Section 129 Penalty on Stock Transfer of Motor Vehicles Quashed — No Tax Evasion Possible Where Goods Are Uniquely Identifiable: GSTAT Prayagraj

The Tribunal held that motor vehicles cannot be sold 'out of books' as each is identifiable by engine and chassis numbers, making clandestine sale virtually impossible, and a stock transfer attracts no tax.

The GSTAT Prayagraj Bench has quashed a penalty of ₹1,96,000 imposed under Section 129 on M/s GP Motors Pvt. Ltd. for transporting five two-wheelers valued at ₹3,50,000 as an intra-city stock transfer from its godown to its showroom without generating an e-way bill. [GP Motors Private Limited v. Commissioner, State Tax Lucknow & Ors.]

The Tribunal acknowledged that the GST Rules do require an e-way bill for stock transfers above ₹50,000, making the non-generation a procedural non-compliance. However, it held that the penalty under Section 129(1) is leviable only with reference to the tax payable on the goods. Since a stock transfer between the dealer's own premises is not a 'supply' under Section 7(1), no tax is payable, and consequently no penalty can be computed.

Relying on the Madras High Court in Tvl. R.K. Motors and multiple Allahabad High Court decisions, the Tribunal observed that motor vehicles cannot be sold without proper registration with the Motor Vehicle Authorities, making clandestine sale virtually impossible. Where there is no intention to evade tax and the goods are fully traceable, the severe penal measures under Section 129 are not warranted.

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