Court’s Decision
The Delhi High Court, comprising Justice Anish Dayal and Justice Nitin Wasudeo Sambre, dismissed an appeal filed by a commercial seller seeking recovery of ₹21,42,199 from a buyer, affirming the trial court’s decision that the plaintiff had failed to prove actual delivery of goods.
The Court held that presumptions under Rule 138(12) of the Central Goods and Services Tax (CGST) Rules, 2017, which deem acceptance of goods after 72 hours, cannot replace independent proof of delivery or contract performance in a civil dispute.
The Bench ruled that invoices, e-way bills, and ledgers—without signed delivery challans or corroborative transport records—were “self-serving documents, insufficient to establish liability.” Consequently, the appeal was dismissed and the decree of the Commercial Court was upheld.
Facts
The appellant, proprietor of a trading firm engaged in selling polycarbonate and PVC sheets, supplied goods to the respondent’s firm engaged in similar business. Two invoices dated 31 July 2021 and 7 August 2021 were raised, and as per the appellant’s ledger, an amount of ₹12,47,850 remained due.
After repeated demands, a legal notice dated 13 March 2023 was issued, which went unanswered. A pre-institution mediation under Section 12A of the Commercial Courts Act failed due to the respondent’s absence, leading to a suit for recovery of ₹21,42,199 (including ₹8,94,349 as interest at 24% p.a.).
The Trial Court, however, dismissed the suit on 14 May 2025, holding that the plaintiff failed to prove delivery of goods. It observed that no delivery challans, transport receipts, or acknowledgment slips were filed. The ledgers were incomplete and prepared unilaterally, and the GST filings could not prove physical delivery.
The plaintiff appealed under Section 13 of the Commercial Courts Act, 2015 read with Section 96 CPC, alleging misapplication of evidence and failure to appreciate presumptions under the CGST Rules.
Issues
- Whether invoices, GST e-way bills, and ledger entries are sufficient to prove delivery of goods under commercial law.
- Whether Rule 138(12) of the CGST Rules, which presumes acceptance of goods if not rejected within 72 hours, creates a binding presumption in civil recovery suits.
- Whether the appellate court should permit additional evidence under Order XLI Rule 27 CPC (delivery challans) at the appellate stage.
Petitioner’s Arguments
Counsel for the appellant argued that the trial court failed to apply Section 114(g) of the Evidence Act, which allows drawing adverse inference when the opposite party does not respond to a legal notice.
It was submitted that Section 55 of the Sale of Goods Act, 1930 permits an unpaid seller to sue for the price of goods sold, and the court should have accepted invoices, e-way bills, and ledger entries as proof of commercial transactions.
The appellant contended that delivery challans—allegedly signed by the respondent—existed but were not placed on record due to oversight by trial counsel. The appellant sought to produce them as additional evidence under Order XLI Rule 27 CPC, claiming that the documents were misplaced and later retrieved.
He further relied on Rule 138(12) of the CGST Rules, arguing that since the respondent never rejected the e-way bills within 72 hours on the GST portal, acceptance of goods must be deemed. Reliance was placed on Sanjana Aggarwal v. Namashivai Apparel Pvt. Ltd. (2024:DHC:9987), where the Court drew an adverse inference under Rule 138(12) against a buyer who failed to reject the e-way bill.
Lastly, counsel argued that the trial court wrongly rejected the deposition of the authorised representative (SPA), contrary to the ruling in A.C. Narayanan v. State of Maharashtra (2014) 11 SCC 790, where the Supreme Court recognised the competence of authorised agents to testify for their principals.
Respondent’s Arguments
The respondent, who was unrepresented at the appellate stage, had before the trial court denied receipt of goods altogether. He alleged that the plaintiff fabricated invoices and ledgers and never delivered any consignment.
He highlighted that there was no purchase order, no acknowledgment receipts, and no evidence of transportation. The GST records, according to him, were mere formalities that did not prove supply. The e-way bills were, at best, indicative of intent to move goods, not conclusive proof of delivery.
The respondent relied on the settled position that entries in books of accounts are not sufficient to fasten liability without corroboration, as held in CBI v. V.C. Shukla (1998) 3 SCC 410.
Analysis of the Law
The High Court began by noting that commercial recovery suits must be proved like any other civil claim, and the burden lies squarely on the plaintiff to establish actual supply of goods.
The Court reaffirmed that Section 34 of the Indian Evidence Act makes entries in books of accounts relevant but not conclusive. It cited V.C. Shukla and Gopal Krishna Ketkar v. Mohammed Haji Latif (AIR 1968 SC 1413) to hold that failure to produce primary documents like delivery challans and transport receipts invites adverse inference.
Addressing Rule 138(12) of the CGST Rules, the Court held that the provision only creates a deemed acceptance for GST compliance, not for civil liability. It cannot shift the evidentiary burden of proving delivery. The rule, the Court clarified, “serves tax administration purposes and does not substitute the civil burden of proof in a contractual claim.”
Regarding Order XLI Rule 27 CPC, the Bench observed that the production of additional evidence in an appeal is an exception, not a right. Citing Union of India v. Ibrahim Uddin (2012) 8 SCC 148), it held that additional documents can be accepted only if the party proves they could not be produced earlier despite due diligence. The appellant’s excuse that his trial lawyer failed to file them was “untenable and unwarranted.”
The Court also rejected reliance on Sanjana Aggarwal, noting that in that case, the Division Bench had relied on independent corroborative proof like bank records, transport driver testimony, and WhatsApp chats—none of which were present in the current case..
Precedent Analysis
- CBI v. V.C. Shukla (1998) 3 SCC 410 — Held that mere entries in account books are not sufficient to fasten liability unless supported by independent evidence.
Applied to reject uncorroborated ledgers as proof of supply. - Gopal Krishna Ketkar v. Mohammed Haji Latif (AIR 1968 SC 1413) — Established that adverse inference must be drawn against a party who withholds best available evidence.
Used to infer that plaintiff’s non-production of delivery challans weakened his case. - Union of India v. Ibrahim Uddin (2012) 8 SCC 148) — Clarified the narrow scope of additional evidence at the appellate stage.
Applied to dismiss appellant’s plea for production of delivery challans now. - Sanjana Aggarwal v. Namashivai Apparel Pvt. Ltd. (2024:DHC:9987) — Relied upon by appellant to claim deemed acceptance under GST Rules.
Distinguished on facts; that case involved corroborative proof, unlike here. - A.C. Narayanan v. State of Maharashtra (2014) 11 SCC 790) — Authorised representatives can depose for principals only on matters within personal knowledge.
Applied to reject testimony of SPA who lacked personal knowledge of transactions.
Court’s Reasoning
The Court examined contradictions in the evidence. The appellant’s witness claimed goods were transported by a small vehicle (“Chhota Hathi”) but could not provide vehicle details, driver name, or receipts. Moreover, the e-way bill showed a distance of 100 km, while both firms were only 200 metres apart—an inconsistency that “remained unexplained.”
The Court held that proof of actual delivery is the cornerstone of a recovery claim, and absence of delivery challans, courier receipts, or buyer acknowledgment rendered the claim untenable. The ledgers and invoices were self-generated and could not be treated as substantive proof.
Further, the appellant’s failure to produce purchase orders or any communication confirming the transaction demonstrated that “the claim was built on presumption, not proof.”
The Court reiterated:
“The presumption under Rule 138(12) of the CGST Rules is intended for tax administration and cannot discharge the civil burden of proof in a claim for delivery.”
Conclusion
The Delhi High Court dismissed the appeal and upheld the Commercial Court’s decree, holding that the appellant failed to discharge the burden of proof required to establish sale and delivery.
The Court concluded that the application for additional evidence was meritless and that the trial court’s findings were well-reasoned and unimpeachable. The judgment reinforces the evidentiary standard required in commercial suits.
All pending applications were disposed of.
Implications
This judgment underscores that commercial plaintiffs must produce concrete proof of delivery—such as signed delivery challans, transport receipts, and buyer acknowledgments—to sustain recovery suits.
It clarifies that GST compliance presumptions do not equate to civil proof, thereby setting a clear boundary between tax regulatory presumptions and contractual enforcement.
The ruling also reiterates that Order XLI Rule 27 CPC cannot be misused to fill evidentiary gaps on appeal, ensuring integrity in trial-stage evidence presentation.
FAQs
1. Does non-rejection of an e-way bill under Rule 138(12) prove delivery of goods?
No. The presumption is limited to GST compliance and does not establish delivery or contractual performance in civil proceedings.
2. Can delivery challans be produced as additional evidence on appeal?
Only if the appellant proves they could not be produced earlier despite due diligence. Oversight by counsel is not a valid reason.
3. What kind of evidence is mandatory to prove a commercial transaction?
Signed delivery challans, transport receipts, buyer communications, or payment records are essential; self-prepared ledgers or invoices are insufficient.
