No E-Way Bill on an Internal Stock Transfer? No Section 129 Penalty Either

Summary: The Thiruvananthapuram Bench of the GST Appellate Tribunal in M.S. Steels v. Commissioner of Kerala State GST, (2026) 45 Centax 257, considered whether penalty under Section 129 of the CGST/KGST Act, 2017 could be imposed where goods were moved from one registered premises to another registered premises of the same assessee under the same GSTIN without an e-way bill. M/s M.S. Steels, a partnership firm dealing in steel goods, moved TMT bars from its own premises to its own godown on 13.06.2022 under Delivery Challan No. M120. The vehicle was intercepted and the goods were detained under Section 129(1) solely for want of an e-way bill, resulting in a penalty of Rs. 1,34,640 under Section 129(3), with no tax demand. The Tribunal held that the movement was not a “supply” under Section 7 because there was only one entity, no second person and no consideration. Consequently, Section 9 was not attracted and there was no “tax payable” on which the Section 129 penalty could be computed. The Tribunal rejected the Revenue’s contention that “tax payable” was merely a yardstick for penalty and also rejected the finding that the transaction was “not genuine” merely because the e-way bill was absent. At the same time, the Tribunal clarified that the e-way bill requirement continues for movement for reasons other than supply under Rule 138(1)(ii), and that the appropriate consequence for such a documentation lapse lies under Section 122(1)(xiv), rather than the tax-linked machinery of Section 129. The appeal was allowed and the Order-in-Appeal was set aside with consequential relief.

No E-Way Bill on an Internal Stock Transfer? No Section 129 Penalty Either
Analysis of M.S. Steels v. Commissioner of Kerala State GST, (2026) 45 Centax 257 (Tri. – GST – Kerala)

1. Introduction

Shifting goods from one of one’s own premises to another – factory to godown, or head office to depot – is a routine business reality. Where both premises operate under the same GST registration (GSTIN), such a movement is a mere internal stock transfer: there is no sale, no customer, and no consideration.

A recurring question is whether the failure to carry an e-way bill during such an internal movement can attract the penalty under Section 129 of the CGST/KGST Act, 2017, which is pegged at 200% of the tax payable on the goods. In M.S. Steels, the Kerala Bench of the GST Appellate Tribunal answered this question in the negative, holding that where no tax is payable on the movement, the Section 129 penalty has nothing to fasten upon.

2. Facts of the Case

The relevant facts, which were not in dispute, are summarised below:

Aggrieved by the dismissal of its first appeal, the firm carried the matter in second appeal before the Tribunal.

3. Question of Law

The Tribunal framed a single, sharply defined issue:

“Whether a penalty under Section 129 of the CGST/KGST Act, 2017 can be levied on a registered person for transporting goods without an e-way bill, where the transport is undertaken purely on account of an internal stock transfer.”

4. The Statutory Scheme

The answer turns on reading Section 129 together with the charging provisions. The three provisions may be seen side by side:

The pivot, therefore, is the expression “tax payable on such goods”. If no tax is payable, the very base on which the Section 129 penalty is computed disappears.

5. Findings of the Tribunal

5.1  A same-GSTIN movement is not a “supply”

The Tribunal held that for a transaction to be a supply under Section 7(1)(a), there must be two distinct persons between whom the sale, transfer or exchange occurs, and there must be a consideration. In a same-GSTIN stock transfer, there is only one entity – the appellant – moving its own goods to its own godown, and no consideration whatsoever. Neither ingredient of a supply was present.

5.2  No supply means no tax, and no tax means no Section 129 penalty

Since the movement was not a supply under Section 7, it could not be an intra-State supply, and the charging Section 9 was never attracted. With no tax payable on the goods, the penalty under Section 129 – which must be quantified as a multiple of that tax – was held to be not leviable. In short: no supply under Section 7, so Section 9 is not attracted, so no tax is payable, and therefore Section 129 cannot apply.

5.3  The Department’s contentions rejected

The Tribunal met each of the Revenue’s arguments squarely:

• On “tax payable” being a mere yardstick: The Tribunal held that “tax payable” presupposes a transaction that is itself liable to tax. If no tax is due, there is nothing to compute the penalty on.
• On Fabricship being distinguishable: The exemption of goods was not the basis of Fabricship. Its ratio is the twin test – two distinct persons and consideration – which is equally absent here, irrespective of whether the goods are taxable or exempt.
• On the movement being “not genuine”: This was held to be an impermissible presumption. The record carried no allegation or evidence of non-genuineness apart from the missing e-way bill.

5.4  The e-way bill was still required – but the consequence lies elsewhere

Importantly, the Tribunal did not hold that no e-way bill was needed. Rule 138(1)(ii) requires an e-way bill even for movement “for reasons other than supply”, so a stock transfer above Rs. 50,000 must still carry one. The Tribunal’s point was narrower: a lapse in that requirement, on a genuine same-GSTIN transfer, is a documentation default for which recourse lies under Section 122(1)(xiv) – a flat penalty – and not under the tax-linked machinery of Section 129.

6. Precedents Relied Upon

7. Conclusion

The Tribunal answered the question of law in the negative, set aside the Order-in-Appeal, and allowed the appeal with consequential relief. In essence, a penalty under Section 129 is not leviable for transporting goods without an e-way bill where the movement is an internal stock transfer between premises of the same registered person.

The decision is a welcome, principled correction. It refuses to let a tax-linked penalty be applied mechanically to a movement on which no tax is, or ever was, due – while still recognising that the e-way bill obligation itself survives, enforced through the appropriate documentation penalty.

8. Key Takeaways for Businesses

• A same-GSTIN move is not a supply: with no second person and no consideration, it sits outside Section 7 entirely.
• No supply means no tax: if Section 9 is never attracted, there is no “tax payable” for Section 129 to compute upon.
• Still generate the e-way bill: Rule 138 covers non-supply movements too; do not skip it merely because the tax is nil.
• A missing bill is a document lapse: on a genuine same-GSTIN transfer, it is a Section 122(1)(xiv) matter, not a tax-linked Section 129 demand.
• Mind the scope: the ruling turns on a same-registration move. Transfers between distinct registrations – e.g. inter-State branch transfers – can be deemed supplies under Schedule I and remain taxable.

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Disclaimer: The views expressed in this article are personal and based on legal interpretations. Readers are encouraged to refer to the specific facts of their case and the latest rules, regulations and circulars before proceeding. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. The author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.