Facts of the Case

The petitioner, H/S Halder Enterprises, received an order for supply of dried arecanuts from M/s Komolika Trading Co., New Delhi. The goods were loaded and dispatched from Calcutta to New Delhi accompanied by an invoice and E-way bill, and were intercepted in the State of Uttar Pradesh on 3 October 2023. Physical verification found no discrepancy between the goods and the accompanying documents, yet the goods were detained on 11 October 2023 on the ground that both the consignor and consignee were declared non-existent. On the date of interception the petitioner held a valid registration under the CGST Act, 2017, though this registration was later suspended by the West Bengal authorities on 6 October 2023 with effect from 18 September 2023. Upon detention, the petitioner, as owner of the goods, sought release under Section 129(1)(a) of the CGST Act; however, the authorities computed the penalty for release under Section 129(1)(b) instead, by order dated 19 October 2023, prompting the present writ petition restricted solely to the Section 129 proceedings.

Issues Involved

  1. Whether goods accompanied by a genuine tax invoice and E-way bill, where the owner comes forward, must be released under Section 129(1)(a) or Section 129(1)(b) of the CGST Act.
  2. Whether the petitioner qualified as the "owner of the goods" under CBIC Circular No. 76/50/2018-GST despite the subsequent suspension of its registration.
  3. Whether the absence of valid CGST registration of the buyer and seller, as alleged by the respondents, could justify computing penalty under the higher Section 129(1)(b) rate.

Petitioner's Arguments

  • As owner of the goods (evidenced by the invoice and E-way bill accompanying the consignment), the goods ought to be released under the lower-penalty regime of Section 129(1)(a), not Section 129(1)(b).
  • Relied on CBIC Circular No.76/50/2018-GST dated 31.12.2018, which clarifies that where an invoice or specified document accompanies the goods, the consignor or consignee is deemed the owner, and where it does not, the proper officer must determine ownership.
  • Cited two Coordinate Bench judgments of the same Court — M/s Sahil Traders v. State of U.P., 2023:AHC:116953-DB, and M/s Sanjay Sales Agency v. State of U.P., 2023:AHC:193624-DB — for the proposition that when the owner comes forward with a tax invoice and E-way bill, the penalty must be calculated under Section 129(1)(a) and not Section 129(1)(b).

Respondent's Arguments

  • Supported the actions of the authorities and contended that they were correct in law, as the buyer and seller were found not to be holding valid CGST registration at the relevant time.

Court Order/Findings

  • Goods were found accompanied by a proper tax invoice and E-way bill belonging to the petitioner, and their genuineness was not disputed on verification; this squarely attracted the CBIC Circular dated 31.12.2018.
  • Where a tax invoice and E-way bill accompany the consignment, the person producing them and coming forward is deemed the owner of the goods under the Circular, and the goods must be released under Section 129(1)(a) of the CGST Act, not Section 129(1)(b).
  • The order dated 19 October 2023 computing penalty under Section 129(1)(b) was quashed and set aside; the authorities were directed to carry out the release exercise under Section 129(1)(a) of the CGST Act within a period of three weeks from the date of the judgment.
  • As the petitioner did not press the remaining prayers in the writ petition, liberty was reserved to pursue them before the appropriate forum, and the writ petition was allowed on the limited issue of the applicable penalty provision.

Important Clarification

  • CBIC Circular No.76/50/2018-GST governs who is treated as the "owner of goods" under Section 129(1): if an invoice or specified document accompanies the consignment, the consignor or consignee who produces it and comes forward is deemed the owner, entitling release at the lower Section 129(1)(a) rate rather than the higher Section 129(1)(b) rate.
  • A subsequent suspension of the consignor's/consignee's GST registration (after the date of interception) does not retroactively deprive the party of "owner" status if the registration was valid on the date of interception and the documents were genuine.
  • This principle has been consistently applied by Coordinate Benches of the Allahabad High Court, including in M/s Sahil Traders and M/s Sanjay Sales Agency, making it a reliable line of authority for transporters and consignors facing similar detention under Section 129(1)(b).

Sections Involved

  • Section 129(1)(a), CGST Act, 2017 — release of detained goods on payment of tax and 100% penalty where the owner comes forward.
  • Section 129(1)(b), CGST Act, 2017 — release on payment of tax and 50% of the value of goods as penalty where the owner does not come forward.
  • CBIC Circular No. 76/50/2018-GST, dated 31 December 2018 — clarifies determination of "owner of the goods" for Section 129(1) purposes.

Decision – In Favour of

In favour of the Assessee — the higher-penalty order under Section 129(1)(b) was quashed, and the authorities were directed to release the goods at the lower Section 129(1)(a) rate.

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. 1297 of 2023
  • CNR: 2023:AHC:227182-DB
  • Coram: Hon'ble Justice Siddhartha Varma and Hon'ble Justice Shekhar B. Saraf
  • Decision Date: 11 December 2023
  • Disposal Nature: Allowed; detention order quashed, goods directed to be released under Section 129(1)(a) CGST Act

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