Stock Transfer Not Liable for Penalty Under Section 129 of GST
Act: Allahabad High Court
Introduction
The Hon’ble High Court of
Judicature at Allahabad has, in the case of M/s T.K. Printers v. Additional
Commissioner Grade 2 and Another (Writ Tax No. 1486 of 2023, Order dated 21
May 2025), delivered a significant judgment in favor of the assessee by setting
aside tax and penalty imposed under Section 129 of the CGST/UPGST Act, 2017.
The Court held that where
goods are under stock transfer and not intended for sale, and the e-way
bill was generated before the detention order, the penalty proceedings
are not sustainable, especially in the absence of any finding related to tax
evasion.
Background
of the Case
The petitioner, M/s
T.K. Printers, is an authorized vendor of Bharat Petroleum Corporation
Ltd. (BPCL). In the regular course of business, the petitioner was
instructed to transport 4 MPD machines (multi-product fuel dispensers
for petrol and diesel) from Kanpur to Atarra, Banda (UP) for
installation at a BPCL petrol pump.
The goods were loaded in
vehicle no. UP78DT5969, but due to a technical issue at BPCL’s end,
the e-way bill could not be generated at the time of dispatch. The
vehicle was intercepted on 28 January 2021, and although no
discrepancy was found in physical verification, the goods were detained
on 29 January 2021, merely due to the absence of an e-way bill and delivery
challan at the time of interception.
Despite producing the e-way
bill before the detention order was passed, the authorities proceeded to
issue notice in Form MOV-07, and later passed an order under Form
MOV-09, demanding tax and penalty. The appeal filed by the petitioner was
also dismissed, prompting the writ petition before the High Court.
Key Legal
Issues
1. Whether
detention of goods was justified when the e-way bill was generated before
the actual order of detention?
2. Whether
penalty under Section 129 is valid where the goods are not meant for
sale and no intention to evade tax is established?
3. Whether
a stock transfer of non-tradable goods like MPD machines attracts
Section 129 provisions?
Submissions
by the Petitioner
The petitioner,
represented by Mr. Aditya Pandey, submitted:
- The goods were not meant for sale,
but for installation at a BPCL petrol pump.
- The e-way bill was generated at
12:44 PM on 29.01.2021, well before the detention order
passed at 6:56 PM the same day.
- A stock transfer note and
other documents were also submitted, but the authorities did not consider
them.
- As per the circular dated 9 May
2018, such situations should not attract penalty when no tax evasion
is involved.
- The goods in question cannot be
sold in the open market, and the BPCL certification clarified that no
price was assigned for them due to their non-commercial nature.
- Reliance was placed on decisions in:
- M/s Vacmet India Ltd. v. Additional
Commissioner Grade-2 [2023:AHC:200160]
- M/s Goverdhan Oil Mill v. Additional
Commissioner [2024:AHC:63409]
Submission
by the Respondent
The State Counsel,
Mr. Ravi Shanker Pandey (ACSC), merely supported the impugned orders and
opposed the petition, without providing substantial rebuttal to the
petitioner’s submissions regarding lack of tax evasion and nature of goods.
Observations
of the Court
Court made the following
critical observations:
- The goods were MPD machines meant
for installation, not for trade, and hence no market value
could be assigned.
- It was admitted and undisputed
that the movement of goods was a stock transfer from BPCL Kanpur to
BPCL Banda.
- Though delivery challan and e-way
bill were not available at the exact time of interception, they were generated
and produced prior to passing of detention order.
- No finding
was recorded by the authorities below regarding any intention to evade
tax.
- The facts were squarely covered by
precedents where no penalty was sustained in cases of stock transfers
and non-saleable goods.
Court’s
Verdict
The Hon’ble Court held:
“The impugned orders
dated 10.07.2023 and 29.01.2021 cannot be sustained in the eyes of law and same
are hereby quashed.”
Accordingly, the writ
petition was allowed, and the Court directed that any amount deposited
by the petitioner shall be refunded in accordance with law.
Conclusion
The Allahabad High Court
has rightly protected the interest of genuine taxpayers like M/s T.K. Printers,
who acted in good faith while transporting non-tradable stock transfer goods.
This ruling offers clarity that technical lapses without tax evasion cannot
be penalized, and ensures that principles of natural justice prevail in
GST enforcement actions.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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