Facts of the Case

The petitioner, M/S Rateria Laminators Pvt. Ltd., a registered dealer (GSTIN 19AABCR2147R1ZU) at Kolkata, made an inward supply of HDPE material from GAIL, Auraiya, U.P., generating two e-way bills valid up to 12.03.2023 for onward transit to Jalpaiguri, West Bengal. En route, the driver fell ill and the vehicle also suffered a breakdown, causing the goods to be intercepted on 13.03.2023, after the e-way bills had expired. Form GST MOV-01 and MOV-06 were prepared on 23.03.2023, and a notice under Section 129(3) proposed penalty of Rs.11,18,624 under Section 129(1)(a) and Rs.36,66,606 under Section 129(1)(b), followed by an order directing deposit of Rs.11,18,624 for release. The petitioner's appeal under Section 107 was rejected on 18.04.2023.

Issues Involved

  1. Whether the detention and penalty order under Section 129(3) of the UPGST Act was sustainable where the only irregularity found was expiry of the e-way bill, and the petitioner's explanation (driver's illness and vehicle breakdown) was rejected without recorded reasons.

Petitioner's Arguments

  • On physical verification, there was no discrepancy in the quality or quantity of goods transited, and there was no intention to evade tax — the detention rested solely on the technical fact that the e-way bills had expired.
  • The delay was explained by the driver falling ill and a vehicle breakdown, and reliance was placed on Assistant Commissioner (ST) v. Satyam Shivam Papers Pvt. Ltd. (Supreme Court) and Gobind Tobacco Manufacturing Co. v. State of U.P. (Allahabad HC, Division Bench), where similar circumstances led to release without penalty.
  • Reliance was also placed on Bharti Airtel Ltd. v. State of U.P. to argue that once the petitioner did not deposit the penalty under Section 129(1), proceedings ought to have been taken under Sections 73, 74 and 75 read with Section 122, not concluded finally under Section 129(3) alone.

Respondent's Arguments

  • The goods were transiting after expiry of the e-way bills, a clear contravention showing intention to evade tax; the petitioner's explanation of illness and breakdown was without supporting material and hence rightly rejected.
  • The authorities below were justified in passing the impugned orders since no material was brought on record to substantiate either the driver's illness or the vehicle breakdown.

Court Order / Findings

  • It was admitted that the goods were accompanied by requisite documents — invoices, e-way bills and GR — and the sole discrepancy found was that the e-way bills, valid up to 12.03.2023, had expired by the time of interception on 14.03.2023, without any other discrepancy in quality, quantity or description of goods.
  • Both the assessing authority's order and the appellate order rejected the petitioner's explanation with only a one-line observation that the reply was "not acceptable," without assigning any reason for disbelieving the claim of illness and breakdown.
  • On query, the Standing Counsel could not point to any finding on evasion of tax recorded by either authority; distinguishing Satyam Shivam Papers and Govind Tobacco on facts (as the petitioner had not placed supporting material on record), the Court nonetheless held the impugned orders unsustainable for the authorities' failure to record any reason for rejecting the petitioner's explanation.
  • The impugned orders dated 27.03.2023 and 18.04.2023, along with the seizure memo dated 23.3.2023, were quashed, and the matter remitted to the respondent, with liberty to both sides to adduce evidence within 15 days, and a direction to pass a fresh, reasoned and speaking order after hearing all stakeholders within 30 days thereafter.

Important Clarification

An order under Section 129(3) of the CGST/State GST Act rejecting an assessee's explanation for an expired e-way bill must record reasons for disbelieving that explanation — a bare, one-line rejection such as "reply not acceptable," without engaging with the material or absence of material, does not meet the standard of a reasoned, speaking order and is liable to be set aside even where the assessee's own evidence is otherwise thin.

Sections Involved

  • Section 129, CGST Act, 2017 (and corresponding UPGST Act, 2017) – detention, seizure and release of goods and conveyances in transit found in contravention of the Act, including penalty under sub-sections (1)(a) and (1)(b).
  • Section 122, CGST Act, 2017 – general penalty for specified offences, referenced as the alternative route argued for by the petitioner in place of standalone Section 129 proceedings.

Decision – In Favour of

In favour of the Assessee — the detention, penalty order and seizure memo were quashed for failure to record reasons, though the matter is remitted for a fresh reasoned order after both sides adduce evidence, leaving the ultimate outcome open.

Case Details

High Court of Judicature at Allahabad; Writ Tax No.599 of 2023; Coram: Hon'ble Mr. Justice Piyush Agrawal; Order dated 16.08.2023 (Reserved); Neutral Citation: 2023:AHC:163876.

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