Allahabad High Court Overturns E-Way Bill Penalty for Intra-State Stock Transfer


Allahabad High Court Overturns E-Way Bill Penalty for Intra-State Stock Transfer
Oct, 2023


Prayagraj, India- In a pivotal ruling, the Allahabad High Court has set aside the penalty faced by M/s Vacmet India Ltd, a leading manufacturer of polyester and BOPP films. The company was slapped with a penalty of Rs. 1.82 lakh due to an oversight in updating Part B of the E-Way Bill during an intra-state transfer of goods. Department Officials had argued that with the interception of the truck, the goods would have been accounted for in the company's books.

Vacmet responded by emphasizing that the transporter's omission in Part 'B' was a transient error, which was immediately updated upon interception. The firm further established that such intra-state transfers between their units are not subject to taxation under GST. Their entire documentation, including the stock transfer challan and transporter bilty, was immediately produced to Department Officials on interception, with the exception of the e-way bill's Part B.

The High Court, upon examination, stated unequivocally that Department Officials failed to provide any concrete rule that mandates taxation on inter-unit stock transfers within the same state. The court further pointed out that a clear intent to evade tax is a prerequisite for imposing any eWay Bill penalty under the GST framework.

Justice Piyush Agrawal, referencing previous rulings, commented, "Without a definitive guideline on intra-state transfers and absent any intent of tax evasion, the charges against Vacmet lack merit."


Renowned GST maven, CA Vikash Dhanania of GST DOST opined on the judgment, "This decision accentuates the essence of the intent in taxation matters. It's a notable precedent for Intra Stock Transfer, yet businesses should be aware that such rulings might not be universally acknowledged across all states. With Department Officials sometimes disregarding such precedents, businesses can face challenges. The best defence is proactive compliance. A comprehensive checklist and vigilant adherence to regulations can circumvent such complications. Proactive vigilance, rather than post-facto explanations, should be the mantra."


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