Ms Steels vs. The Commissioner Of Kerala State GST, Thiruvananthapuram

Facts

M/s. MS Steels (the appellant) transported steel goods from its own premises to its own godown, both registered under the same GSTIN. This movement was against a Delivery Challan, without generating an e-way bill. The goods were detained, and a penalty of Rs. 1,34,640/- was imposed under Section 129(3) of the CGST/KGST Act. The appellant contended that the movement was a stock transfer and not a 'supply' as defined under Section 7 of the Act, hence no tax was payable and consequently, no penalty under Section 129 could be levied. The revenue argued that the absence of an e-way bill, even for non-supply movements, attracted Section 129 penalties.

Held

The Court held that the movement of goods by way of stock transfer between the appellant's own premises under the same GSTIN does not constitute 'supply' under Section 7 of the CGST/KGST Act, as it involves only one entity and no consideration. Consequently, no tax is payable under Section 9. The Court further held that since Section 129 penalty is linked to 'tax payable', it is not leviable when no tax is due. Regarding the e-way bill requirement, the Court acknowledged Rule 138(1)(ii) mandates it for movements other than supply, but held that contravention of this rule for non-taxable movements does not attract penalty under Section 129(3); recourse lies under Section 122(1)(xiv). The Court followed the Bombay High Court's decision in Fabricship Pvt. Ltd. v. Union of India, holding that 'tax payable' implies an underlying taxable transaction and cannot be merely a measure for penalty. The Court also found no evidence on record to support the revenue's contention that the transaction was non-genuine due to the absence of an e-way bill. The impugned order was set aside, and the appeal was allowed.

Key Issues

1. Whether the movement of goods by way of stock transfer between the appellant's own registered premises under the same GSTIN constitutes 'supply' under Section 7 of the CGST/KGST Act? The appellant argued it does not, as it involves only one entity and no consideration. The revenue did not explicitly argue this point but implicitly disagreed by imposing penalty. 2. Whether a penalty under Section 129 of the CGST/KGST Act can be imposed where no tax is payable on the goods transported by way of stock transfer? The appellant argued that Section 129 is linked to 'tax payable', and thus not leviable if no tax is due. The revenue implicitly argued for its leviability. 3. Whether the non-generation of an e-way bill for movement of goods for reasons other than supply can, by itself, attract penalty under Section 129(3)? The appellant contended that while an e-way bill might be required under Rule 138(1)(ii) for non-supply movements, contravention does not attract Section 129 penalties, but rather Section 122(1)(xiv). The revenue argued that the contravention of Rule 138(1)(ii) independently attracts Section 129. 4. Whether the expression 'tax payable on such goods' under Section 129(1)(a) can be treated merely as a measure for quantifying penalty, without an underlying taxable transaction? The appellant relied on the Bombay High Court's decision in Fabricship Pvt. Ltd. v. Union of India, holding that 'tax payable' contemplates a transaction liable for tax. The revenue argued this was distinguishable as the goods in Fabricship were exempted. 5. Whether the absence of an e-way bill, by itself, can justify a finding that the stock transfer transaction was not genuine? The appellant argued that there was no allegation or evidence of non-genuineness on record. The revenue contended that the absence of an e-way bill made the transaction non-genuine.