Goods detention for alleged route deviation despite valid invoice-s.129 penalty set aside for lack of evasion proof

 KARNATAKA HIGH COURT-M/s. Hysum Steel Versus The Joint Commissioner of Commercial Taxes (Appeals) -Mangaluru, The Commercial Tax Officer (Eng) – Mangaluru-No.- WRIT PETITION NO. 8775 OF 2024 (T-RES), Dated:- November 5, 2025

 Case Note :- The decision of the Karnataka High Court in M/s. Hysum Steel v. Joint Commissioner of Commercial Taxes (Appeals) constitutes a significant reaffirmation of the settled GST law that mere route deviation, in the absence of evidence of tax evasion, cannot justify detention of goods and levy of penalty under Section 129 of the CGST/KGST Acts. The ruling harmonises statutory provisions with binding departmental circulars and constitutional principles governing free movement of trade and proportionality of penalties.

Factual Background :- The petitioner-consigner purchased goods from M/s. VRKP Sponge and Power Plant LLP, Bellary, under a valid tax invoice, e-invoice and e-way bill dated 29.01.2023, for transportation from Bellary to Kannur, Mangaluru. While in transit, the vehicle was intercepted at Moodabidire on 31.01.2023. The sole allegation against the petitioner was that the vehicle had deviated from the usual route.

Despite the fact that:

(i)       all statutory documents were valid and in order,

(ii)     there was no discrepancy in quantity, value, consignee or destination,

(iii)    and the driver explained that the deviation was inadvertent,

the Commercial Tax Officer detained the goods and vehicle under Section 129(3) and levied penalty by order dated 01.02.2023 (FORM GST MOV-09). The appeal under Section 107 was dismissed, leading to the present writ petition.

Core Legal Issue Whether detention of goods and imposition of penalty under Section 129 can be sustained solely on the ground of route deviation, when there is no material to establish intention to evade tax and the consignment is supported by valid documents.

Statutory and Administrative Framework The Court placed substantial reliance on Circular No. 64/38/2018-GST dated 14.09.2018, issued under Section 168 of the CGST Act, which mandates that:

(i)       minor or procedural lapses should not trigger Section 129,

(ii)     proceedings under Section 129 are intended only for substantive contraventions, and

(iii)    in cases of trivial discrepancies, only general penalty under Section 125 may be imposed.

The Circular was held to be binding on field officers, a principle consistently recognised by constitutional courts.

Judicial Precedents Applied

The High Court followed and applied a consistent line of authority, including:

(i)       Joint Commissioner of Commercial Taxes v. Transways India Transport (Karnataka HC, Division Bench),

(ii)     Kamalesh Steels v. Deputy State Tax Officer (Telangana HC),

(iii)    R.K. Motors v. State Tax Officer (Madras HC).

These judgments uniformly hold that route deviation, without more, does not constitute contravention warranting detention, and that intent to evade tax is the sine qua non for invoking Section 129.

In Transways India Transport, the Division Bench went further to recognise that:

(a)     neither the CGST Act nor the Rules mandate adherence to a fixed route,

(b)     freedom of trade and movement under Articles 19(1)(g) and 301 of the Constitution includes the freedom to choose a route, unless specifically regulated by law.

Court’s Reasoning The High Court found that:

(a)     the only material relied upon by the department was a cyclostyled statement of the driver, unsupported by corroborative evidence,

(b)     there was no mismatch in documents, no undervaluation, and no diversion of goods for clandestine sale,

(c)     the petitioner had furnished a reasonable and probable explanation at the earliest point of time, and

(d)     the authorities mechanically invoked Section 129, contrary to the Circular and binding precedent.

The Court emphasised that Section 129 is a drastic power, to be exercised only in cases of deliberate tax evasion, and not for technical, inadvertent or venial lapses such as an unintended change of route.

Final Directions The High Court set aside the appellate order dated 22.12.2023 and the penalty order dated 01.02.2023-held that invocation of Section 129 was illegal and arbitrary, and  directed the petitioner to pay general penalty of Rs. 25,000 under Section 125 of the KGST Act within four weeks.

Ratio Decidendi -Mere route deviation, in the absence of evidence of intention to evade tax and where goods are accompanied by valid statutory documents, does not justify detention or penalty under Section 129 of the CGST/KGST Acts; at best, a general penalty under Section 125 may be imposed.

Practical Significance

This ruling provides substantial relief to traders and transporters frequently subjected to detention proceedings on hyper-technical grounds. It reinforces that GST enforcement must be intent-based, proportionate and business-friendly, and that Section 129 cannot be reduced to a tool of routine harassment. The judgment will serve as a strong precedent across jurisdictions where route deviation is cited as a standalone ground for detention of goods in transit.