Penalty for Expired E-Way Bill Not Sustainable in Case of Export (Zero-Rated Supply)- says Gujarat High Court
Date and Year of Judgment
23 February 2026
The Gujarat High Court held that penalty under Section 129 cannot be imposed merely for expiry of E-way bill when the goods are meant for export and no tax is payable on such zero-rated supply.
The Court relied upon earlier Gujarat High Court decisions dealing with procedural lapses in transportation of goods where there is no intention to evade tax.
Case Citation
Balkrishna Industries Limited v. Union of India & Ors.
Special Civil Application No. 1903 of 2026
Neutral Citation: 2026:GUJHC:14411-DB
High Court of Gujarat at Ahmedabad
Bench:Justice A. S. SupehiaJustice Pranav Trivedi
1. Main Issue Involved
Whether penalty under Section 129(1)(a) of the CGST Act can be imposed when the E-way bill expires during transportation of goods meant for export, particularly when there is no intention to evade tax and the supply itself is zero-rated.
The judgment clarifies the scope of Section 129 penalty for procedural lapse in E-way bill during export transactions.
2. Sections and Rules Discussed
Section 129 CGST Act – Detention, seizure and penalty
Section 7(5) IGST Act – Inter-State supply
Section 16 IGST Act – Zero-rated supply
Rule 138 CGST Rules – E-way bill provisions
Rules 89 and 96 CGST Rules – Refund of export supplies
The Court emphasized the interaction between zero-rated supply provisions and procedural transportation rules under GST.
3. Facts of the Case
The petitioner Balkrishna Industries Limited transported goods meant for export under a valid E-way bill dated 21.03.2025.
The E-way bill expired at 24:00 hours on 22.03.2025, though the transporter had the option to extend the validity up to 08:00 hours on 23.03.2025 under Rule 138(10).
33. E way Bill Expiry in case o…
However, due to breakdown of the transport vehicle, the E-way bill could not be extended in time.
The vehicle was intercepted at 15:22 hours on 23.03.2025, i.e., roughly 15 hours after the expiry of the E-way bill.
The authorities imposed penalty of ₹18,00,140 under Section 129, treating the lapse as violation of transportation provisions.
The petitioner challenged the penalty through writ proceedings before the High Court.
The dispute arose purely due to procedural lapse in extending E-way bill during transportation.
4. Petitioner’s Submissions
The petitioner submitted that:
The goods were meant for export and therefore constituted zero-rated supply under the IGST Act.
There was no intention to evade tax.
The expiry occurred due to breakdown of the vehicle during transit.
The issue was already covered by the Gujarat High Court decision in Marcowagon Retail Pvt. Ltd. v. Union of India (2025).
The petitioner argued that procedural violation cannot justify harsh penalty where tax liability itself is nil.
5. Department’s Submissions
The department relied upon Section 129 of the CGST Act and contended that:
Transportation of goods without valid E-way bill constitutes violation.
Therefore penalty under Section 129 was justified.
The department treated expiry of E-way bill as strict liability regardless of the nature of supply.
6. Analysis and Findings of the Court
The Court referred to the earlier Gujarat High Court decision in Marcowagon Retail Pvt. Ltd. v. Union of India, which examined similar issues relating to transportation of goods and procedural lapses in E-way bill.
The Court noted that export of goods is treated as zero-rated supply under Section 16 of the IGST Act, meaning that although tax may be leviable in theory, no tax is actually payable on such supply.
The Court further observed that Section 129 provides for penalty when there is contravention involving tax liability, but where the supply itself is zero-rated and no tax is payable, the computation of penalty becomes unsustainable.
In the present case, the delay in extending the E-way bill occurred due to breakdown of the vehicle, and therefore the lapse was purely procedural in nature.
Thus, the imposition of heavy penalty of ₹18,00,140 was held to be disproportionate and beyond the scope of Section 129.
The Court emphasized that procedural lapses without tax implication cannot justify harsh penalties under GST. The Court clearly recognized that expiry of E-way bill during export transit does not automatically justify penalty.
7. Judgment of the Court
The High Court held that:
The penalty imposed under Section 129 was unsustainable in law.
The orders dated 29.11.2025 and 02.12.2025 were quashed and set aside.
The department was directed to refund ₹18,00,140 along with applicable interest within 12 weeks.
The Court granted complete relief to the exporter and ordered refund of the entire penalty amount.
8. Similar / Related Judgments
Marcowagon Retail Pvt. Ltd. v. Union of India (2025) – Gujarat High Court
Boron Rubber India – Gujarat High Court
These cases consistently hold that procedural lapses in E-way bill without tax evasion cannot attract harsh penalty.
9. CA BTA Insights
This judgment is very significant for exporters and logistics operators.
Key Principles Emerging
Export supplies are zero-rated and therefore do not involve tax liability.
Penalty under Section 129 cannot be mechanically imposed for procedural lapses.
Expiry of E-way bill due to genuine circumstances such as vehicle breakdown cannot justify heavy penalty.
Courts may interfere when penalty is disproportionate to the nature of violation.
Practical Implications
This ruling will be very useful in cases involving:
Expired E-way bill during export movement
Technical transportation violations
Penalty proceedings under Section 129
Taxpayers can rely on this judgment to argue that procedural mistakes in zero-rated supplies should not lead to harsh penal consequences.
The decision reinforces the judicial approach that GST enforcement must be proportionate and should not penalize bona fide procedural lapses.