Facts of the Case

The petitioner, M/S Kumar Brothers, a proprietorship firm registered under the Assam Goods and Services Tax Act (GSTIN 18AEKPM5808E1ZE), sold goods to M/s Shlok Brothers, Delhi, under e-way bill no. 881122952901 dated 31.10.2020, transported vide G.R. No. 0207 of M/s Nagpur Assam Road Lines on Truck No. RJ47 GA 2801. The consignment was intercepted at Gorakhpur on 3.11.2020, and a detention order in Form GST MOV-06 was passed on 11.11.2020 on the ground that the documents relating to the consignment and both parties were not verified, indicating an intention to evade tax. This was followed by a show cause notice in Form GST MOV-07 and an order in Form GST MOV-09 seizing the goods, with security and penalty under Section 129(3) of the CGST Act, 2017 imposed for release. The petitioner's appeal against this order was rejected by the Additional Commissioner, Grade-2 (Appeal), Commercial Tax, Judicial Division, Basti, by order dated 21.1.2022, leading to the present writ petition. The petition was entertained because the GST Tribunal was not functional in Uttar Pradesh pursuant to Central Government Gazette notification CG-DL-E-14092023-248743 dated 14.09.2023.

Issues Involved

  1. Whether penalty and security under Section 129(3) of the CGST Act could be sustained once documentary proof showed the purchasing dealer's GST registration to be valid and functional.
  2. Whether the appellate authority was justified in disregarding the petitioner's supporting documents (registration certificate and electronic credit ledger) as an afterthought.

Petitioner's Arguments

  • The goods were transported with genuine documents prescribed under the Act, and the authorities seized them merely to harass the petitioner.
  • The purchaser, M/s Shlok Brothers, Delhi, is a registered dealer regularly filing its returns, and there was no irregularity in the transaction.
  • The electronic credit ledger placed on record showed the purchaser was carrying on business both prior to and after the date of the disputed purchase.
  • The impugned order was passed illegally without considering this material on record.

Respondent's Arguments

  • The proceedings were rightly initiated because, at the time of detention and seizure, the purchaser at Delhi was found not to be conducting any business at its declared premises.
  • The documents filed by the petitioner thereafter were only an afterthought and could not cure the defect found at the time of inspection.
  • The writ petition deserved to be dismissed and the impugned order upheld.

Court Order/Findings

  • The requisite documents accompanied the goods and their genuineness was not disputed; it was only a subsequent inspection report on the purchaser's business activity that triggered the seizure and demand.
  • The petitioner placed on record proof (Annexure 9) that the purchasing firm's GST registration was valid and functional, and (Annexure 10) an electronic credit ledger for the period 1.11.2020 to 31.1.2021 evidencing genuine business activity.
  • Once the material on record shows the purchasing dealer's registration to be valid and functional and its returns/credit ledger to reflect genuine business activity, the authorities are not justified in imposing security or levying penalty under Section 129(3) of the CGST Act.
  • Both the appellate order dated 21.1.2022 and the original seizure order dated 11.11.2020 were quashed, and the writ petition was allowed with all consequential benefits.

Important Clarification

  • A subsequent inspection report suggesting the purchaser was not found doing business cannot override documentary proof — valid and functional GST registration, filed returns, and electronic credit ledger entries — that the purchaser was genuinely carrying on business.
  • Authorities cannot dismiss corroborating documents produced after detention as a mere "afterthought" once they are consistent with the transaction and the purchaser's continuing GSTIN status.
  • The genuineness of the e-way bill, invoice and transport documents accompanying goods in transit remains central to sustaining or quashing detention/seizure action under Section 129.

Sections Involved

  • Section 129(3), CGST Act, 2017 — penalty for detained/seized goods and conveyances transported in contravention of the Act.
  • Form GST MOV-06/07/09 — statutory forms for the detention order, show cause notice, and seizure/demand order.
  • Section 107, CGST Act, 2017 — governs the appeal against the original adjudication order.

Decision – In Favour of

In favour of the Assessee — both the seizure order and the appellate order confirming it were quashed, and the writ petition was allowed with all consequential benefits.

Related Case Laws

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

Case Details

  • Court: Allahabad High Court
  • Case No.: WRIT TAX No. 1424 of 2022
  • CNR: Not available on record
  • Coram: Hon'ble Justice Piyush Agrawal
  • Decision Date: 3 October 2023
  • Disposal Nature: Allowed – impugned orders quashed

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