2026-VIL-218-GSTAT-PYG
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SGST Tribunal

GST - Leviability of penalty under Section 129(1)/129(3) of CGST Act, 2017 on stock transfer of goods moved without e-way bill - Appellant transferred five two-wheelers in its own loader from its godown to its showroom about 14 km away and the loader was intercepted by the Mobile Squad - Penalty under Section 129(3) was imposed for want of an e-way bill and was upheld by the FAA - Appellant contended that it was an internal stock transfer of tax-paid goods with no supply and no tax liability - Whether penalty under Section 129 can be confirmed on a registered person for transporting goods without an e-way bill when the goods are moved as a stock transfer - HELD - Rule 138(1) of the CGST Rules, 2017 applies equally to movement of goods for reasons other than supply and therefore covers an intra-city stock transfer. A delivery challan under Rule 55 does not exempt the movement from the e-way bill requirement since Rule 55(3) provides that the movement must still be declared as specified in Rule 138 - The exemption in Rule 138(14)(n) is only for movement to and from a weighbridge, and the provisos to Rule 138(3) and Rule 138(5) only relate to Part B of the e-way bill. Non-generation of the e-way bill is therefore a procedural non-compliance. However, the penalty under Section 129(1) is leviable only with reference to the tax payable on such goods. For a transaction to be a supply under Section 7 there must be two different persons between whom the sale, transfer or disposal takes place for consideration. In a stock transfer there is only one party and no consideration, hence it is not a supply, is not covered by Section 9, and no tax is payable on the goods. Once no tax is payable the penalty determined with reference to such tax is not leviable - The penalty under Section 129 is quashed, the orders of the adjudicating authority and the FAA are set aside - The appeal is allowed - Necessity of intent to evade tax for penalty under Section 129 of CGST Act, 2017 and charge of clandestine removal in stock transfer of two-wheelers - Goods were moved by Appellant from its godown to its showroom under a delivery challan but without an e-way bill - Revenue contended that statutory GST penalties do not require proof of mens rea Appellant contended that goods could not be sold out of books and that there was no deliberate intent to evade tax - Whether a charge of deliberate intent to evade tax by clandestine removal and imposition of penalty under Section 129 is warranted - HELD - Each two-wheeler is uniquely identifiable by its engine and chassis numbers, and registration with the R.T.O. and insurance require a valid tax invoice, Form 21 and Form 22, which makes a clandestine sale virtually impossible. The charge of clandestine removal is therefore unsustainable both in law and on facts - The vehicles were purchased from the manufacturer against valid tax invoices on which GST was duly paid and where the tax has already reached the State exchequer the motive to evade tax is absent. The Appellant's practice of not generating e-way bills for such transfers and its reliance on the distance-based exemptions arose from an honest misunderstanding, so there was a technical and procedural breach without mens rea - A stock transfer carrying no tax liability discloses no material from which an intent to evade tax can reasonably be inferred and mens rea remains a necessary ingredient for penalty under Section 129 - Although the law required an e-way bill to be generated, the virtual impossibility of tax evasion and the absence of fraudulent intent rule out the penal measures under Section 129, therefore the penalty is quashed - The appeal is allowed
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