Facts of the Case: In this case, the petitioner ’s old hydraulic excavator was being transported after completion of job work to a repair facility. A valid delivery challan and e-way bill were generated for this movement. However, the vehicle was intercepted and seized by the Assistant Commissioner who alleged that the documents were an “afterthought.” A show cause notice (MOV-07) was issued on the same day, and despite the petitioner submitting all relevant documents — including the bilty, e-way bill, and delivery challan — the officer imposed a tax and penalty of ₹3,42,000 under Section 129(3) of the CGST/UPGST Act for release of goods. The first appellate authority dismissed the appeal, upholding the penalty order. The petitioner then approached the High Court challenging both orders.

The Petitioner argued that the excavator was sent only for repair purposes, not for sale or supply. The movement of machinery for repairs is not a taxable supply under the GST law. The Central Government’s Circulars dated 07.07.2017 and 22.11.2017 expressly clarify that such movement of goods for repairs is neither supply of goods nor supply of services. Therefore, invoking Section 129(3) and demanding tax/penalty was illegal.

Issue:  Whether the transport of a hydraulic excavator sent for repairs constitutes a “supply” under the GST Act, warranting seizure and penalty under Section 129(3), despite the existence of government circulars clarifying the contrary.

Held that: The Allahabad High Court observed and held as under:

Movement of Machinery for Repairs is Not a Supply – The Court noted that the Central Government Circulars dated 07.07.2017 and 22.11.2017 explicitly state that the movement of machinery such as cranes for repair or maintenance does not constitute a supply and is therefore not liable to GST.

Further, relied upon the Supreme Court’s rulings in CCE v. Dhiren Chemical Industries and CCE v. Ratan Melting & Wire Industries, wherein the Court reiterated that departmental circulars are binding on the tax authorities, and non-compliance amounts to violation of administrative discipline. 

Since no tax was leviable on the movement of goods, the requirement of carrying tax documents and invocation of Section 129 proceedings was held to be unwarranted.

The Court allowed the writ petition, quashing the seizure and penalty orders. 

Case Name: Abhay Prakash Katariar v. State of UP dated 22.09.2025

To read complete judgement 2025 Taxo.online 2442