The Bombay High Court in the case of FABRICSHIP PVT. LTD. VERSUS THE UNION OF INDIA, THE STATE OF MAHARASHTRA, THE COMMISSIONER OF STATE TAX, MUMBAI, SECRETARY, MINISTRY OF FINANCE, UNION OF INDIA, DEPT. OF REVENUE, NEW DELHI vide WRIT PETITION NO. 2611 OF 2021 WITH WRIT PETITION NO. 5900 OF 2021 WITH WRIT PETITION NO. 5899 OF 2021 dated 21.06.2024, has held that transportation of machinery from Jawaharlal Nehru Port Authority (JNPT) to the factory of the assessee does not constitute supply under Section 7 of the MGST Act, as it involves no consideration or transfer of title between different entities, and hence GST is not payable.  Therefore, the transportation in question does not trigger GST liability.

Facts of the Case:-   The Petitioner imported machinery from China, which was exempted from Customs duty and IGST under the EPCG scheme. The machinery was transported to Surat without an accompanying e-way bill, which led to the State GST authority imposing a penalty. However, the bill of entry accompanying the vehicle contained all the details.

The state GST authority issued a notice under the MGST Act for the imposition of a penalty. The petitioner replied to the said show cause notice. The state GST authority passed the impugned order imposing a penalty under Section 129(1) of the MGST Act equivalent to a tax applicable to the value of the machinery.

Submission of the Petitioner:-  It was contended that at the time of the import of machinery, there is no customs duty or IGST liability since goods are exempt under notification no. 16 of 2015, read with notification no. 18 of 2020. After the goods were cleared by customs, they were being transported to the petitioner's factory in Surat.

The petitioner admitted that the e-way bill did not accompany the vehicle when it was intercepted. However, the petitioner submits that there cannot be any GST liability when goods are transported by an importer to his own factory, and therefore the state GST authority was not justified in imposing a penalty by applying the rate of tax to the value of machinery and arriving at the tax amount to determine the penalty. Further, it was submitted that a penalty of only Rs. 25,000 should have been imposed under Section 129(1) of the MGST Act since it was less than two percent of the value of exempt goods.

Also, it was contended that while passing the order, the state GST authority has not considered any of its submissions made in response to the show cause notice. The petitioner, therefore, prayed for reducing the penalty to Rs. 25,000 only.

Submission of the Department:-  The Respondent department contended that at the time when the vehicle was intercepted, there was no e-way bill, and therefore, there had been a contravention of Rule 138A of the MGST Rules. As per Section 129(1) of the MGST Act, the petitioner is liable for a penalty equivalent to the tax applicable. Further, Section 129(1)(a) of the MGST Act provides for a penalty equal to one hundred percent 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.

Held that:-  The court analyzed the applicability of Section 129 (1) of the MGST Act. Also, it was concluded that he transport of machinery from JNPT to the petitioner's factory does not constitute “supply” under Section 7 of the MGST Act, as it involves no consideration or transfer of title between different entities.

It was observed that the applicability of Section 129 (1) of the MGST Act. The State GST Authority in the impugned order has erroneously applied the rate of GST without first satisfying itself whether the transportation to one's own factory can at all fall within the charging section. The applicability of the rate of tax would get triggered only if a transaction falls within the meaning of the term “supply” as per Section 7 of the Maharashtra Goods and Service Tax Act (MGST Act).

The petitioner is not liable to pay GST on the transportation of machinery from JNPT to its factory. The impugned orders imposing higher penalties are modified to impose a penalty of Rs. 25,000/- only under Section 129(1) of the CGST Act.

To read the complete judgment 2024 Taxo.online 1295