Hydraulic Excavator Sent for Repair Not ‘Supply of Goods or Services’: Allahabad HC [Read Order]

The Allahabad High Court has held that the movement of a hydraulic excavator sent for repair cannot be treated as a supply of goods or services, and hence, no GST ( Goods and Services Tax ) liability arises in such cases.

The Court quashed the seizure and penalty orders imposed on the petitioner under Section 129(3) of the GST Act, ruling them unsustainable in law.

A hydraulic excavator owned by the petitioner, M/s Abhay Prakash Katariar, which was being transported for repair after completion of a job was intercepted by the officers. The petitioner had generated an e-way bill and carried a delivery challan along with other documents.

Despite this, the vehicle was intercepted by the Mobile Squad of the GST Department, and a seizure order was issued on the ground that the transportation was “afterthought” and not adequately supported by documents. Subsequently, a demand of ₹3.42 lakh was raised as tax and penalty under Section 129(3), which was upheld in appeal.

Before the High Court, the petitioner argued that the transaction did not constitute a supply, as the movement of the excavator was solely for repair purposes and not for sale or transfer of ownership.

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The counsel noted CBIC Circulars dated 7 July 2017 and 22 November 2017, which clarified that inter-State movement of goods such as cranes, rigs, or other equipment on wheels, when not meant for supply, is to be treated as “neither supply of goods nor supply of services” under GST.

It was also argued that there was no intent to evade tax, and the authorities were bound by these circulars.

The Court accepted the petitioner’s contention, observing that the CBIC circulars are binding on the tax authorities, as held by the Supreme Court in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries and Commissioner of C. Ex., Bolpur v. Ratan Melting & Wire Industries.

The High Court noted that the movement of machinery for repair purposes does not attract GST and, therefore, the very foundation of the seizure and penalty proceedings was legally flawed.

Justice Piyush Agrawal observed that once the excavator was being sent solely for repair and was covered under the Government’s circulars, the transaction did not constitute a “supply” under the GST Act, making any demand or penalty unsustainable.

Accordingly, the impugned orders were set aside.

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