2026-VIL-286-GSTAT-AGR
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SGST Tribunal

GST - Penal jurisdiction of the transit State - Invocation of Section 129 of the CGST Act, 2017 - The Appellant, registered in two States, supplied goods to a recipient in a third State, and the vehicle was intercepted in the transit State. The goods were moving under tax invoices and e-way bills with no discrepancy in description or quantity - Whether the tax authorities of a transit State have penal jurisdiction under Section 129 in a transaction originating in another State and destined for a third State, when no tax liability or tax evasion arises within the transit State - HELD - It was not in dispute that the transaction originated outside the transit State and was destined outside it. The transit State was a transit State simpliciter, where no tax event was about to happen - A decision of the Allahabad High Court in M/s Maruti enterprises holds that a transit State has only a limited power of inspection and verification of goods and cannot exercise penal jurisdiction under Section 129. No tax incidence under CGST, SGST or IGST accrues to or is payable in the transit State on an interstate consignment. Verification of goods in transit and imposition of tax or penalty are two distinct powers - If the transit State officer notices a document deficiency or anomaly, the officer may point it out and intimate the jurisdictional authorities of the origin or destination State. Where goods are merely passing through a state with no tax implication arising therein, authorities of such State cannot invoke powers conferred on them by virtue of Section 129 - The question is answered against the department. The appeal is allowed - Timeline mismatch in inter-unit stock transfer invoice - Contravention of Section 129 - The goods were moving under valid tax invoices and e-way bills issued for the supply to the recipient. The invoice for the inter-State stock transfer between the two registrations of the Appellant was issued a day after the dispatch of goods - Whether a minor timeline mismatch in inter-unit stock transfer invoices amounts to a contravention of Section 129 justifying penalty - HELD - The date difference between the outward dispatch documents and the internal stock transfer invoice is a revenue neutral inter-branch accounting sequence mismatch. Section 129 is intended to tackle deliberate tax evasion during transit, that is, untaxed or unaccounted goods and fake bills. It is not meant for technical invoice dating irregularities between two distinct registrations of the same business entity - The order of the FAA and the order in original are set aside, the penalty is quashed.
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