Facts of the Case

M/S Balaji Traders, a registered firm bearing GSTIN 09AIPPJ5474K1ZX and engaged in trading cigarettes, pan-masala and food spices, received an order from Vaishya Distributors, Nashik, and raised invoice no. 1406 dated 18.11.2022 to dispatch goods by rail. On 18.11.2022 the goods, loaded on an e-rickshaw en route to Kanpur railway station, were intercepted outside the station and confiscated as the e-way bill had not yet been generated, since it required a Railway Receipt number obtainable only from the station. A show cause notice dated 19.11.2022 proposed a penalty of Rs. 5,58,286/- under Section 129(1) of the UPGST Act; the petitioner deposited the penalty and the goods were released, but the Assistant Commissioner confirmed the penalty by order dated 25.11.2022 under Section 129(3), and the first appeal was dismissed on 24.03.2023. The petitioner then approached the Allahabad High Court, this Writ Tax being entertained because no GST Appellate Tribunal was yet functional in Uttar Pradesh.

Issues Involved

  1. Whether penalty under Section 129(1)/129(3) of the UPGST Act could be sustained absent any finding of intent to evade tax.
  2. Whether the authorities were obliged to consider the petitioner's explanation that the e-way bill could not be generated due to a technical constraint linked to obtaining a Railway Receipt number.
  3. Whether Section 129 proceedings, rather than Section 122 proceedings, were the correct recourse on these facts.

Petitioner's Arguments

  • The e-way bill could not be generated because a Railway Receipt number, obtainable only at the station, was mandatorily required for Part-B of the e-way bill.
  • The e-rickshaw driver informed the GST officials that the owner, with documents, was inside the station, yet the authorities neither waited nor cross-checked before confiscating the goods.
  • Neither the show cause notice nor the penalty order recorded any finding of intent to evade tax, which is a mandatory pre-requisite under Sections 129 and 130 of the CGST Act.
  • Reliance was placed on Assistant Commissioner (ST) vs. Satyam Shivam Papers Pvt. Ltd., M/s Shyam Sel & Power Limited vs. State of U.P., M/s Bhawani Traders vs. State of U.P., and M/s Raghav Metals vs. State of Haryana.

Respondent's Arguments

  • No documents were produced at the time of interception outside the railway station, justifying confiscation and the subsequent proceedings.
  • Had the goods not been intercepted, the petitioner would have succeeded in avoiding entry of the transaction in its books of account, evidencing intent to evade tax.
  • The precedents cited by the petitioner were distinguishable on facts, being cases where goods were accompanied by proper documents.

Court Order/Findings

  • The petitioner had promptly explained the technical difficulty and produced the invoice; the authorities never disputed that the owner was inside the station obtaining the Railway Receipt number needed for the e-way bill.
  • Intent to evade tax is a mandatory pre-requisite for invoking Section 129 (read with Section 130) of the CGST Act, and since neither the show cause notice nor the penalty order recorded any such finding, the proceedings could not be sustained; at most, a minor breach attracting Section 122 could have been made out.
  • The impugned penalty order and the appellate order were quashed; the writ petition was allowed with costs of Rs. 1,000/-, with the deposited penalty to be refunded with 9% interest if delayed beyond 15 days, and liberty to recover the cost from the erring officer.

Important Clarification

  • Detention, seizure or penalty under Section 129 of the CGST/SGST Act cannot be sustained unless the authorities record a specific finding of intent to evade tax; a bona fide technical inability to generate an e-way bill, promptly explained, does not by itself establish such intent.
  • Where the breach is minor and unaccompanied by any evasion motive, proceedings under Section 122 rather than Section 129/130 are the appropriate recourse.

Sections Involved

  • Section 129, CGST/UPGST Act, 2017 — detention, seizure and release of goods and conveyances in transit.
  • Section 130, CGST Act, 2017 — confiscation of goods/conveyance and levy of penalty, read with Section 129 to determine mandatory intent to evade tax.
  • Section 122, CGST Act, 2017 — general penalty provision applicable to minor contraventions without evasion intent.
  • Rule 138, CGST Rules, 2017 — e-way bill requirements for movement of goods.

Decision – In Favour of

The writ petition was allowed and the penalty orders were quashed, a clear decision in favour of the Assessee. The Court held that Section 129 penalty cannot stand without a specific finding of intent to evade tax, and directed refund of the deposited penalty with interest, along with costs against the Department.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: WRIT TAX No. 784 of 2023
  • CNR: Not available
  • Coram: Justice Piyush Agrawal
  • Decision Date: 6 October 2023
  • Disposal Nature: Allowed

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