Facts of the Case

The petitioner's goods were in transit from Delhi to Adilabad, Telangana, when they were intercepted at Agra. At the time of inspection, the e-way bill could not be produced, and it was found that the purchasing dealer's registration had been suspended with effect from 22.02.2025 (later revoked and restored). The Assistant Commissioner, Mobile Squad, Agra, passed an order dated 09.03.2025 imposing penalty under Section 129(1)(b) of the GST Act, which was upheld in appeal by order dated 08.04.2025.

Issues Involved

  1. Whether penalty could be imposed under Section 129(1)(b), treating the petitioner as an unregistered owner, when a tax invoice accompanied the goods in transit.
  2. Whether the subsequent restoration of the purchasing dealer's registration cured the defect relied upon by the authorities.

Petitioner's Arguments

  • Due to a technical glitch the e-way bill could not be generated, but the tax invoice accompanied the consignment, and no discrepancy in description, quality or quantity was pointed out.
  • Per Clause 6 of the CBIC Circular dated 31.12.2018, where an invoice or other specified document accompanies the consignment, the consignor or consignee is deemed to be the owner of the goods, and the order ought to have been passed under Section 129(1)(a) rather than 129(1)(b).
  • Reliance was placed on the Division Bench rulings in H/S Halder Enterprises v. State of U.P. and M/s Shahil Traders v. State of U.P., as well as a Tripura High Court decision, in support of applying Section 129(1)(a).

Respondent's Arguments

  • At the time of inspection, no e-way bill was presented, and this was expressly admitted in the writ petition itself.
  • Non-generation of the e-way bill could easily reflect an intention to evade tax, since movement of goods would otherwise go unnoticed; reliance was placed on M/s Aysha Builders and Suppliers and M/s Akhilesh Traders to sustain the penalty and seizure order, with the concession that at best relief could be granted only to the extent of applying Section 129(1)(a) instead of (b).

Court Order / Findings

  • The Court held that it was undisputed that no e-way bill was produced at the time of inspection, and following M/s Aysha Builders and Akhilesh Traders, absence of an e-way bill at interception attributes an intention to evade tax, so no interference with the penalty order per se was warranted.
  • However, since the tax invoice accompanied the goods in transit, and per Clause 6 of the Circular dated 31.12.2018 the consignor/consignee accompanied by such a document is deemed the owner, the petitioner's status as owner was established.
  • The fact that the purchasing dealer's registration was suspended at the time of interception but subsequently restored meant that no adverse inference of a bogus transaction could be drawn against the petitioner.
  • Applying Halder Enterprises and Shahil Traders, the Court held the proceedings ought to have been initiated under Section 129(1)(a) rather than 129(1)(b), and the impugned orders were modified to be treated as passed under Section 129(1)(a) of the GST Act.

Important Clarification

  • Where a tax invoice or other specified document accompanies goods in transit, the consignor or consignee is deemed the owner under Clause 6 of CBIC Circular dated 31.12.2018, entitling the assessee to the more favourable Section 129(1)(a) penalty regime, even where the e-way bill itself was not produced at the time of inspection.
  • Subsequent restoration of a purchasing dealer's suspended GST registration retrospectively negates any adverse inference that the transaction was with a non-existent or bogus dealer.

Sections Involved

  • Section 129(1)(a), GST Act, 2017 – lower penalty applicable where the owner of the goods comes forward for release.
  • Section 129(1)(b), GST Act, 2017 – higher penalty applicable where the owner does not come forward, invoked (and modified) in this case.
  • CBIC Circular dated 31.12.2018 (Clause 6) – clarifies that accompanying tax invoice or specified document deems the consignor/consignee as the owner of goods.

Decision – In Favour of

The petition is partly allowed in favour of the Assessee. The seizure and penalty are sustained on facts, but the impugned orders are modified to be treated as passed under the more favourable Section 129(1)(a) of the GST Act.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: Writ Tax No. 1834 of 2025
  • Neutral Citation: 2025:AHC:132173
  • Coram: Hon'ble Mr. Justice Piyush Agrawal
  • Date of Order: 06.08.2025

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