Movement of Crane for Execution of Works Contract Not a ‘Supply’ under GST: Allahabad HC [Read Order]

The Allahabad High Court has held that the inter-State movement of cranes or similar equipment for use in works contracts does not amount to a ‘supply’ under GST ( Goods and Services Tax ), and therefore, no tax or penalty can be levied on such movement.

The petitioner, M/s Earth Minerals, was awarded a works contract by SBCC Buildcon Pvt. Ltd. for the construction of a six-lane Greenfield Varanasi-Ranchi-Kolkata Highway under the Bharatmala Pariyojana in Bihar.

To execute the project, the petitioner transported a motor grader (crane) from Rajasthan to Bihar, engaging a transporter for the same. During transit, the vehicle was intercepted and detained by GST authorities, who issued orders under Section 129(1) of the CGST Act, alleging movement of goods without valid documentation and imposed tax and penalty.

The petitioner contended that the transfer of the crane was not a transaction involving sale or supply, but merely the movement of its own capital asset for project execution.

The petitioner relied on Circular No. 1/1/2017-IGST, as amended by Circular No. 21/21/2017 dated 22.11.2017, which clearly provides that inter-State movement of rigs, tools, spares, and all goods on wheels (like cranes) shall be treated as “neither a supply of goods nor a supply of services” unless such movement is for further supply of the same goods.

The High Court accepted the petitioner’s submission, observing that the circulars issued by the Central Board of Excise and Customs are binding on the authorities, stating the Supreme Court’s decisions in Collector of Central Excise v. Dhiren Chemical Industries and Commissioner of Central Excise v. Ratan Melting & Wire Industries.

The Court said that administrative circulars cannot be disregarded by field officers, particularly when they clarify the legal position on the applicability of GST.

Justice Piyush Agrawal observed that since the crane was being moved for the petitioner’s own use in fulfilling a government-awarded contract, and not for any commercial sale or onward supply, the movement could not be taxed under GST.

The Court further noted that there was no intention to evade tax, and the authorities’ action of detention and seizure was unjustified.

The High Court finally ruled that movements of goods for stock transfer or internal use between units do not constitute taxable supply. Accordingly, it quashed the seizure and penalty orders, directing the authorities to release the detained crane immediately.

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