Summary: The Appellate Tribunal, Thiruvananthapuram Bench, in M/S M S Steels dated 14.08.2026, examined whether penalty under Section 129 of the CGST/KGST Act, 2017 could be imposed where goods were transported without an e-way bill but no tax was payable. The appellant transported goods by Delivery Challan from its own premises to its own godown, and the vehicle was detained under Section 129(1) for absence of an e-way bill. A penalty of Rs.1,34,640 was imposed under Section 129(3), without a tax demand, and the First Appellate Authority confirmed it. The Tribunal considered that the transaction was not a “supply” under Section 7 and therefore did not attract the charging provision under Section 9, so no tax was payable on the goods. It considered the phrase “tax payable” in Section 129(1)(a) and relied on Fabricship Pvt. Ltd. v. Union of India, VACMET INDIA LTD. Versus ADDITIONAL COMMISSIONER GRADE-2 (APPEAL) and GOVERDHAN OIL MILL Versus ADDITIONAL COMMISSIONER. The supplied material states that where no tax is payable, penalty under Section 129 cannot be imposed merely because goods were transported without an e-way bill.
Penalty is not leviable under section 129 of the CGST Act, 2017 on the registered person, for transport of goods without e-way bill, when such transport was undertaken on account of stock transfer.
This proposition was examined by the Hon’ble APPELLATE TRIBUNAL THIRUVANANTHAPURAM BENCH in the case of M/S M S Steels vide judgement dated 14.08.2026.
- Facts of the Case
- Issue before the Hon’ble Tribunal
- There Is No Dispute in This Regard
- Views in Regard to the Phrase “Tax Payable” as Contemplated in Section 129(1)
- The Appellant's View
- The Respondent (Department) View
- Section 129(1)
- Fabricship Pvt. Ltd. v. Union of India — Bombay High Court
- M/s Vacmet India Ltd. v. Additional Commissioner Grade-2 (Appeal) — Allahabad High Court
- Goverdhan Oil Mill v. Additional Commissioner — Allahabad High Court
- Conclusion
Facts of the Case
The Appellant a partnership firm transported goods vide Delivery Challan from its own premises to its own godown. The vehicle was intercepted by Mobile Squad and detained under Section 129(1) of the CGST/KGST Act, 2017 on the ground that no e-Way Bill was available. After proceedings, a penalty of Rs.1,34,640 (CGST Rs.67,320 + SGST Rs.67,320) was imposed under Section 129(3) — with no tax demand.
The First Appellate Authority dismissed the appeal and confirmed the penalty under Section 129 merely on the ground that e-way bill was not available.
Issue before the Hon’ble Tribunal
The issue before the Hon’ble Tribunal was whether a penalty could be levied under Section 129 of the CGST Act, 2017 when no tax was payable by the assessee.
There Is No Dispute in This Regard
(a) the transaction in question would not be a supply as defined under section 7 of the CGST /KGST Act 2017.
(b) Once it is not a supply simpliciter, there is no question of it being an intra state supply.
(c) Once it is determined that it is not an intra state supply, it would be dehors the charging section – section 9 of the CGST/KGST Act- and therefore is no tax payable on the impugned goods.
Views in Regard to the Phrase “Tax Payable” as Contemplated in Section 129(1)
The Appellant’s View
Once a determination has been made that tax on the goods is non est, it stands to reason that penalty under section 129(1) of the CGST/KGST Act (which is to be determined in terms of such tax payable), is not leviable.
The Respondent (Department) View
The expression “tax payable on such goods” in Section 129(1)(a) is a measure for quantifying the penalty by reference to the value and the rate of tax ordinarily applicable to goods of that description; it does not require proof that an actual completed supply occurred.
Section 129(1)
129. Detention, seizure and release of goods and conveyances in transit.
(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, ––
1[(a) on payment of penalty equal to two hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty;(emphasis supplied)
The Hon’ble Tribunal relies upon the following judgements in this present matter.
Fabricship Pvt. Ltd. v. Union of India — Bombay High Court
Fabricship Pvt. Ltd. v. Union of India (Bombay High Court)
The phrase “tax payable” would contemplate that the transaction is liable for tax and on which the tax becomes payable.
The activity of transport of machinery from JNPT to petitioner’s own factory would not fall within Section 7 which deals with scope of supply and consequently in the absence of any supply, and absence of consideration the charging Section 9 also would not get attracted so as to make petitioner liable to pay any tax.
M/s Vacmet India Ltd. v. Additional Commissioner Grade-2 (Appeal) — Allahabad High Court
M/s Vacmet India Ltd. v. Additional Commissioner Grade-2 (Appeal) & Anr. (Allahabad High Court)
14. Since the goods in question were stock transfer from one Unit to another within the State of Uttar Pradesh (Agra to Mathura) and in absence of any provision being pointed out by the learned ACSC or any authority below that the goods (stock transfer) in transit were liable for payment of tax, no evasion of tax could be attributed to the goods in question. Once there was no intention to evade payment of tax, the entire proceedings initiated against the petitioner are vitiated and are liable to be set aside.
Goverdhan Oil Mill v. Additional Commissioner — Allahabad High Court
Goverdhan Oil Mill v. Additional Commissioner & Anr. (Allahabad High Court)
5. Upon perusal of the judgments cited above by the petitioner, I am of the view that in the case of stock transfer, there is no liability of any payment of tax. Accordingly, there can be no intention to evade tax whatsoever. In the present case, the authorities did not dispute the fact that the movement of the goods was in relation to stock transfer. Accordingly, penalty imposed under Section 129(3) of the Act is without any basis in law and is liable to be set aside.
Conclusion
1. Where no tax is payable in respect of the goods, no penalty can be imposed under Section 129 of the CGST Act, 2017, merely on the ground that the goods were transported without an e-way bill.
2. An e-way bill is also required where goods are transported for purposes other than supply, subject to the applicable provisions and exemptions under the GST law.
