Facts of the Case:

In this case, the petitioner transported goods from its own registered premises to its own godown on 13.06.2022 under a delivery challan. Both premises belonged to the appellant and were registered under the same GSTIN. During transit, the goods were intercepted for non-generation of an e-Way Bill and were detained under Section 129 of the CGST/KGST Acts. A penalty of ₹1,34,640 was imposed under Section 129(3), which the appellant paid for release of the goods. The first appellate authority upheld the penalty, leading to the appeal before the GST Appellate Tribunal.

The appellant contended that the movement was merely an internal stock transfer between its own registered premises under the same GSTIN and was not an outward taxable supply to a customer. The goods were transported under a delivery challan and not pursuant to a sale invoice. Further, it was contended that the absence of an e-Way Bill, by itself, could not establish that the transaction was non-genuine or that there was an intention to evade tax. It relied upon judicial precedents including Fabricship Pvt. Ltd. v. Union of India, Vacmet India Ltd. v. Additional Commissioner Grade-2 (Appeal) and Goverdhan Oil Mill v. Additional Commissioner. It was alternatively submitted that if the omission was treated as a documentation-related contravention, the appropriate provision would be Section 122(1)(xiv) and not the tax-linked penalty mechanism under Section 129.

Issue:

Whether penalty under Section 129 can be imposed for transportation of goods without an e-Way Bill where the movement is merely a stock transfer between the registered premises of the same assessee under the same GSTIN, and consequently there is no tax payable on such movement.

Held That:

The GST Appellate Tribunal, Thiruvananthapuram Bench, allowed the appeal and set aside the impugned Order-in-Appeal, holding that penalty under Section 129 of the CGST/KGST Act is not leviable on a registered person for transportation of goods without an e-Way Bill where such transportation is undertaken as a stock transfer between the registered premises of the same assessee.

The Tribunal found that the goods were being transported under a delivery challan from one registered premises to another registered premises of the same assessee and that, apart from the absence of the e-Way Bill, there was no allegation or finding of fraud, wilful misstatement, suppression of facts or intention to evade tax. The appellate authority had also failed to provide any independent basis for treating the transaction as non-genuine merely because an e-Way Bill was not available.

The Tribunal examined Section 129(1)(a) and observed that the penalty prescribed therein is linked to the “tax payable on such goods.” It thereafter considered Sections 7 and 9 of the CGST/KGST Acts and concluded that the stock movement in the present case did not constitute a “supply”. The Tribunal reasoned that a supply under Section 7, in the circumstances relevant to the case, requires a transaction between two persons/entities, whereas the present movement involved only one person—the appellant—moving its own goods from one registered premises to another. There was also no consideration involved in the stock transfer. Accordingly, the movement did not qualify as a supply under Section 7 and consequently did not constitute an intra-State supply attracting the charging provision under Section 9.

the Tribunal held that the statutory basis for calculating and imposing the Section 129 penalty was absent. It consequently held that the penalty under Section 129(1) was not leviable. The Tribunal further relied upon the ratio of Fabricship Pvt. Ltd. v. Union of India, holding that where a transaction does not involve two distinct entities and there is no consideration, the transaction falls outside the charging provision and therefore cannot attract the tax-linked penalty under Section 129. The Tribunal expressly rejected the Revenue’s attempt to distinguish Fabricship merely because the goods in that case were exempt goods, observing that the underlying ratio concerning the absence of two distinct entities and consideration remained applicable.

Further, the Tribunal also considered the Revenue’s reliance on Rule 138(1)(ii), which requires an e-Way Bill for movement of goods “for reasons other than supply.” It clarified that its decision did not hold that an e-Way Bill is unnecessary for movements covered by Rule 138(1)(ii). Rather, the Tribunal accepted that such movement may constitute a contravention of the e-Way Bill requirement, but held that the appropriate consequence of such contravention is not the tax-linked penalty under Section 129(3). Following the reasoning in Goverdhan Oil Mill, the Tribunal held that where the stock transfer does not involve any tax liability, Section 129(3) cannot be invoked, and recourse, if warranted, would lie under the specific documentation-related penal provision, namely Section 122(1)(xiv). 

Case Name: M S Steels v. Commissioner of Kerala State GST, Thiruvananthapuram dated 14.08.2026

Citation No. 2026 Taxo.online 2411