Facts of the Case

The petitioner, M/S Om Prakash Kuldeep Kumar, a registered dealer trading in bidi, matchbox and tobacco, challenged an appellate order dated 17.08.2021 passed under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 in Appeal No. GST 016/2020 for A.Y. 2019-20. The petitioner had prepared Tax Invoices No.723 and 724 dated 16.01.2020 and corresponding e-way bills for supply to buyers in Mainpuri and Kannauj, loaded on Truck No. UP 76 K 5205. During transit the vehicle was intercepted; Form GST MOV-01 was prepared on 17.01.2020, followed by detention/seizure in MOV-06, then MOV-07, and finally MOV-09 imposing tax and penalty. The petitioner deposited Rs.2,36,304.68/- under protest and appealed, but the appeal was dismissed confirming the demand, leading to WRIT TAX No. 277 of 2022 before the Allahabad High Court, entertained because the GST Appellate Tribunal was not functional in Uttar Pradesh at the relevant time.

Issues Involved

  1. Whether detention and seizure of goods accompanied by genuine tax invoices and e-way bills can be sustained merely because the vehicle deviated from the destination route or the driver's statement was allegedly inconsistent.
  2. Whether the absence of a statutory route-declaration requirement under the GST Act (unlike the earlier VAT regime) permits an adverse inference of tax evasion from route deviation alone.
  3. Whether the seizure/penalty order under Section 129(3) is sustainable where the genuineness of the accompanying documents is not disputed.

Petitioner's Arguments

  • The goods were accompanied throughout by genuine tax invoices and e-way bills, and the seizure was wrongly based on the driver having produced only one invoice/e-way bill at interception.
  • The allegation that the driver stated the goods were to be unloaded at Mainpuri itself, contrary to the accompanying documents, was factually incorrect and unsupported by the driver's own recorded statement in GST MOV-01.
  • Relied on the Gujarat High Court's ruling in M/s Karnataka Traders v. State of Gujarat and the Telangana High Court's ruling in Vijay Metal v. Deputy Commercial Tax Officer, both holding that route deviation alone cannot found a presumption of tax evasion.
  • Argued that, unlike the erstwhile VAT Act, the GST Act contains no requirement to declare the transportation route, so no adverse inference could be drawn from taking a different route absent other cogent material.

Respondent's Arguments

  • Supported the impugned orders, contending that the truck driver had stated at interception that the goods were to be unloaded at Mainpuri, in the garb of accompanying documents, contrary to the Act's provisions.
  • Prayed for dismissal of the writ petition on this basis.

Court Order/Findings

  • The Court examined the driver's statement recorded in GST MOV-01 itself and found not a single word suggesting the goods were to be unloaded at an undisclosed location; the department's own record did not support its allegation.
  • Since the GST Act, unlike the earlier VAT Act, imposes no obligation to declare the transportation route, seizure cannot be justified merely because the vehicle was not on the 'regular' or destined route, absent other cogent material of evasion.
  • The power of detention and seizure under Section 129 can be exercised only where goods are not accompanied by genuine documents; genuineness was undisputed here, and no material was placed on record to substantiate the allegation of a single-document discrepancy.
  • Following the Gujarat and Telangana High Court precedents, the Court quashed the order dated 17.08.2021, allowed the writ petition with costs of Rs.5,000 payable by the State (recoverable from the erring officer), and directed refund of the deposited amount within one month, listing the matter after three months to monitor compliance.

Important Clarification

  • Mere deviation from the shortest or 'expected' transportation route cannot, by itself, justify detention or seizure under Section 129 of the GST Act, since (unlike the VAT regime) there is no statutory obligation to declare the route.
  • Detention and seizure require goods to be unaccompanied by genuine documents; where the genuineness of tax invoices and e-way bills is undisputed, seizure is impermissible.
  • Allegations attributed to a driver's statement must be verifiable against the actual recorded statement (here, in GST MOV-01); unsubstantiated allegations cannot sustain a penalty order.
  • Costs can be imposed on the State, recoverable from the erring officer personally, for unsustainable seizure or penalty action.

Sections Involved

  • Section 129, U.P. GST Act, 2017 — detention, seizure and release of goods and conveyances in transit.
  • Section 129(3), U.P. GST Act, 2017 — specific provision under which the penalty order (Form GST MOV-09) was passed.
  • Forms GST MOV-01, MOV-06, MOV-07, MOV-09 — the procedural forms used in detention/seizure proceedings under the GST Act.

Decision – In Favour of

The decision is in favour of the Assessee. The seizure and penalty order was quashed with costs of Rs.5,000, and the deposited amount was ordered to be refunded.

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. 277 of 2022
  • CNR: Not available on record
  • Coram: Justice Piyush Agrawal
  • Decision Date: 03.10.2023
  • Disposal Nature: Allowed with costs (seizure/penalty order quashed; deposited amount to be refunded)

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