Stock transfer under GST defeats penalty where no tax liability or intent to evade is shown.

Penalty under Section 129(3) of the Uttar Pradesh GST Act could not be sustained where the goods movement was accepted as a stock transfer. Because no tax liability arose on that factual basis, the element of intent to evade tax was absent and the statutory foundation for penalty did not exist. The penalty was therefore held to be unsustainable and liable to be set aside.

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Issues: Whether penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 could be sustained where the movement of goods was found to be a stock transfer and no tax liability arose.

Analysis: The movement of goods was not disputed to be in the nature of stock transfer. In such a case, no payment of tax is due, and therefore the element of intention to evade tax does not arise. On that footing, the penalty imposed under Section 129(3) had no legal basis.

Conclusion: The penalty was unsustainable and was liable to be set aside.

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