Transit State Cannot Levy Section 129 Penalty on Inter-State Consignment: GSTAT Agra

The GST Appellate Tribunal’s Agra Bench quashed a ₹7.75 lakh penalty imposed in Uttar Pradesh on industrial machinery moving from Haryana to Karnataka, also excusing a one-day stock-transfer invoice date gap.

The GST Appellate Tribunal, Agra, has held that the authorities of a State through which goods merely pass cannot exercise penal jurisdiction under Section 129 of the CGST/UPGST Act, 2017 over an inter-State consignment that begins and ends outside it. The Bench of Ajeet Singh, Member (Judicial), who wrote the order, and Vivek Kumar, Member (Technical), allowed the taxpayer’s appeal [Technocem Systems India Private Limited v. Shri Prakash Yadav, Joint Commissioner (It), Uttar Pradesh & Ors., 2026-juristway.com-3263-GSTAT(Agra)-GST].

The appellant, registered in Delhi and Haryana, supplies industrial machinery and equipment mainly to cement plants. Goods for ACC Limited in Karnataka, covered by tax invoices and e-way bills, were intercepted at Agra on 7 Oct 2024, and no discrepancy in goods, invoices or quantity was found. The officer objected that the goods were dispatched on 3 Oct 2024 while the Haryana-to-Delhi stock transfer invoice was dated 4 Oct 2024, and imposed a penalty of ₹7,75,240, which the first appellate authority upheld.

Following the Allahabad High Court’s ruling in M/s Maruti enterprises vs State of U.P (2026), the Bench held that a transit State has limited powers of inspection and verification but no penal jurisdiction where no tax incidence arises within it. An officer of a transit State who notices a document deficiency may intimate it to the jurisdictional authorities of the origin or destination State.

On the second issue, the Bench held that the one-day gap between the outward documents and the internal stock transfer invoice was a revenue-neutral accounting sequence mismatch between two registrations of the same business. Section 129, it said, targets deliberate evasion in transit, not technical invoice dating irregularities.

The order-in-original dated 8 Oct 2024 and the order-in-appeal were set aside and the penalty quashed. Any penalty or security collected is to be refunded with interest as per law.

2026-juristway.com-3263-GSTAT(Agra)-GST