The Allahabad High Court has quashed the penalty and detention orders, holds detention and imposition of penalty bad in law in absence of tax on inter-state movement of motor grader for works contract.
The bench of Justice Piyush Agrawal has observed that the circulars issued by the 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 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.
The petitioner/assessee, Earth Minerals is engaged in the business of works contract and is duly registered under the Goods and Services Tax Act in the State of Rajasthan and GSTN 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.
The petitioner transferred the Motor Grader, which was covered by the said circulars and therefore, on the 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.
The court while allowing the writ petition held that 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 movement.
Case Details
Case Title: M/S Earth Minerals Versus State Of U.P. And 2 Others
Case No.: Writ Tax No. – 4067 Of 2025
Date: 03/09/2025
Counsel For Petitioner: Kaif Mohammad, Yashonidhi Shukla
Counsel For Respondent: C.S.C.
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