GST WEEKLY UPDATE :20/2026-27 (16.08.2026) By CA Vipul Khandhar

-By CA Vipul Khandhar

1. Government Reports No Instances of Wrongful Vehicle Detention for Minor E-Way Bill Errors:

In a written response to Rajya Sabha Unstarred Question No. 2629 answered on August 11, 2026, Minister of State for Finance Shri Pankaj Chaudhary stated that no instances of vehicle detentions under Section 129 of the CGST Act, 2017 for minor or clerical errors in e-way bills have come to the Government’s notice.

Statutory Safeguards and CBIC Guidelines

The Ministry highlighted existing administrative circulars and statutory mechanisms designed to prevent arbitrary detentions for minor technical or procedural lapses:

• Circular No. 41/15/2018-GST (April 13, 2018): Establishes a standardized, form-based, and time-bound procedure for the interception, inspection, detention, and release of conveyances to limit field officers’ discretionary power.
• Circular No. 64/38/2018-GST (September 14, 2018): Directs field formations not to initiate Section 129 proceedings for bona fide clerical or technical errors. Instead, a nominal penalty of ₹500 each under Section 125 of the CGST and SGST Acts (₹1,000 total, or ₹1,000 under IGST) applies.

Permissible Minor Errors Eligible for Nominal Penalty:

• Spelling errors in the consignor or consignee name.
• Minor discrepancies in vehicle registration numbers.
• Incorrect PIN code entry.
• One- or two-digit errors in document numbers.
• Non-mention of one of the two addresses in “Bill-to / Ship-to” transactions.

The Government reaffirmed that Section 129 embeds fundamental principles of natural justice, including strict procedural timelines and opportunities for fair hearing before penalty imposition.

2. Important Judgements:

(i) Classification and Applicable Rate of Goods and Services Tax (GST) on Papad Khar: In re: Sardar Chemical Industries: Before the Authority for Advance Rulings, Gujarat

The Applicant (M/s Sardar Chemical Industries, Rajkot) sought an Advance Ruling regarding the taxability and rate of GST applicable to Papad Khar (traditionally known as Saji Khar or Papad Kharo), an essential raw material and dough-conditioning agent used exclusively in the manufacture of papad.

The primary questions before the Authority were:

1. Whether an essential raw material/processing ingredient (Papad Khar) should be granted GST exemption or preferential tax treatment aligned with the finished product (Papad), which is exempt from GST.
2. Whether Papad Khar qualifies for classification as Common Salt (attracting 5% GST) or as ‘Prepared Food Additives/Condiments’.

Applicant’s Contentions

• Principal-Agent / Essential Ingredient Principle: The Applicant submitted that Papad Khar is not a standalone commercial product but an integral processing ingredient for papad. Following established jurisprudence, when the final manufactured product (papad) is wholly exempt from GST, essential raw materials used in its production should logically qualify for similar or preferential tax treatment.

Alternate Classifications: The Applicant urged the Authority to classify Papad Khar either as an alkaline salt composition under Common Salts (taxable at 5% GST) or as Prepared Food Additives/Condiments based on its usage in food processing.

Ruling & Findings of the Gujarat AAR

1. Rejection of the Raw Material Exemption Theory

The AAR unequivocally rejected the argument that inputs inherit the tax exemption status of finished goods:

• Independence of Input/Output Taxation: GST operates as a value-added tax system where rates for inputs and final products are determined independently by the GST Council based on economic policy.
• Distinct HSN Classifications: A raw material and its final product are separate commercial commodities with distinct Harmonized System of Nomenclature (HSN) codes. Tariff entries and tax rates apply strictly per specific tariff schedules, independent of an item’s position in a supply chain.
• The Authority held the Applicant’s contention to be “illogical and devoid of merit.”

2. Chemical Composition & Alternative Classification Review

Based on chemical composition and functional properties:

• Papad Khar is an alkaline salt mixture comprising Sodium Carbonate (washing soda/soda ash, providing dough elasticity and crispiness) and Sodium Bicarbonate (baking soda, acting as a leavening agent).
• Often refined as sodium sesquicarbonate, its primary application is as a dough conditioner and preservative in Indian snacks.
• The product does not meet the legal specifications of Common Salt or Prepared Food Additives/Condiments.

Final Decision

• Classification & Taxability: Papad Khar does not qualify for GST exemption, nor does it qualify for reduced rates under Common Salts or Food Additives.

Applicable GST Rate: Papad Khar is liable to tax at 18% GST.

(ii) Effect of Omission of Rule 96(10) of the CGST Rules, 2017 without a Saving Clause on Pending Proceedings: Citation / Reference: Petition(s) for Special Leave to Appeal (C) No(s). 24550/2025: Before the Supreme Court of India: Union of India & Ors. v. Goodluck India Limited & Anr.

Overview of the Issue

Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017 restricted exporters from claiming refunds of Integrated GST (IGST) paid on exported goods if they had availed benefits under specified tax exemption or concessional-tax schemes.

By Notification No. 20/2024 (effective October 8, 2024), the Government omitted Rule 96(10). The central question before the Supreme Court was whether show-cause notices, refund disputes, demands, and court proceedings initiated under Rule 96(10) prior to October 8, 2024, could survive after its omission without an explicit saving clause.

Key Findings & Legal Principles Affirmed

1. Absence of a Saving Clause Nullifies Pending Actions

• The Supreme Court applied settled principles governing statutory repeals, omissions, and deletions, reiterating the Constitution Bench precedent in Kolhapur Canesugar Works Ltd. v. Union of India.
• When a provision is omitted without a saving clause preserving previous actions, it is treated as excised from the statute book altogether.
• Consequently, any proceedings, demands, or notices that were still pending on the date of omission (October 8, 2024) cannot be legally sustained or continued.

2. Prospective Operation vs. Continuation of Pending Disputes

• The Supreme Court rejected the Revenue’s argument that the omission operated only prospectively to preserve pre-existing proceedings.
• The Court clarified that while the omission takes effect prospectively from October 8, 2024, the unavailability of the rule post-omission prevents the further prosecution of unfinished actions. Terminating non-finalized proceedings upon omission does not constitute giving the notification retrospective effect.

3. Legislative Intent Behind Omission

• The Court observed that Rule 96(10) was omitted by the Government because it created unnecessary procedural complications without achieving its intended purpose.
• The decision to omit the provision without inserting a saving clause reflected a clear executive/legislative intent to permanently end disputes and litigation surrounding the rule, rather than prolonging them for past tax periods.

Held & Direction

• Ruling: The Supreme Court affirmed the judgment of the Gujarat High Court and dismissed the Special Leave Petitions (SLPs) filed by the Revenue.
• Impact on Pending Matters: Pending show-cause notices, demands, and refund disputes under Rule 96(10) that had not reached finality before October 8, 2024, stand voided.

Pan-India Application: To resolve conflicting decisions and bring uniform finality across jurisdictions, the Supreme Court directed that its order be circulated to all High Courts for the expeditious disposal of pending Rule 96(10) litigation in line with this ruling.

(iii) Power Tech Global Private Limited: APPEAL NO. APL/62/KLK/2026: GOODS AND SERVICES TAX SETTLEMENT TRIBUNAL, KOLKATA BENCH

Section 164, read with Rule 43 of the Central Goods and Services Tax Rules, 2017 – Input Tax redit (ITC) – Reversal of ITC – Exclusion of Duty Credit Scrips – Retrospective vs. Prospective Operation:

• Where Notification No. 14/2022-CT dated July 5, 2022 inserted clause (d) in Explanation 1 to Rule 43 of the CGST Rules excluding the value of duty credit scrips from exempt supplies for the purpose of ITC reversal, said amendment operates purely prospectively from July 5, 2022, and cannot be given retrospective effect to benefit taxpayers for FYs 2017-18 to 2019-20 merely because it is beneficial or procedural in nature.

• Held: Although duty credit scrips became exempt supplies via Notification No. 35/2017-CT dated October 13, 2017, no corresponding exclusion from Rule 43 was enacted at that time. The rule-making authority introduced the exclusion nearly four years later without express language indicating it was clarifying an existing ambiguity. Since Section 164(3) explicitly grants the power to give GST rules retrospective effect, and the authority consciously chose to make the 2022 amendment effective prospectively, the First Appellate Authority erred in reading it retrospectively.

Section 107 of the Central Goods and Services Tax Act, 2017, read with CBIC Circular No. 207/1/2024-GST – Appeals – Maintainability – Monetary Limit Exceptions

• Revenue’s appeal is maintainable even if individual components fall below monetary limits when the composite disputed amount across consolidated proceedings exceeds the threshold, or where the appeal involves recurring legal issues/interpretation of GST law.

• Held: For composite orders covering multiple demand notices or appeals, the monetary threshold specified in Circular No. 207/1/2024-GST is measured against the aggregate disputed amount. Furthermore, disputes regarding the legal applicability and temporal scope of Rule 43 fall under the permitted exceptions for recurring issues and interpretation of law.

Section 74, read with Sections 73 and 75(2) of the Central Goods and Services Tax Act, 2017 – Determination of Tax – Extended Period of Limitation – Absence of Fraud/Suppression – Conversion of Proceedings

• Where a taxpayer discloses duty credit scrip transactions in statutory returns and the dispute stems from a bona fide legal interpretation regarding Rule 43 reversal, extended period under Section 74 cannot be invoked; proceedings are liable to be converted to Section 73 under Section 75(2).

• Held: The Revenue failed to establish fraud, wilful misstatement, or deliberate suppression with intent to evade tax. Consequently, invocation of Section 74 was unjustified. In terms of Section 75(2), the proper officer was directed to re-determine the tax liability treating the proceedings under Section 73 after affording the assessee a fair opportunity of hearing.

CASE DETAILS

• Statutory Provisions Referred: Sections 73, 74, 75(2), and 164 of the Central Goods and Services Tax Act, 2017; Rule 43 of the Central Goods and Services Tax Rules, 2017.
• Notifications/Circulars Referred: Notification No. 35/2017-CT dated October 13, 2017; Notification No. 14/2022-CT dated July 5, 2022; Circular No. 207/1/2024-GST.

ORDER

1. Context and Issues

The Revenue filed appeals challenging the order of the First Appellate Authority, which had granted retrospective relief to the Respondent-Taxpayer (M/s Power Tech Global Private Limited) for Financial Years 2017-18 to 2019-20 by applying Notification No. 14/2022-CT retrospectively. Two key legal questions arose for consideration:

1. Whether the insertion of clause (d) in Explanation 1 to Rule 43 of the CGST Rules, 2017 (excluding duty credit scrips from exempt supplies for ITC reversal) via Notification No. 14/2022-CT dated July 5, 2022, applies retrospectively or prospectively.
2. Whether proceedings initiated under Section 74 of the CGST Act, 2017 can be sustained in the absence of deliberate suppression or fraudulent intent.
3. Maintainability of Revenue’s Appeals

As a preliminary point, the Respondent questioned the maintainability of the Revenue’s appeals based on the monetary limits prescribed under Circular No. 207/1/2024-GST. The Tribunal rejected this objection, holding that:

• In composite orders covering multiple assessment periods or consolidated notices, the monetary threshold must be computed on the aggregate disputed tax amount.
• The Circular explicitly exempts matters involving recurring legal questions or disputes concerning the interpretation of statutory provisions and rules from strict monetary limits. The temporal scope of Rule 43 clearly falls under these exceptions.

3. Prospective Operation of Rule 43 Amendment

On the substantive issue of ITC reversal:

• Duty credit scrips were declared exempt supplies under Notification No. 35/2017-CT effective October 13, 2017. However, no simultaneous amendment was made to Rule 43 to exclude such scrips from the common credit reversal formula.
• The exclusion was subsequently introduced via Notification No. 14/2022-CT on July 5, 2022.
• Under Section 164(3) of the CGST Act, the Government is vested with express powers to give rules retrospective effect. Since the rule-making authority consciously chose to bring Notification No. 14/2022-CT into force from July 5, 2022, without declaring it retrospective or curative, the First Appellate Authority erred in extending its benefit to FYs 2017-18 through 2019-20. Beneficial or procedural amendments cannot be presumed to be retrospective when the statute explicitly stipulates a prospective effective date.

4. Inapplicability of Section 74 & Conversion to Section 73

Regarding the invocation of the extended period of limitation under Section 74:

• The Tribunal observed that the Respondent had duly recorded and disclosed the transactions pertaining to duty credit scrips in its statutory returns.
• The dispute arose purely out of a bona fide interpretation of a complex statutory mechanism governing ITC reversal under Rule 43.
• In the absence of fraud, wilful misstatement, or suppression of facts with intent to evade tax, Section 74 could not be invoked.
• Invoking Section 75(2) of the CGST Act, the Tribunal directed the Adjudicating Authority to convert the proceedings to Section 73 and re-determine the tax and interest liability accordingly, after affording the taxpayer a reasonable opportunity of being heard.

5. Disposition

The Revenue’s appeal was partially allowed on the prospective operation of Rule 43, while the demand under Section 74 was set aside and remanded for re-determination under Section 73.

(iv) Section 129, read with Sections 7, 9, 122(1)(xiv) of the Central Goods and Services Tax Act, 2017 & Rule 138 of the Central Goods and Services Tax Rules, 2017 – Detention, Seizure and Release of Goods and Conveyances – Inter-branch Stock Transfer – Movement under Delivery Challan – Absence of E-Way Bill – Applicability of Section 129(3) Penalty vs. Section 122(1)(xiv): APPEAL NO. APL/1/TVP/2026: M/s. M.S. Steels: GOODS AND SERVICES TAX APPELLATE TRIBUNAL, THIRUVANANTHAPURAM BENCH

• Where goods were transported without an e-way bill under a delivery challan between two premises of the same registered taxpayer under the same GSTIN (stock transfer), penalty provisions under Section 129(3) computed with reference to “tax payable” are unsustainable, as a stock transfer within the same GSTIN does not constitute a taxable supply under Section 7; procedural infractions of Rule 138 in such cases attract general document-related penalties under Section 122(1)(xiv) instead of Section 129(3).
• Held: Section 129(1)(a) quantifies penalty with reference to the “tax payable on such goods”.Tax liability under Section 9 arises strictly on a “supply” of goods.In a movement between locations belonging to the same entity/GSTIN without consideration or a second party, there is no taxable outward supply, and consequently no “tax payable”.The Revenue cannot bypass the statutory precondition of “tax payable” under Section 129 and levy a tax-linked penalty on non-supply movements by notionally applying a GST rate.In such circumstances, where the movement lacks intent to evade tax and is undertaken merely without an e-way bill in violation of Rule 138(1)(ii), the breach is governed by the specific penal provision under Section 122(1)(xiv) for transporting goods without required cover documents.

CASE DETAILS

• Citations: (2026) taxcode.in 86 GSTAT; 2026 TAXSCAN (GSTAT) 135
• Statutory Provisions Referred: Sections 7, 9, 122(1)(xiv), and 129 of the Central Goods and Services Tax Act, 2017; Rule 138(1)(ii) of the Central Goods and Services Tax Rules, 2017.

ORDER

1. Facts and Procedural History

The Appellant (M/s. M.S. Steels) transported goods between its own premises registered under the same GSTIN using Delivery Challan No. M120. The vehicle was intercepted by the proper officer, and detention proceedings were initiated due to the non-generation/absence of an e-way bill. The Adjudicating Authority levied a penalty under Section 129(3) of the CGST/Kerala SGST Act, treating the movement as a contravention and applying a notionally calculated GST rate to derive the penalty. The First Appellate Authority subsequently upheld the order, prompting the present appeal before the GSTAT. 

2. Appellant’s Submissions

The Appellant contended that:

• The transport of goods was purely an internal inter-branch stock transfer between premises carrying the same GSTIN.
• It was accompanied by a valid delivery challan and was neither an outward sale invoice nor a supply to any third-party customer.
• Since no taxable supply took place under Section 7 of the Act, there was no underlying “tax payable”.
• In the absence of tax liability, a tax-linked penalty under Section 129(3) could not be invoked. The procedural lapse of non-generation of an e-way bill under Rule 138 ought to be dealt with under the document-specific penalty clause in Section 122(1)(xiv).

3. Tribunal’s Findings & Legal Analysis

Upon reviewing the statutory provisions and arguments, the Tribunal observed:

• Requirement of “Tax Payable” under Section 129:Section 129(1)(a) explicitly links the quantum of penalty to a percentage of the “tax payable on such goods.”A levy of tax under Section 9 is contingent upon the existence of a “supply” within the scope of Section 7.
• Nature of Stock Transfer within the Same GSTIN: An internal stock movement between different locations of the same registered person under a single GSTIN does not involve consideration or a distinct second party and does not amount to a taxable supply. Therefore, no tax liability is attracted.
• Misapplication of Section 129:The Department erred in artificially applying GST rates to non-supply stock movements to quantify a penalty under Section 129. Where the fundamental element of “tax payable” is absent, Section 129 cannot be sustained.
• Correct Statutory Provision for Document Lapses: A breach of Rule 138(1)(ii) for failure to generate or carry an e-way bill during movement—without an intent to evade tax—constitutes an offense under Section 122(1)(xiv) (transporting goods without cover documents). Such infractions carry a fixed nominal penalty rather than a tax-linked penalty under Section 129. 

4. Conclusion and Disposition

The Tribunal set aside the impugned order imposing penalties under Section 129(3). The bench held that any penalty for the procedural breach could only be considered under Section 122(1)(xiv).The appeal was allowed with consequential relief to the Appellant.

(v) Section 129(3) of the Central Goods and Services Tax Act, 2017 / Kerala Goods and Services Tax Act, 2017 – Detention, Seizure and Release of Goods and Conveyances – Mandatory Limitation Period for Passing Order – Delay of 47 Days – Effect of Breach: Siddhi Vinayak Automobiles: APPEAL NO. APL/2/TVP/2026: GOODS AND SERVICES TAX APPELLATE TRIBUNAL, THIRUVANANTHAPURAM BENCH

• Where an order in Form GST MOV-09 under Section 129(3) was passed confirming penalty 47 days after the service of notice in Form GST MOV-07, the order suffers from a fatal procedural illegality due to non-compliance with the strict statutory timeline of seven (7) days prescribed under Section 129(3), rendering the penalty order void and unenforceable.
• Held: Section 129(3) explicitly mandate that the proper officer shall pass an order confirming tax and penalty within a period of seven days from the date of service of notice. The word “shall” in the statute imports mandatory compliance. In the instant case, notice in Form GST MOV-07 was served on April 18, 2022, but the order in Form GST MOV-09 was passed only on June 04, 2022 (after a lapse of 47 days). Such an inordinate and unexplained delay beyond the statutory limit invalidates the proceedings and invalidates the penalty imposed under Section 129(3).

Section 129, read with Section 68 of the Central Goods and Services Tax Act, 2017 & Rule 138A of the Central Goods and Services Tax Rules, 2017 – Absence of E-Way Bill – Accommodation by Valid Tax E-Invoices – Absence of Intent to Evade Tax (Mens Rea)

• Where goods in transit were accompanied by valid tax e-invoices showing payment/accountability of GST, the mere non-generation or non-production of an e-way bill does not automatically lead to the conclusion of an intention to evade tax or non-genuineness of transaction so as to attract harsh penalties under Section 129.
• Held: The primary objective of Section 129 is to prevent tax evasion during movement of goods. Where valid e-invoices generated on the GST portal carrying full tax details accompany the consignment, the genuineness of the transaction and payment of tax stand established. The absence of an e-way bill is a procedural omission under Rule 138A, but in the absence of mens rea or fraudulent intent to evade tax, routine technical/procedural lapses cannot automatically justify the invocation of Section 129 penalty.

ORDER

1. Facts and Procedural Background

The Appellant (M/s. Siddhi Vinayak Automobiles, Thiruvananthapuram) is an automobile parts dealer. On April 18, 2022, automobile spare parts were intercepted during transit by the Assistant State Tax Officer, Mobile Squad IV, Kollam. The consignment was accompanied by two valid Tax e-Invoices (G-168 and G-169 dated April 16, 2022) issued in favor of a registered buyer (M/s. J.B.S. Automotive).However, the driver could not produce an e-way bill for the consignment.

The proper officer detained the vehicle and issued a Notice in Form GST MOV-07 on April 18, 2022, proposing a penalty of ₹1,38,706 under Section 129(1). The goods and conveyance were released on April 20, 2022, against the execution of a Bank Guarantee. Subsequently, the proper officer passed the final Penalty Order in Form GST MOV-09 on June 04, 2022—47 days after the service of the MOV-07 notice.The First Appellate Authority dismissed the appeal, holding that transportation without an e-way bill rendered the transaction “not genuine” and attracted penalty. 

2. Major Submissions & Contentions

The Appellant argued that:

• The order in Form GST MOV-09 was hopelessly time-barred under Section 129(3), having been passed 47 days after notice against the strict 7-day statutory mandate.
• The consignment was covered by valid e-invoices with full tax disclosures, proving that GST was paid/accounted for, and thus there was zero intent to evade tax. 

3. Tribunal’s Findings & Legal Analysis

The Tribunal set aside the order based on two key legal principles:

• Violation of Mandatory Statutory Timeline: Section 129(3) mandates that the proper officer shall pass an order within seven (7) days from the service of notice. Here, MOV-07 was issued on April 18, 2022, but MOV-09 was issued on June 04, 2022. Passing an order after a 47-day delay violates the strict statutory deadline, rendering the penalty order legally unsustainable and void ab initio.
• Absence of Intent to Evade Tax (Mens Rea): The consignment was accompanied by tax e-invoices generated on the GST portal for a registered recipient. Missing an e-way bill is a procedural infraction under Rule 138A, but when tax payment and transaction details are fully disclosed in e-invoices, the Department cannot presume an intent to evade tax.Mechanically invoking Section 129 without proving mens rea is bad in law. 

4. Disposition

The GSTAT quashed the penalty order passed in Form GST MOV-09. The appeal was allowed, and the Department was directed to release the Appellant’s Bank Guarantee immediately.  

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

(The author is a well known Chartered Accountant practicing in direct and indirect tax at Ahmedabad)