI Summary

Taxpayer Navigates E-Way Bill Penalty Complexity: Cash Ledger Balance Remains Unresolved Without Official Penalty Order A taxpayer generated a penalty challan for a wrong e-way bill in February 2025, with the amount remaining in the cash ledger's penalty section. No official penalty order was issued. Experts advised that payment is not mandatory without a formal demand order. Options include waiting for a potential order, voluntarily settling through DRC-03, or seeking a refund if no order is ultimately issued. The cash ledger balance can be used for future penalty payments or potentially transferred to other tax heads.