Facts of the Case:

In this case, the petitioner challenged the appellate order and order dated 02.12.2025 i.e. in Form GST APL-04, imposing penalty under Section 129(1)(a) of the Central Goods and Services Tax Act, 2017 on the ground of expiry of E-way Bill during transit of export goods (zero-rated supply). The E-way Bill dated 21.03.2025 expired at midnight on 22.03.2025. As per Rule 138(10) of the CGST Rules, the transporter could have extended it until 08:00 AM on 23.03.2025. However, due to breakdown of the vehicle, the E-way Bill was not extended. The goods were intercepted at 15:22 hours on 23.03.2025, approximately 15 hours after expiry. There was no dispute that the goods were meant for export and constituted zero-rated supply under the Integrated Goods and Services Tax Act, 2017.

Issue:

Whether penalty under Section 129(1)(a) of the CGST Act is leviable for expiry of an E-way Bill during transit of export goods (zero-rated supply), when there was no intention to evade tax and no tax was payable on such supply?

Held that:

The Court held that the controversy was squarely covered by the earlier decision of the Gujarat High Court in Marcowagon Retail Pvt. Ltd. v. Union of India. It observed that export supplies qualify as zero-rated supplies under Section 16 of the Integrated Goods and Services Tax Act, 2017 and, although tax may be leviable in theory under Section 5 read with Section 7 of the IGST Act, no tax is actually payable on such zero-rated supplies.

In the present case, the E-way Bill had expired shortly before interception due to breakdown of the vehicle, and there was no dispute regarding the genuineness of the export transaction or any intention to evade tax.

The Court held that contravention of Rule 138 relating to E-way Bill is procedural in nature and, in absence of tax liability, imposition of harsh penalty under Section 129(1)(a) of the Central Goods and Services Tax Act, 2017 was unwarranted and beyond the scope of the provision. Accordingly, the impugned appellate orders dated 29.11.2025 and 02.12.2025 were quashed and set aside, and the respondents were directed to refund ₹18,00,140/- along with applicable interest within twelve weeks.

Case Name: Balkrishna Industries Limited Versus Union of India & Ors. dated 23.02.2026