M S Steels v. The Commissioner of Kerala State GST, Thiruvananthapuram
Appeal No.: APL/1/TVP/2026
Final Order No.: 01/TVP/KERALA/2026
Tribunal: Goods and Services Tax Appellate Tribunal, Thiruvananthapuram Bench (Division Bench)
Date of Order: 14 August 2026
Coram: Hon’ble Shri Subramanya V Rayaprol, Member (Judicial) and Hon’ble Shri Ramamoorthi Sriram, Member (Technical)
Background
M.S. Steels, a partnership firm dealing in steel goods, transported steel goods on 13 June 2022 under Delivery Challan No. M120 from its own premises to its own godown. The movement was an intra-firm stock transfer between locations covered under the same GSTIN.
The vehicle was intercepted by Mobile Squad No. II, Thiruvananthapuram and detained because no e-way bill was available. A penalty of ₹1,34,640 (CGST ₹67,320 + SGST ₹67,320) was imposed under Section 129(3), without any tax demand. The appellant paid the penalty for release of the goods. Its first appeal was dismissed by the Joint Commissioner of State Tax (Appeals), Thiruvananthapuram, leading to the second appeal before the GSTAT.
Issue Before the GSTAT
The principal issue was whether penalty under Section 129 of the CGST/KGST Acts could be imposed for transportation of goods without an e-way bill when the movement was merely a stock transfer from one premises of the registered person to another premises of the same registered person.
GSTAT’s Findings
The Tribunal observed that the goods were admittedly transported under a delivery challan between premises of the same assessee. Except for the absence of an e-way bill, there was no allegation or finding of fraud, wilful misstatement or suppression of facts to evade tax.
The Tribunal further noted that the first appellate authority had repeatedly relied upon the absence of the e-way bill but had not given any other reason for treating the transaction as non-genuine.
Examining Sections 7 and 9 of the CGST/KGST Acts, the Tribunal held that the transaction did not constitute a “supply”. There was only one party—the appellant—and there was neither a second party to the transaction nor any consideration involved in the stock transfer.
Consequently, the transaction was not an intra-State supply and fell outside the charging provision under Section 9. Therefore, no tax was payable on the transaction.
Section 129 Penalty Depends on “Tax Payable”
The Tribunal held that penalty under Section 129(1) is determined with reference to the “tax payable on such goods”.
Once the tax on the transaction was found to be non-existent, penalty under Section 129, which is calculated with reference to such tax payable, could not be levied.
The Tribunal rejected the Revenue’s argument that “tax payable on such goods” merely provides a measure for calculating the penalty by applying the normal tax rate applicable to the goods. It relied upon Fabricship Pvt. Ltd. v. Union of India, where the Bombay High Court held that the expression “tax payable” contemplates a transaction that is itself liable to tax.
E-Way Bill Requirement Continues to Apply
The Tribunal clarified an important distinction. It did not hold that an e-way bill is unnecessary for stock transfers.
Rule 138(1)(ii) specifically covers movement of goods “for reasons other than supply”, and therefore the e-way bill requirement continues to apply to such movements where the prescribed conditions are satisfied.
However, according to the Tribunal, where the transaction is a stock transfer on which no tax is payable, penalty under Section 129(3) is not leviable. For such e-way bill contravention, the Tribunal observed that recourse would have to be taken under Section 122(1)(xiv).
Final Decision
The GSTAT held that penalty under Section 129 of the CGST/KGST Acts is not leviable on a registered person for transportation of goods without an e-way bill when such transportation is undertaken on account of stock transfer.
Accordingly, the impugned Order-in-Appeal was set aside, and the appeal filed by M.S. Steels was allowed with consequential relief.
Key Takeaway
The ruling distinguishes between an e-way bill compliance violation and the applicability of a tax-linked penalty under Section 129. Although an e-way bill may be required even for movement undertaken for reasons other than supply, the Tribunal held that Section 129 penalty cannot be imposed where a same-GSTIN stock transfer does not constitute a supply and consequently no tax is payable.
