(2026) 1 GSTAT E-Journal 80 (Thiruvananthapuram)Section 129Decision: In Favour of Assessee
GSTAT on Same-GSTIN Stock Transfers: Section 129 Penalty Inapplicable to Non-Supply Movements Dehors Section 9
The GSTAT Thiruvananthapuram Bench held that movement of goods between premises under the same GSTIN does not constitute a 'supply' under Section 7. Because no tax is payable under Section 9, tax-linked penalty under Section 129(1)(a) cannot be imposed for omission of an E-way bill.
Case Name / Parties
MS Steels v. The Commissioner of Kerala State GST, Thiruvananthapuram
Appeal Number
APL/1/TVP/2026
Tribunal Bench
Thiruvananthapuram Bench
Date of Judgment / Order
14/08/2026
Coram
Hon'ble Shri Subramanya V Rayaprol, Member (Judicial) • Hon'ble Shri Ramamoorthi Sriram, Member (Technical)
For Appellant: Shri Unnikrishnan M, Chartered Accountant
For Respondent: Shri Mansur M I, Joint Commissioner, Authorized Representative
Facts of the Case
The Appellant, a partnership firm dealing in steel goods, was transporting TMT steel bars on 13.06.2022 under Delivery Challan No. M120 from its own business premises to its own godown located in the same State under the same GSTIN (single legal entity, intra-firm stock movement). The vehicle was intercepted by Mobile Squad No. II, Thiruvananthapuram and detained under Section 129(1) on the ground that no E-way bill accompanied the goods. The Proper Officer treated the transaction as non-genuine solely for lack of an E-way bill and imposed a penalty of ₹1,34,640/- under Section 129(3) (CGST ₹67,320/- + SGST ₹67,320/-) computed at 200% of the tax notionally applicable to TMT bars, without raising any tax demand. The First Appellate Authority dismissed the appeal.
Issues Before GSTAT
- 1Whether movement of goods by way of stock transfer between premises of the same person under the same GSTIN constitutes a 'supply' under Section 7 of the CGST/KGST Act.
- 2Whether penalty under Section 129 can be levied where no tax is payable under Section 9 on the underlying movement.
- 3Whether the expression 'tax payable on such goods' under Section 129(1)(a) is merely a notional measure for quantifying penalty, or requires an actual taxable supply.
- 4Whether non-generation of an E-way bill for non-supply movement under Rule 138(1)(ii) attracts Section 129(3) or general document penalty under Section 122(1)(xiv).
Relevant Statutory Provisions & Rules
Statutory Sections
Section 7 of CGST Act, 2017Section 7(1)(a) of CGST Act, 2017Section 9 of CGST Act, 2017Section 68 of CGST Act, 2017Section 122(1)(xiv) of CGST Act, 2017Section 126 of CGST Act, 2017Section 129 of CGST Act, 2017Section 129(1)(a) of CGST Act, 2017Section 129(3) of CGST Act, 2017Section 2(64) of CGST Act, 2017Section 8 of IGST Act, 2017
GST Rules
Rule 138(1)(ii) of CGST/KGST Rules, 2017Rule 138A of CGST/KGST Rules, 2017
Contentions of the Parties
Appellant / Taxpayer Contentions
- •A supply under Section 7(1)(a) mandates two distinct persons and consideration. In an intra-firm stock transfer under the same GSTIN, there is only one party and zero consideration; hence, no supply occurred.
- •In the absence of a supply, charging Section 9 is not attracted and tax payable is non-est.
- •Penalty under Section 129(1)(a) is explicitly formulated as '200% of the tax payable on such goods'. Where tax payable is nil, no penalty can be computed or demanded.
- •The Bombay High Court in Fabricship and Allahabad High Court in Vacmet India and Goverdhan Oil Mill have conclusively established that Section 129 does not apply to non-taxable stock transfers; the appropriate provision for documentation defaults is Section 122(1)(xiv).
Respondent / Revenue Contentions
- •Rule 138(1)(ii) explicitly mandates E-way bills for movement 'for reasons other than supply' exceeding ₹50,000/-; hence, a statutory contravention occurred.
- •Section 129 is an independent, non-obstante code for transit enforcement and does not require the officer to establish an executed supply under Section 7.
- •The phrase 'tax payable on such goods' is merely an objective yardstick to calculate penalty by reference to the tariff rate of the goods, irrespective of whether the specific movement is taxable.
Findings of GSTAT
For an activity to constitute 'supply' under Section 7(1)(a), it must involve two distinct persons/entities and consideration. Internal stock transfer between premises of the same entity under the same GSTIN involves only one person and zero consideration. It is not a supply.
Being outside Section 7, the transaction falls outside the charging provision of Section 9. Consequently, there is no tax payable on the movement.
Section 129(1)(a) computes penalty as 'two hundred per cent of the tax payable on such goods'. The phrase 'tax payable' contemplates a transaction that is legally liable to tax. It cannot be treated as a fictitious yardstick to penalize non-taxable movements. Followed Bombay High Court in Fabricship Pvt. Ltd.
While Rule 138(1)(ii) requires E-way bills for non-supply movements, non-compliance therewith cannot attract Section 129 where the transaction is not taxable. The proper statutory remedy available to Revenue in such cases is confined to Section 122(1)(xiv).
Absence of an E-way bill cannot by itself support a finding that the stock transfer was fraudulent or non-genuine without independent evidence.
Ratio Decidendi
Key Legal Principle
“Penalty under Section 129 of the CGST/KGST Act is not leviable on an intra-firm stock transfer between registered premises under the same GSTIN, as such movement does not constitute a 'supply' under Section 7 and attracts no tax payable under Section 9. Documentation lapses on non-supply movements can only be proceeded with under Section 122(1)(xiv).”
Final Decision & Relief Granted
Outcome: The appeal of M/s M.S. Steels was allowed with consequential relief. The Order-in-Appeal and the original order imposing penalty of ₹1,34,640/- under Section 129(3) were set aside.
Relief Granted: Setting aside of Section 129(3) penalty order; refund of ₹1,34,640/- deposited by the Appellant.
Operative relief was verified against the Tribunal's order and accurately summarized without altering its legal effect.
Practical Implications for Taxpayers
- When moving goods between own branches, warehouses, or job work sites under the same GSTIN, always carry a valid Delivery Challan under Rule 55.
- If the mobile squad detains goods under the same GSTIN for lack of an E-way bill, immediately demonstrate that the movement involves no second party and zero consideration, ousting Section 9 and Section 129.
- Be aware that the Department may still impose a general documentation penalty under Section 122(1)(xiv) (capped at ₹10,000/- CGST + ₹10,000/- SGST), but they cannot levy the draconian 200% tax penalty under Section 129.
Practical Takeaways for Tax Professionals
- Do not concede Section 129 jurisdiction in stock transfer cases: anchor the defense squarely on Fabricship (Bom HC), Goverdhan Oil Mill (All HC), and this M.S. Steels GSTAT precedent.
- Argue that 'tax payable' under Section 129(1)(a) is a condition precedent, not a hypothetical arithmetic multiplier. If the charging section (Section 9) does not bite, Section 129 penalty is legally zero.
- Distinguish inter-State stock transfers (which are deemed supplies between distinct persons under Schedule I Para 2) from intra-State same-GSTIN transfers (which are not supplies).
SKM
Editorial Commentary
SKM Laws Professional Analysis
The M.S. Steels ruling cuts to the core of GST jurisprudence by reconciling transit enforcement with the foundational charging provisions of the Act. For years, mobile squad officers routinely treated Section 129 as an isolated penal island, mechanically multiplying the commodity tariff rate by 200% even for internal movements between an enterprise's shop and its warehouse down the street. GSTAT Thiruvananthapuram has authoritatively held that Section 129 cannot operate in a statutory vacuum: its penalty formula is inextricably anchored to 'tax payable on such goods' under Section 9. Where there is no supply under Section 7, tax payable is non-existent, rendering Section 129 legally inapplicable.
Related Cases & Precedents
(2026) 1 GSTAT E-Journal 163
Distinguishing non-supply movements where business rental consideration was unaccounted.
(2026) 1 GSTAT E-Journal 75
Quashing Section 129 penalties for bona fide timing lapses.
Related GST Tools & Utilities
Source Citation & Forensic References:
Official Citation: (2026) 1 GSTAT E-Journal 80 (Thiruvananthapuram)
Source Publication: GSTAT E-Journal, Volume I (Till 31.08.2026), Published by Goods and Services Tax Appellate Tribunal
Journal Pages: 80-90
Legal Information Disclaimer
This case law analysis is published strictly for informational, educational, and research purposes. It does not constitute legal, tax, or professional advice. The ratio decidendi and commentary reflect professional editorial interpretations of the Goods and Services Tax Appellate Tribunal's reported judgment. Readers must refer to the full certified order of the Tribunal before initiating or defending litigation.