Facts of the Case

M/S Sun Flag Iron And Steel Company Limited, holding GST No. 27AACCS3376C1ZH and engaged in manufacturing and sale of iron and steel, filed Writ Tax No.837 of 2023 before the High Court of Judicature at Allahabad, challenging a penalty order dated 09.06.2023 and the first appellate order dated 17.06.2023 upholding it. The petitioner had dispatched 30 tonnes of non-alloy steel to M/s Hi-Tech Gears Limited, Bhiwadi, Rajasthan, under Invoice No. 232705612 dated 26.05.2023 and E-Way Bill No. 281596024395, valid up to 01.06.2023, transported through Vehicle No. UP 94 T 6681. While passing through Uttar Pradesh en route from Maharashtra to Rajasthan, the vehicle got stuck in mud due to heavy load on 28.05.2023 and subsequently suffered a breakdown; after repairs involving a trip to Jhansi for spare parts, the vehicle resumed its journey but was intercepted on the intervening night of 2/3.06.2023, after the e-way bill had expired. A show-cause notice dated 04.06.2023 was replied to with a supporting affidavit of the driver, but the authorities imposed a penalty of Rs. 8,43,456/- under Section 129, which was upheld in appeal. The matter was heard by Hon'ble Justice Piyush Agrawal.

Issues Involved

  1. Whether a penalty under Section 129 of the CGST Act could be sustained merely because the e-way bill had expired at the time of interception, without any finding of intent to evade tax.
  2. Whether the documented explanation of vehicle breakdown due to being stuck in mud, corroborated by the driver's affidavit, was wrongly disbelieved for want of supporting documentary evidence.

Petitioner's Arguments

  • The goods were accompanied by valid documents — e-tax invoice, e-way bill (valid up to 01.06.2023), and G.R. — at the commencement of the journey.
  • The vehicle got stuck in mud on 28.05.2023 due to heavy load, could only be pulled out with a crane, and thereafter suffered an engine breakdown; the driver had to travel to Jhansi to procure spare parts, all of which was detailed in a sworn affidavit filed with the reply to the show-cause notice.
  • Neither the original authority nor the appellate authority recorded any finding of intent to evade tax, and the appellate authority wrongly rejected additional evidence on the ground that it was not filed before the lower authority.

Respondent's Arguments

  • Proceedings were validly initiated under Section 129(1) of the GST Act since the e-way bill accompanying the goods had already expired on 01.06.2023 at the time of interception.
  • The petitioner failed to justify not filing documentary evidence supporting the breakdown claim at the time of detention itself, and the violation of Rule 138 of the CGST Rules justified the penalty.

Court Order/Findings

  • The Court found that the authorities had not actually rejected the petitioner's breakdown explanation on facts, but had disbelieved it only for want of corroborating documents, even though the driver's detailed affidavit was on record.
  • Since the authorities never recorded a finding that the petitioner intended to evade payment of tax, the penalty under Section 129 was not justified, relying on the Court's own precedents in M/s Shyam Sel & Power Limited, M/s Bhawani Traders, the Punjab & Haryana High Court's M/s Raghav Metals, and the Supreme Court's ruling in M/s Satyam Shivam Papers Private Limited that intent to evade tax is a sine qua non for invoking Section 129.
  • The writ petition was allowed, the impugned orders dated 09.06.2023 and 17.06.2023 were quashed, and the authorities were directed to refund any amount deposited by the petitioner within one month of production of the certified copy of the order.

Important Clarification

Mere technical expiry of an e-way bill during transit, where the delay is satisfactorily explained by circumstances beyond the transporter's control (such as a documented vehicle breakdown) and no finding of intent to evade tax is recorded by the authorities, cannot sustain a penalty under Section 129 of the GST Act; intent to evade tax is a mandatory prerequisite for invoking Sections 129 and 130.

Sections Involved

  • Section 129 of the Central Goods and Services Tax Act, 2017 – detention, seizure and release of goods and conveyances in transit.
  • Section 130 of the Central Goods and Services Tax Act, 2017 – confiscation of goods, read together with Section 129 to require intent to evade tax.
  • Rule 138 of the CGST Rules, 2017 – e-way bill requirements for movement of goods.

Decision – In Favour of

The decision is squarely in favour of the Assessee. The Section 129 penalty was quashed for want of any recorded intent to evade tax, and a refund of the deposited amount was directed within one month.

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.837 of 2023
  • CNR: Not available on record
  • Coram: Hon'ble Justice Piyush Agrawal
  • Decision Date: 09 November 2023
  • Disposal Nature: Writ petition allowed, orders quashed

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