GAIL India’s Goods Detained by GST dept: Allahabad HC Quashes Detention noting Technical Error not Tax Evasion - Taxscan

The Allahabad High Court has set aside the seizure and penalty order imposed on GAIL (India) Ltd. by the GST ( Goods and Services Tax ) authorities, holding that the detention of machinery being transported between two units of the same government-owned enterprise was based on mere technical errors in the e-way bill rather than any intent to evade tax.

The Court ruled that when the movement of goods is a stock transfer with no element of sale or consideration, minor discrepancies cannot justify proceedings under Section 129(3) of the CGST Act.

GAIL, a Government of India undertaking, had shut down its Raigarh LPG recovery unit in Maharashtra in 2014 and decided to shift unused machinery to its Pata unit in Uttar Pradesh. For this purpose, three tax invoices, delivery challans and an e-way bill were generated.

However, while preparing the e-way bill, the value of two invoices was inadvertently added together and GST was calculated on that combined amount. Additionally, one digit of the truck number was mistakenly entered as “UP 18 FT 3127” instead of “UP 18 ET 3127.”

During the movement of goods, GST authorities intercepted the vehicle, recorded the driver’s statement and detained the consignment on the ground that the vehicle number did not match, and discrepancies were noted between the consignment note, gate pass and invoice values.

A seizure order under Section 129(3) was passed, and the appeal challenging it was also dismissed. GAIL argued that the movement was a stock transfer between two units of the same company, fully supported by all documents except for minor clerical errors, and that no tax could possibly be evaded in such circumstances.

The company/petitioner also relied on CBIC’s Circular dated 14 September 2018 cautioning officers against invoking Section 129 for trivial mistakes.

The High Court agreed with GAIL, observing that the authorities never disputed that the machinery belonged to the Raigarh unit and was being transferred internally for operational purposes.

The Court noted that GAIL is a government-owned corporation and that no sale or supply for consideration was involved.

Justice Piyush Agarwal, stating its earlier decisions in Vacmet India Ltd., Vishnu Singh, and D&D Construction and Developers, observed that stock transfers cannot attract allegations of tax evasion and that penalties are unsustainable when discrepancies are purely technical.

Accordingly, the order was quashed.