Facts of the Case

The petitioner, M/S Hysum Steel, a partnership firm at Mangaluru, purchased goods accompanied by a valid tax invoice, e-invoice and e-way bill from a Bellary supplier for transport to its premises. The driver, without malafide intent, inadvertently missed the route and drove to Moodabidire, where the vehicle was intercepted and detained under Section 129(3) of the KGST Act after a Form GST MOV-01 statement recorded the driver's route deviation. A penalty order followed, and the petitioner's appeal was dismissed on 22.12.2023. Relying on CBIC Circular No. 64/38/2018-GST and precedents including a Division Bench ruling in The Joint Commissioner of Commercial Tax v. M/s. Transways India Transport, the petitioner challenged both the penalty and the appellate order before the Karnataka High Court.

Issues Involved

  1. Whether mere deviation from the route mentioned in transport documents, without any discrepancy in the accompanying tax invoice or e-way bill, justifies detention and penalty under Section 129 of the KGST Act.
  2. Whether CBIC Circular No. 64/38/2018-GST, distinguishing minor/procedural defects from substantive violations, governs such cases.
  3. Whether a general penalty under Section 125 is the appropriate consequence instead of the higher Section 129 penalty where there is no intent to evade tax.

Petitioner's Arguments

  • A trader's right to choose the transport route is a facet of the constitutionally guaranteed freedom of trade and movement under Articles 19(1)(g), 19(1)(d) and 301, and cannot by itself be treated as a taxable event or evasion indicator absent a specific law restricting route choice.
  • The goods were accompanied throughout by valid tax invoice, e-invoice and e-way bill, and the driver's own explanation for the deviation was neither considered nor disbelieved with any supporting material by the authorities.
  • CBIC's Circular No. 64/38/2018-GST and the Division Bench ruling in Transways India Transport establish that Section 129 detention and penalty require an actual contravention with intent to evade tax, not a mere route or document mismatch.

Respondent's Arguments

  • The Additional Government Advocate submitted there was no merit in the petition and that it was liable to be dismissed, defending the authorities' finding that the documents tendered were defective.

Court Order / Findings

  • The Court extensively surveyed precedent, including Transways India Transport, Synergy Fertichem (Gujarat HC) and Kamalesh Steels (Telangana HC), holding that detention under Section 129 requires the authority to first assess the nature of the contravention and then whether it was accompanied by intent to evade tax.
  • The impugned Form GST MOV-06 vaguely alleged that 'documents tendered are found to be defective' without specifying which document or how, and the petitioner's explanation of an inadvertent route deviation, offered at the earliest opportunity, was neither examined nor rebutted with material.
  • A mere change of route by the transport vehicle, without any discrepancy in the accompanying tax invoice, e-way bill or other prescribed documents, and without material establishing an intent to evade tax, does not attract detention and penalty under Section 129 of the KGST Act; at best it justifies imposition of the minor general penalty under Section 125.
  • The impugned penalty order and the appellate order dismissing the appeal were both set aside, and the petitioner was directed instead to pay a general penalty of Rs. 25,000 under Section 125 of the KGST Act within four weeks.

Important Clarification

  • Detention and penalty under Section 129 of the CGST/KGST Act for goods in transit require the authorities to demonstrate an actual contravention coupled with an intent to evade tax, not merely a deviation in route or an unexplained technical mismatch.
  • CBIC Circular No. 64/38/2018-GST specifically directs that minor documentary discrepancies attract only the modest general penalty under Section 125, not the substantially higher Section 129 penalty (up to 100% of tax) or confiscation under Section 130.
  • Authorities must record specific reasons identifying which document is defective and how, rather than issuing vague detention orders alleging 'defective documents' without particulars.

Sections Involved

  • Section 129, KGST/CGST Act, 2017 – detention, seizure and release of goods and conveyances in transit for contravention of the Act.
  • Section 125, KGST/CGST Act, 2017 – general penalty provision for contraventions not otherwise specifically penalised.
  • Section 130, CGST Act, 2017 – confiscation of goods for cases involving intent to evade tax, distinguished from mere procedural lapses.
  • Rule 138, CGST Rules, 2017 and CBIC Circular No. 64/38/2018-GST – e-way bill requirements and the circular clarifying minor versus substantive violations.

Decision – In Favour of

The decision substantially favours the assessee. Both the Section 129 penalty order and the appellate order were set aside, with only the minor general penalty under Section 125 held payable.

Case Details

High Court of Karnataka at Bengaluru; Writ Petition No. 8775 of 2024 (T-RES); M/S Hysum Steel vs Joint Commissioner of Commercial Taxes (Appeals), Mangaluru and Another; Coram: Justice S.R. Krishna Kumar; Decided on 05.11.2025.

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