Facts of the Case

The petitioner, M/s Citykart Retail Pvt. Ltd., is engaged in the business of trading ready-made garments and is duly registered under the Uttar Pradesh GST as well as the VAT Act, 2008. The company transported goods from Gurgaon (Haryana) to Rae Bareli (Uttar Pradesh).

During transit, the goods vehicle was intercepted by the Commercial Tax Department at Auraiya, Uttar Pradesh. The authorities found that Part-B of the E-Way Bill did not contain the vehicle number, resulting in detention and seizure of the goods.

A show cause notice was issued, followed by an order demanding tax of ₹1,36,300 along with an equivalent penalty under Section 129 of the CGST Act. The petitioner deposited the amount to secure the release of the goods. Subsequently, the appellate authority dismissed the appeal, leading to the filing of the writ petition before the Allahabad High Court.

Issues Involved

  1. Whether tax and penalty under Section 129 of the CGST Act can be imposed merely because Part-B of the E-Way Bill was incomplete.
  2. Whether a technical system error preventing entry of the vehicle number can justify detention and seizure of goods.
  3. Whether penalty is sustainable in the absence of any intention to evade payment of tax.
  4. Whether departmental clarificatory circulars regarding technical glitches are binding while deciding such cases.

Petitioner's Arguments

  • The petitioner submitted that the goods were being transported with a valid E-Way Bill.
  • The vehicle number was DL01M6498, but due to a technical glitch in the E-Way Bill portal, the vehicle number could not be reflected in Part-B.
  • The petitioner relied upon the Department's Clarificatory Circular dated 18.03.2018, which acknowledged the technical problem relating to Delhi registration numbers and prescribed the manner of entering such numbers.
  • It was argued that there was no intention whatsoever to evade tax, and the department had never alleged suppression of goods or tax evasion.
  • Reliance was also placed upon the Ministry of Finance Circular dated 14.09.2018, which clarified that proceedings under Section 129 should not be initiated for minor mistakes, including minor errors relating to vehicle numbers.
  • The petitioner further relied upon the judgment of the Allahabad High Court in VSL Alloys India Pvt. Ltd. vs. State of U.P., wherein seizure on similar facts had been set aside.

Respondent's Arguments

  • The State defended the demand and penalty orders.
  • It contended that the explanation regarding the technical glitch was not acceptable and maintained that failure to fill Part-B of the E-Way Bill justified detention of the goods and levy of tax and penalty under the GST provisions.

Court Order / Findings

The Allahabad High Court allowed the writ petition and held as follows:

  • The only allegation against the petitioner was that Part-B of the E-Way Bill was incomplete.
  • There was no allegation or evidence suggesting that the goods were transported without payment of tax or with any intention to evade tax.
  • The petitioner's explanation regarding the technical glitch was fully supported by the Department's own Clarificatory Circular dated 18.03.2018.
  • The Court observed that the Ministry of Finance Circular dated 14.09.2018 specifically advised that minor errors, including mistakes relating to vehicle numbers, should not result in detention or penalty under Section 129.
  • The Court also held that the earlier decision in VSL Alloys India Pvt. Ltd. vs. State of U.P. squarely covered the controversy.
  • Since there was no intention to evade tax, merely leaving Part-B incomplete because of a technical problem could not justify seizure, tax demand, or penalty.
  • Accordingly, the penalty order dated 18.04.2018 and the appellate order dated 14.05.2019 were quashed.
  • The respondents were directed to refund the entire amount recovered from the petitioner within two months.

Important Clarification

This judgment reiterates an important GST principle that procedural or technical lapses in an E-Way Bill, without any intention to evade tax, cannot automatically attract detention, seizure, tax demand, or penalty under Section 129 of the CGST Act.

The Court also emphasized that departmental circulars issued to address technical glitches and minor mistakes must be given due effect by tax authorities, particularly where there is no revenue loss or fraudulent intent.

Sections Involved

  • Section 129 of the Central Goods and Services Tax Act, 2017 – Detention, Seizure and Release of Goods and Conveyances in Transit.
  • Provisions relating to E-Way Bill (Rule 138 of the CGST Rules, 2017).
  • Ministry of Finance Circular dated 14.09.2018 regarding minor mistakes in E-Way Bills.
  • Departmental Clarificatory Circular dated 18.03.2018 relating to technical glitches in entering vehicle numbers.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785395195_2323compressed.pdf

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