Gail (India) Ltd Vs State of U.P. And 2 Others
Date: November 16, 2025
Subject Matter
Technical Errors During Stock Transfer Do Not Warrant Seizure. Penalty Quashed.
Summary
The Allahabad High Court quashed the penalty and seizure orders against the petitioner, a Government of India undertaking, ruling that the transfer of old machinery between its own units (stock transfer) cannot be penalized under Section 129(3) of the CGST Act due to technical errors, as no intent to evade tax was established.
Summary of Facts and Dispute:
| Detail | Petitioner's Position (Govt. Undertaking) | Revenue's Allegation (Grounds for Seizure) |
| Nature of Movement | Stock Transfer of old machinery from Raigarh Unit (Maharashtra) to Pata Unit (Uttar Pradesh). No sale or consideration involved. | "Glaring mistakes" in documents and one invoice lacking an E-Way Bill. |
| Key Errors | 1. Typo in Truck Number: UP 18 FT 3127 instead of UP 18 ET 3127. 2. E-Way Bill Error: Tax value was mistakenly calculated, and 18% GST was added. 3. Date Mismatch: Discrepancy between Gate Pass and Consignment Note dates. | Intent to evade tax due to the document mismatches. |
| Adjudication | Final penalty order under Section 129(3) was passed and upheld on appeal. | No specific finding on intent to evade payment of tax was recorded. |
Ruling:
The High Court allowed the writ petition and quashed the impugned order imposing the penalty and seizure.
Absence of Intent (Mens Rea): The movement was undisputedly a stock transfer of old machinery between two units of the same government entity, a fact the authorities did not challenge. Where there is no element of sale or consideration, and the goods are old machinery, no intention to evade tax can be attributed.
Trivial/Technical Errors: The discrepancies, such as the single digit typo in the truck number and date mismatches, are deemed mere technical errors that do not warrant the imposition of a penalty under the stringent provisions of Section 129(3).
Binding Precedent: The court affirmed the legal principle established in its precedents (Vacment India Ltd., D&D Construction, and Vishnu Singh) that proceedings under Section 129(3) are unsustainable for stock transfers and other technical lapses in the absence of a recorded finding of intent to evade tax.
Refund Directed: The authority concerned is directed to refund any amount deposited by the petitioner in pursuance of the quashed proceedings, in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1.Heard Mr. Nishant Mishra, learned counsel for the petitioner and learned ACSC for the respondent-State.
2. By means of present petition, the petitioner is assailing the order dated 15.10.2020.
3. Learned counsel for the petitioner submits that the petitioner is a Government of India undertaking engaged in the processing and distribution of gas and also manufacturing of plastic granules by using gas as raw material. He submits that manufacturing units of the petitioner situated across the country including one LPG recovery plant situated at Post Usar, Taluka Alibagh, Distt. Raigarh, Maharashtra (herein after referred as Raigarh Unit). He further submits that in the year 2014, manufacturing activities at Raigarh Unit was shut down, and plant and machinery installed in the said unit was no longer in use, therefore, petitioner has decided to shift some of the machinery to its another unit situated at Auraiya, Uttar Pradesh (herein after referred to as Pata Unit). He submits that both the units of the petitioner were having separate GSTIN. He submits that in view of the decision of shifting the machinery from Raigarh Unit to Pata Unit, 3 tax invoices as well as delivery challans were prepared and e-way bill was also generated but due to some technical mistake, while generating the e-way bill, the value of the tax invoice, whose amount was more than 50 % was added together and thereafter 18 % GST was added. Further due to inadvertence, one digit of the truck number was wrongly mentioned as UP 18 FT 3127 instead of UP 18 ET 3127. He submits that the goods were intercepted and detained in UP and statement of the driver was recorded in MOV-1 on 22.1.2020 and it was alleged that there was difference in the date of gate pass and consignment note and on the said premise, the goods were seized and order under Section 129 (3) of the CGST Act was passed on 24.1.2020 against which an appeal has been filed, which has also been dismissed.
4. Learned counsel for the petitioner further submits that a Circular dated 14.9.2018 was issued by the C.B.I.C. which provides that the proceedings under Section 129 shall not be pressed into service on the ground of some trivial mistake. He submits that there was some technical mistake in the e-way bill but as all documents were accompanying the goods except vehicle number, which was wrongly mentioned. He submits that it was merely a stock transfer from one unit to another unit of the petitioner, therefore, the same cannot be treated as sale or service; at the best it can be said to be supply that too without any consideration.
5. In support of his submission, learned counsel for the petitioner has relied upon the judgements of this Court in the cases of Vacment India Ltd. Vs. Additional Commissioner Grade -2 (Appeal) (2023) 12 Centax 156 (All), Vishnu Singh Vs. State of UP (2025) 28 Centax 384 (All.)and D & D Construction and Developers Company Vs. Additional Commissioner (2025) 29 Centax 276 (All.).
6. Per contra, learned ACSC supports the impugned order and submits that goods in question was rightly detained and seized as there was a glaring mistake found in the accompanying documents, which does not commensurate the e-way bill. He submits that there was a difference in truck number, gate pass and consignment note and one invoice for sum of Rs. 2288250/- for which no e-way bill was generated, therefore, the proceedings has rightly been drawn against the petitioner.
7. After hearing learned counsel for the parties, the Court has perused the record.
8. It is not in dispute that the goods in question were stock transfer from one unit to another unit and the said fact has specifically been mentioned in the reply to the show cause notice copy of which has been annexed as Annexure no. 11 of this writ petition. Further in the grounds of appeal also specific averments and grounds have been taken that the goods in question were stock transfer, (copy of grounds of appeal has been annexed as Annexure no. 14 of this writ petition), therefore, the said fact has not been disputed by the authorities at any stage that the goods in question were not stock transfer but it was sale / service.
9. It is further not in dispute that the petitioner is a Government of India undertaking owned and controlled by the Ministry of Petroleum and the goods in question were old machinery of the petitioner’s unit which were being sent to its Pata Unit as stock transfer. There is no averments of sale involved in the goods in question. Hence no tax evasion can be attributed. The goods in question are the old machinery and same has been transported from one unit to another unit accompanying with delivery challan and gate pass, therefore, at the best the same can be said to be technical error exists in the e-way bill without discrepancy in the goods or intent to evade the payment of tax.
10. This Court in the case of Vacment India Ltd. (supra) has held that no evasion of tax could be attributed when the goods were stock transfer.
11. Again this Court in the case of D&D Construction and Developers Company (supra) has held that if the machinery were transferred from its head unit to its work place and if some technical error is there, the evasion of tax cannot be attributed as no element of sale is involved.
12. Further, this Court in the case of Vishnu Singh (supra) has held that where technical error exists in e-way bill without discrepancy in goods or tax evasion intent, penalty under GST Act Section 129 (3) is unsustainable.
13. In view of the facts and circumstances of the case as well as law laid down by this Court as referred herein above, the impugned order cannot be sustained in the eyes of law and same is hereby quashed.
14. The writ petition succeeds and is allowed.
15. Any amount deposited by the petitioner shall be refunded to him in accordance with law.