Earth Minerals Vs State of U.P. And 2 Others

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. With the consent of parties, the present writ petition is being decided finally without calling for the counter affidavit.

2. Heard Sri Ms. Shraddha Agrawal, learned counsel for the petitioner and Sri R.S. Pandey, learned Additional Chief Standing Counsel for the State-respondents.

3. By means of instant writ petition, the petitioner has assailed the impugned order dated 22.07.2025 passed by respondent no.2 and the order dated 28.05.2025 as well as communication dated 13.06.2025 passed by respondent no.3.

4. Learned counsel for the petitioner submits that the petitioner is engaged in the business of works contract and is duly registered under the Goods and Services Tax Act bearing GSTN 08AAEFE1347E2ZR in the State of Rajasthan and GSTN 10AAEFE1347E1Z7 in the State of Bihar. The petitioner was awarded a works contract by SBCC Buildcon Private Limited vide Work Order dated 01.05.2025 for execution of embankment works pertaining to the constructions of 6-lane Greenfield Varanasi-Ranchi-Kolkata Highway, stretching from Anarbanselea village to Sangrampur village, under the aegis of the Bharatmala Pariyojana in the State of Bihar, on Hybrid Annuity Mode (HAM). As per Circular No.1/1/2017-IGST amended by Circular No.21/21/2017 dated 22.11.2017 inter-state movement of rigs, tools and spares, and all goods on wheels (like cranes) shall be treated ‘neither as a supply of goods nor supply of service’ and consequently no IGST was applicable on such movements. In the present case, the petitioner transferred the Motor Grader, which was covered by the said circulars and therefore, on the said transfer, no IGST was applicable for which the petitioner engaged Padam Transport Company, which was a movement of a capital asset by the petitioner to the project site for execution of the awarded works contract for which the transporter issued a bilty with wrong vehicle number mentioning vehicle as RJ01GC1474 whereas the goods were transported by vehicle having registration as RJ46GA4003 to which the petitioner was never informed. While the goods were on its journey from State of Rajasthan to Bihar, the same were intercepted and pursuant to such interception, respondent no.3 issued Form GST MOV-02 on 16.05.2025, directing the driver of the vehicle to station the same at the SGST Office, Lakhanpur, Kanpur Nagar where the statement of the truck driver was recorded in MOV-01 on 16.05.2025 and thereafter, on 19.05.2025, the physical verification of the vehicle and goods in movement were carried out by the respondent authorities, and the same was recorded in Form GST MOV-04 in the said verification. Further, on 20.05.2025, the respondent no.3 proceeded to issue Form GST MOV-06 i.e. order of detention under Section 129 (1) of the Central Goods and Services Tax Act, 2017 and a notice was issued in Form DRC-01 along with an annexure in the form of GST MOV-07 on 25.05.2025 whereby it is evident that the date and time of hearing was fixed as 25.05.2025 at 11:30 hours, but the order was signed on the very day at 02:22 hours, which shows that the petitioner was not given due opportunity of hearing. Further, to the notice issued to the petitioner, reply was submitted, making a request for release of the goods, but in vain. Thereafter, on 28.05.2025 an order passed under Section 129 (3) of the GST Act, 2017, and thereafter, on 13.06.2025, a notice was issued by respondent no.3, directing the petitioner to deposit the penalty. Being aggrieved the said order, an appeal was filed which has been dismissed by order dated 22.07.2025, confirming the order dated 28.05.2025.

5. Learned counsel for the petitioner submits that the goods in question which is being used by the petitioner for execution of works contract, there was no element of sale or supply hence there was no liability for tax. She further submits that a Circular No.1/1/2017-IGST dated 07.07.2017 which was amended by Circular No.21/21/2017 dated 22.11.2017 which categorically mentioned that inter- state movement of rigs, tools and spares, and all goods on wheels (like cranes) shall neither be treated as supply of goods nor supply of services, and therefore, no liability for IGST would be applicable on such movements. Once the said fact was there in the present case, no tax is liable against the petitioner as being no element of sale.

6. In support of her submission, she has placed reliance upon the judgments of the Hon’ble Apex Court passed in the cases of Collector of C. EX., Vadodara Vs. Dhiren Chemical Industries, 2002 (139) E.L.T. 3 (S.C.) and Commissioners of E. EX., Bolpur Vs. Ratan Melting & Wire Industries, 2008 (231) E.L.T. 22 (S.C.) as well as judgments of this Court passed in the cases of Marcowagon Retail (P.) Ltd. Vs. Union of India [2025] 175 com791 (Gujarat), Assistant Commissioner (ST) V. Satyam Shivam Papers Pvt. Ltd., 2022 (57) G.S.T.L. 97 (S.C.) & Vacment India Ltd. Vs. Additional Commissioner Grade-2 (Appeal) [2023] 156 taxmann.com 317 (Allahabad).

7. Per contra, learned Additional Chief Standing Counsel supports the impugned orders and submits that if the goods were not intercepted, the petitioner would have succeeded in its attempt in not disclosing the alleged goods in question. He further submits that the documents accompanied with the goods in question clearly shows that a different truck number was mentioned therein, which was rectified after the interception of vehicle on which goods were loaded and after passing of the seizure order. He prays for dismissal of the present writ petition.

8. After hearing the parties, the Court has perused the record.

9. It is not in dispute that the petitioner was awarded a works contract by SBCC Buildcon Private Limited vide Work Order dated 01.05.2025 for execution of embankment works pertaining to the constructions of 6-lane Greenfield Varanasi-Ranchi-Kolkata Highway, stretching from Anarbanselea village to Sangrampur village, under the aegis of the Bharatmala Pariyojana in the State of Bihar, on Hybrid Annuity Mode (HAM). For the execution of said works contract, the goods in question i.e. crane which was being sent by the petitioner from the State of Rajasthan to State of Bihar.

10. It is nobody’s case that the goods in question i.e. crane was to be used by the petitioner itself though as per Section 25(4) of the Goods and Services Tax Act, 2017 as being distinct person, nonetheless a circular issued by the Central Government which covers the issue. The said Circular No.1/1/2017-IGST dated 07.07.2017 which was amended by Circular No.21/21/2017 dated 22.11.2017 is quoted as below:

“CIRCULAR NO.21/21/2017-GST [F.NO.354/320/2017-TRU (PT.)]

SECTION 7 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017-SUPPLY, SCOPE OF -CLARIFICATION ON INTER-STATE MOVEMENT OF RIGS, TOOLS AND SPARES AND ALL GOODS ON WHEELS (LIKE CRANES)
CIRCULAR NO.21/21/2017-GST [F.NO.354/320/2017-TRU (PT.)],
DATED 22-11-2017

1. The issue of IGST exemption on inter-state movement of various modes of conveyance, between distinct persons as specified in section 25(4) of the Central Goods and Services Tax Act, 2017, carrying goods or passengers or both; or for repairs and maintenance, (except in cases where such movement is for further supply of the same conveyance] was examined and a circular 1/1/2017-1GST dated 7-7-2017, was issued clarifying that such inter state movement shall be treated “neither as a supply of goods nor supply of service” and therefore would not be leviable to IGST.

2. The issue pertaining to inter-state movement of rigs, tools and spares, and all goods on wheels [like cranes] was discussed in GST Council’s meeting held on 10th November, 2017 and the Council recommended that the circular 1/1/2017-1GST shall mutatis mutandis apply to inter-state movement of such goods, and except in cases where movement of such goods is for further supply of the same goods, such inter-state movement shall be treated ‘neither as a supply of goods or supply of service, and consequently no IGST would be applicable on such movements.

3. In this context, it is also reiterated that applicable CGST/SGST/IGST, as the case maybe, is leviable on repairs and maintenance done for such goods.

4. Difficulty if any, in the implementation of the circular should be brought to the notice of the Board.”

11. Perusal of the aforesaid circular clearly shows that if the goods on wheel (crane) sent for interstate movement, but such goods are not for supply of the same, then it shall be treated “neither as supply of goods nor supply of services” and squarely no goods and services tax would be leviable on such movement.

12. The said circulars are binding upon the authorities as has been held by the Hon’ble Apex Court in the case of Collector of C. Ex., Vadodara Vs. Dhiren Chemical Industries, 2002 (139) E.L.T. 3 (S.C.). The relevant paragraph no.9 of the said judgment is quoted as below:

9. We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue.”

13. Following the said judgment, the Hon’ble Apex Court in the case of Commissioner of C. Ex., Bolpur Vs. Ratan Melting & Wire Industries, 2008 (231) E.L.T. 22 (S.C.) has also reiterated the said fact. The relevant paragraph of the said judgment is quoted as below:

“6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the =clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.”

14. The perusal of the aforesaid paragraph clearly demonstrates that the circulars issued by Board are binding on the authorities concerned and as such, the authorities below cannot take a contrary view. Once the goods in question i.e. crane held to be non vital goods, were sending for the execution of the aforesaid works contract, the same could not have treated as supply of goods and no liability of goods and services tax would be applicable in view of the said circulars and as there was not intent to evade payment of tax, the goods in question ought not to have seized.

15. The Gujarat High Court in the case of Dhiren Chemical Industries (supra) in para no. 13 has held that the scope of the goods and services tax under Section 24 comes into play when there is an intention to evade the tax, but in absence thereof, the goods cannot be seized.

16. This Court in the case of Vacment India Ltd. (supra) in paragraph nos.8 & 10 has taken the similar view, which is quoted as under:

“8. Admitted, the goods in question were going to petitioner’s one unit to another, i.e., from Agra to Mathura, as stock transfer. The said goods were accompanying with stock transfer challan, in which no discrepancy, whatsoever, was pointed out. Further, the consignment note/bilty was also accompanying the goods, in which also no discrepancy was pointed out. E-way bill was also accompanying the goods, in which part ‘A’ was duly filled, but part ‘B’ was not filled up, on the basis of which, the present proceedings were initiated against the petitioner. At the time of interception of the goods, when it came to the notice of the petitioner, the same was duly filled up and produced before the authorities along with the reply, but not being satisfied with the reply, the impugned penalty order was passed against the petitioner, which was confirmed by the appellate authority in appeal. In the appeal, a specific point was raised that the goods in question are raw material, which were going from one unit to another unit as stock transfer and there was no intention of the petitioner to evade any tax as there was no liability for payment of tax for stock transfer being made from one unit to another, but still, by the impugned order, the penalty order has been confirmed.

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10. In the present case, the goods were sent from one unit to another. Learned ACSC could not point out any provision under the GST Act, which could show that while stock transfers are made within the State of Uttar Pradesh from one unit to another, i.e., Agra to Mathura, the tax is to be charged as the goods in question, which were raw material and not a finished goods.”

17. Similarly, in the case in hand, the goods in question cannot be treated as supply or service in view of the circulars referred as above, and therefore, there is no liability of tax under the goods and services tax act

18. This Court in the case of K. Printer Vs. Additional Commissioner Grade-2 (Writ Tax No.1486 of 2023), decided on May 21, 2025 has also followed the judgment of Vacment India Limited (supra).

19. In view of the above facts as stated as well as law laid down in the aforesaid judgments, the seizure order is bad and as such, the impugned orders cannot be sustained in the eyes of law and the same are hereby quashed.

20. Accordingly, the writ petition is allowed, directing the authorities concerned to release the goods in question forthwith after the production of certified copy of this order.