No Penalty for Expired E-Way Bill in Zero Rated Export | HC

Case Details: Marcowagon Retail (P.) Ltd. vs. Union of India - [2025] 175 taxmann.com 791 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & D.N. Ray, JJ.
• Uchit N Sheth for the Petitioner.
• Ms Shrunjal Shah, AGP & Ankit Shah for the Respondent.

Facts of the Case

The petitioner, an exporter, challenged the imposition of penalty under section 129 of the CGST Act in relation to goods in transit that were being transported for export under a zero rated supply. The petitioner had received an export order from a buyer in the UAE for sports-related apparel and accessories and placed a corresponding purchase order on a vendor in Gurugram through its sister concerns. The goods were dispatched from Gurugram to Mundra Port with duly generated e-invoice and e-way bill clearly indicating their export purpose. During transit, one of the conveyances broke down and, owing to the Diwali festival, the delivery could not be completed within the validity period of the e-way bill, which expired.

Upon interception by the jurisdictional officer under GST, a notice in Form GST MOV-7 was issued proposing penalty on the ground of expired e-way bill. The petitioner objected, contending that no tax was payable on the goods since they were being exported under a letter of undertaking (LUT) with zero rated supply status. Despite this, the authority passed an order confirming penalty at 200 per cent of the tax purportedly leviable on the goods. The matter was accordingly placed before the Gujarat High Court.

High Court Held

The Gujarat High Court held that as the goods in transit were part of a zero rated supply under section 16 of the IGST Act, no tax was payable by the petitioner-exporter. Although tax on export is leviable under section 5(1) read with section 7(5) of the IGST Act, the exporter is not liable to pay such tax where the supply is made under LUT without payment of tax. The Court further clarified that in such cases, the exporter may either furnish an undertaking or claim refund of the input tax credit as per rule 89 and/or rule 96 of the CGST Rules and the Gujarat GST Rules. Therefore, in the absence of any tax payable on the transaction, the computation of penalty under section 129 of the CGST Act was unsustainable. The penalty was accordingly reduced to a nominal amount of Rs. 25,000.

List of Cases Referred to

• Atul Auto Ltd. v. State of Gujarat [2016] 66 taxmann.com 98 (Gujarat) (para 18)
• J. K. Synthetics Ltd. v. Commercial Taxes Officer (1994) 4 SCC 276 (para 19)
• Boron Rubbers India v. Union of India [2025] 173 taxmann.com 547 (Gujarat) (para 20)
• Rayzon Solar (P.) Ltd. v. State of Gujarat [Special Civil Application No. 13745 of 2024, dated 23-12-2024] (para 25).