🚗 Detention of Demo Vehicles under GST: Relief from Kerala High Court

🧾 Case: M/s Kun Motor Company Pvt. Ltd. vs Assistant State Tax Officer & Ors.

Citation: 2024 (4) TMI 321 – Kerala High Court

Judgment Date: 27 March 2024

📚 Background:

M/s Kun Motor Company Pvt. Ltd., a registered dealer of Mercedes-Benz vehicles, transported a demo car between showrooms within the state. The transport was done without generating an e-way bill, but was accompanied by a delivery challan, as the vehicle was not intended for sale.

During the transit, the Assistant State Tax Officer intercepted the vehicle, alleging that it was moved without an e-way bill as mandated under Rule 138 of the CGST Rules, and detained the vehicle under Section 129 of the CGST Act, 2017.

⚖️ Key Legal Questions:

1. Is a demo vehicle, not meant for sale, liable for e-way bill generation under GST?

2. Does transport under a delivery challan provide enough documentation to avoid detention under Section 129?

3. Can such an act be deemed a tax evasion attempt?

🧠 High Court Observations:

• The vehicle in question was clearly marked as a demo vehicle, supported by:

  • Valid registration,

  • Company ownership documents,

  • A delivery challan citing internal branch movement for demonstration.

• The Hon'ble High Court referred to Rule 55 of the CGST Rules, which allows delivery challan for movement of goods not being a supply, such as:

  • Goods sent for job work,

  • Exhibitions,

  • Branch transfers for display/demo.

• The Court ruled that no sale was involved, and GST liability did not arise.

• As such, the detention was unjustified, and the order was quashed.

✅ Conclusion & Compliance Insight:

This case reaffirms that not all goods movement requires an e-way bill. Where goods are:

• Not intended for sale,

• Properly documented with a delivery challan under Rule 55,

• And the nature of the movement (like demo use, return, job work) is evident,

then detention under Section 129 is not legally sustainable.

📌 GST Portal Tip:

If you are moving goods not for sale, here’s what to do:

1. Prepare a delivery challan under Rule 55 (must contain details like date, description, quantity, consignee).

2. Maintain internal records showing the reason for movement (like demo, testing, return).

3. If in doubt, generate a voluntary e-way bill using “Others – Not for Sale” reason (to avoid disputes).