Facts of the Case

The petitioner, M/S Vacmet India Ltd., a company registered under the Companies Act, 1956 and manufacturing polyester films, BOPP films, specialty coated films and metallised paper, challenged before the Allahabad High Court an order dated 23.02.2019 passed by the Additional Commissioner, Grade-2 (Appeal), State Tax, Mathura, affirming a penalty order dated 16.05.2018 passed by the Assistant Commissioner, State Tax, Mobile Squad, Unit-4, Mathura under Section 129(3) of the UPGST Act, 2017. On 14.05.2018, while goods were being transferred from the petitioner's Agra unit to its Kosi Kalan, Mathura unit, the vehicle was intercepted and detained in FORM GST MOV-06 solely because Part B of the e-way bill was not filled, though Part A, the stock transfer challan and the bilty were in order. A same-day show cause notice proposed tax of Rs. 1,82,000/- and an equal penalty on an estimated value of Rs. 6,50,000/-. The petitioner promptly updated Part B and replied, but the penalty order was passed and upheld in appeal. The writ was entertained since no GST Appellate Tribunal existed for Uttar Pradesh.

Issues Involved

  1. Whether penalty under Section 129(3) of the UPGST Act could be imposed for the mere non-filling of Part B of the e-way bill during an inter-unit stock transfer, in the absence of any intent to evade tax.
  2. Whether a stock transfer between two units of the same registered person, involving raw material and not a taxable supply, could attract detention and penalty proceedings at all.
  3. Whether the appellate authority erred in confirming the penalty despite the discrepancy being rectified before the seizure order was passed.

Petitioner's Arguments

  • The goods bore proper documents — stock transfer challan, e-way bill and bilty — with no discrepancy except the unfilled Part B, a transporter's omission rectified as soon as noticed.
  • There was no tax liability at all, since the goods were merely transferred between the petitioner's own units, with no sale or evasion.
  • The breach was purely technical; once rectified, the authorities ought to have released the goods without demand or penalty.
  • Reliance was placed on Shyam Sel & Power Limited vs State of U.P. and Same Deutzfahr India P Limited vs State of Telangana, holding stock transfers without intent to evade tax cannot attract Section 129.

Respondent's Arguments

  • A properly filled e-way bill, as required under Rule 138, was not produced at interception, justifying initiation of proceedings.
  • Had the goods not been detained, the petitioner would have escaped disclosing them in its books of account.
  • The impugned orders deserved to be upheld and the writ petition dismissed.

Court Order/Findings

  • The goods were admittedly moving as a stock transfer between the petitioner's own units, accompanied by a challan and consignment note with no discrepancy; only Part B of the e-way bill was blank, and it was rectified before the seizure order was passed.
  • The Standing Counsel could not point to any provision taxing an intra-State stock transfer of raw material between two units of the same entity.
  • Since Section 129 must be read with Section 130 of the CGST Act, which makes intent to evade tax a sine qua non for detention/penalty proceedings, and the respondents failed to show any such intent, the proceedings were held vitiated and unsustainable in law.
  • The orders dated 23.02.2019 and 16.05.2018 were quashed, the petition was allowed, and any penalty deposited was directed to be refunded within one month with 8% interest thereafter, the respondents being left at liberty to recover such interest from the erring officer.

Important Clarification

A mere failure to fill Part B of an e-way bill during a bona fide inter-unit stock transfer, unaccompanied by any other discrepancy and rectified promptly, is a technical/ minor breach that does not, by itself, establish the intent to evade tax required to sustain proceedings under Section 129(3) read with Section 130 of the CGST/UPGST Act; such lapses are more appropriately dealt with, if at all, under Section 122.

Sections Involved

  • Section 129, CGST/UPGST Act, 2017 — detention, seizure and release of goods/conveyances in transit found in contravention of the Act.
  • Section 130, CGST/UPGST Act, 2017 — confiscation of goods/conveyances and levy of penalty; source of the intent-to-evade requirement.
  • Section 122, CGST Act, 2017 — penalty for specified offences, the more appropriate provision for minor/technical breaches.
  • Rule 138, CGST Rules, 2017 — mandates the e-way bill for movement of goods above the prescribed value.

Decision – In Favour of

This decision is clearly in favour of the Assessee. The Allahabad High Court quashed both the original penalty order and the appellate order affirming it, holding that no intent to evade tax was shown for a mere Part B e-way bill lapse during an inter-unit stock transfer, and ordered a refund of any penalty deposited with interest.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Allahabad High Court
  • Case No.: WRIT TAX No. 687 of 2019
  • CNR: 2023:AHC:200160
  • Coram: Hon'ble Piyush Agrawal, J.
  • Decision Date: 17 October 2023
  • Disposal Nature: Allowed; penalty and appellate orders quashed, refund with interest directed

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