TaxTMI 
TaxTMI 
2026 (8) TMI 1053
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....ng in steel goods was transporting steel goods on 13.06.2022 under Delivery Challan No. M120 - a same-GSTIN intra-firm stock movement from its own premises to its own godown. The vehicle was intercepted by Mobile Squad No. II, Thiruvananthapuram and detained under Section 129(1) of the CGST/KGST Act, 2017 on the ground that no e-Way Bill was available. After proceedings, a penalty of Rs.1,34,640 (CGST Rs.67,320 + SGST Rs.67,320) was imposed under Section 129(3) - with no tax demand. To secure release of the goods, full penalty was paid via CPIN 22063200032740 dated 14.06.2022. A First Appeal filed before the Joint Commissioner of State Tax (Appeals), Thiruvananthapuram was dismissed vide Order-in-Appeal No. GSTA No. 77/2022 dated 02.11.2022. The Appellant, being aggrieved, files this Second Appeal. 3.0 Grounds of Appeal/Submissions of the Appellant: 3.1 The most important and primary grounds of appeal are that: (i) First Appellate Authority has mechanically confirmed penalty under Section 129 merely on the ground that e-way bill was not available, without appreciating that the movement was an internal movement between locations of the same GSTIN, supported by deliver....
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....eal confirms the penalty by holding that transportation without e-way bill makes the transaction not genuine. This is an impermissible presumption. Absence of e-way bill may be a statutory contravention, but it does not automatically establish evasion of tax or non-genuineness of the movement. The appellant relies on the judgment of the Hon'ble Allahabad High Court in Goverdhan Oil Mill v. Additional Commissioner, (2025) 32 Centax 368 (All.). (iii) Once the tax-linked penalty under Section 129 fails for want of tax payable, the alleged contravention, if any, falls under the specific document-related penal provision under Section 122(1)(xiv). The penalty should have been limited to Rs. 20,000/- (CGST Rs. 10,000 and SGST Rs. 10,000). The Department could not bypass the statutory requirement of "tax payable" under Section 129 and impose penalty by notionally applying the GST rate to a non-supply stock movement. (iv) Penalty under Section 129 cannot be imposed mechanically merely upon noticing a movement-document lapse. The consistent judicial view now is that proceedings under Section 129 cannot be sustained in the absence of intent to evade tax, particularly where the goods, mo....
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....lves exempt from duty, and the Court accordingly applied the concessional formula prescribed for exempted goods. No parallel concession is available here, since TMT bars are not exempt goods, whatever the character of the particular movement. (iv) Section 68 read with Rule 138A mandates that a valid e-way bill accompany the movement of goods exceeding Rs. 50,000/- in value, in addition to the delivery challan or other prescribed document. (v) In the present case, no e-way bill was generated at all. This is a total and uncured default, qualitatively different from an expired or partially defective e-way bill, and the finding that the transaction was not genuine for want of any e-way bill whatsoever is sustainable on the material on record. (vi) Section 129, unlike Section 130 (confiscation), does not require the Department to establish intent to evade tax as a jurisdictional precondition; it is attracted upon mere contravention of the movement-document requirements of the Act and Rules. The penalty under Section 129 is in the nature of a civil liability flowing automatically from such contravention, and is not penal in the criminal sense requiring proof of....
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....ng to which of two provisions properly governs the contravention, and ought to have been raised at the earliest opportunity so that the First Appellate Authority had occasion to examine and rule upon it. Its introduction for the first time in second appeal denies both the Department and the first appellate forum that opportunity. (xii) Section 129 opens with a non-obstante clause and operates specifically and independently at the stage of detention and release of goods and conveyances in transit; it is not displaced merely because Section 122(1)(xiv) also separately penalizes transport without prescribed documents in a different context. Kamal Envirotech Pvt. Ltd. (Del.), relied upon by the Appellant, does not hold that Section 122(1)(xiv) ousts Section 129; it treats Section 129 as a self-contained release-and-penalty mechanism, read harmoniously with the moderation principles of Section 126. (xiii) Kamal Envirotech reads Section 129 in harmony with Section 126, and extends that harmonious reading to breaches falling within the description of a "minor breach" in the Explanation to Section 126(1) - tax involved less than Rs. 5,000/- and an error apparent on the fa....
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....vided any reasons for the above, other than fact that the -E way Bill was not produced. 6.3 We find that in the instant case penalty has been levied under section 129(1) of the CGST /KGST Act 2017 on goods which were being transported on account of stock transfer. The relevant section is reproduced under: 129. Detention, seizure and release of goods and conveyances in transit. (1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, -- [(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;(emphasis supplied). 6.4 Fr....
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....on of it being an intra state supply. (c) Once it is determined that it is not an intra state supply, it would be dehors the charging section - section 9 of the CGST/KGST Act-and therefore is no tax payable on the impugned goods. 6.10 Once a determination has been made that tax on the goods is non est, it stands to reason that penalty under section 129(1) of the CGST/KGST Act (which is to be determined in terms of such tax payable), is not leviable. For the foregoing reasons, we find that order of the appellate authority is not legal and is liable to be set aside. 7.0 We find support for the above decision in the decision of the Honorable Bombay High Court in 7.1 Fabricship Pvt. Ltd. v. Union of India, 2024 (90) G.S.T.L. 302 (Bom.) / (2024) 20 Centax 84 (Bom.) relevant extracts of which are reproduced under: "11. Section 129(1)(a) of the MGST Act provides for penalty equal to one hundred per cent of the tax payable on goods detained or seized. The phrase "tax payable" would contemplate that the transaction is liable for tax and on which the tax becomes payable. In the instant case, when the machinery is being transported from JNPT to petitioner's fact....
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.... 14. Since the goods in question were stock transfer from one Unit to another within the State of Uttar Pradesh (Agra to Mathura) and in absence of any provision being pointed out by the learned ACSC or any authority below that the goods (stock transfer) in transit were liable for payment of tax, no evasion of tax could be attributed to the goods in question. Once there was no intention to evade payment of tax, the entire proceedings initiated against the petitioner are vitiated and are liable to be set aside. (b) Judgment dated 10/4/2024 of the Honorable Allahabad High Court in the case of GOVERDHAN OIL MILL Versus ADDITIONAL COMMISSIONER (2025) 32 Centax 368 (All.) wherein the Honorable High court held as follows: 5. Upon perusal of the judgments cited above by the petitioner, I am of the view that in the case of stock transfer, there is no liability of any payment of tax. Accordingly, there can be no intention to evade tax whatsoever. In the present case, the authorities did not dispute the fact that the movement of the goods was in relation to stock transfer. Accordingly, penalty imposed under Section 129(3) of the Act is without any basis in law and is liable....
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.... (iii) The next contention is of the learned DR is that in the present case, no e-way bill was generated at all and the finding that "the transaction was not genuine for want of any e-way bill whatsoever is sustainable on the material on record". We have thoroughly perused the crucial documents such as show cause notice, order in original and order in appeal and find that in the absence of any allegation, leave alone evidence, regarding non genuineness of the transaction, the above said contention of the DR is not backed by any material on record. (iv) Yet another contention of the learned DR is that Goverdhan Oil Mill (All.), to the extent it holds that a stock transfer attracting no tax liability cannot attract penalty for want of intention to evade tax, does not account for the independent operation of Rule 138(1)(ii), which mandates an e-way bill for movement of goods "for reasons other than supply" irrespective of whether the movement is ultimately taxable; the statutory contravention on which Section 129 is founded survives regardless of the tax character of the underlying movement, as submitted under Issue 1 above. We have perused the relevant portion of the ab....