Om Logistics Ltd Vs Deputy State Tax Officer
Date: May 15, 2025
Subject Matter
Detention of a vehicle based solely on the possession of an e-way bill without any corresponding movement of goods is invalid
Summary
In the case involving Om Logistics Ltd., the Madras High Court assessed the validity of the detention of a vehicle under Section 129 of the CGST Act, 2017. The vehicle was intercepted at a toll gate while transporting goods, leading to the discovery of discrepancies in an e-way bill. A penalty was imposed for the undervaluation of goods and another for possessing an e-way bill without corresponding movement of the goods. Key details of the case include: - The vehicle was detained based on two penalties: (1) Under valuation of goods, which was paid, and (2) Discrepancies in the e-way bill, which was based on an issue that did not involve actual movement of goods. The second penalty, which was not paid, resulted in the vehicle's continued detention. - The High Court stressed that Section 129 can only be invoked when goods are being transported in contravention of the Act, specifically that there must be actual transportation of goods. Since the authorities acknowledged that there was no actual movement of goods, the Court ruled that this element is essential for applying Section 129. - The Court concluded that the detention of the vehicle based solely on the possession of an e-way bill—without any corresponding movement of goods—was invalid and without jurisdiction. - The Madras High Court consequently ordered the immediate release of the detained vehicle and allowed the miscellaneous petition, deferring the main writ petition for further proceedings. The case underscores the premise that mere discrepancies in documentation without actual contravention through the movement of goods do not justify the detention of a vehicle under the provisions of the CGST Act.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Heard both sides.
2. The petitioner challenges the validity of the impugned order dated 01.04.2025 levying penalty on two counts: (a) Under valuation of the goods and (b) Possession of an e-way bill raised without any corresponding movement of goods. The penalty levied under the first head had been paid by the owner of the goods and the goods also released. Since the penalty levied under second head had not been paid, the petition mentioned vehicle remains under detention. Seeking release of the same, a miscellaneous petition has been filed.
3. A reading of the impugned order dated 01.04.2025 passed by the second respondent indicates that the petition mentioned vehicle was intercepted by the first respondent on 17.03.2025 at 12.30 a.m., at Pallikonda Toll Gate to verify the genuineness of the consignment. It was found that a particular consignment had been undervalued. Hence, penalty to the tune of Rs.1,10,592/- was levied. It was also found that the driver of the vehicle was in possession of an invoice along with an e-way bill, the contents of which did not tally. While the petition mentioned vehicle bore the registration number HR-55-V6069, the vehicle number set out in the said e-way bill was something else. The proper officer came to the conclusion that the invoice and the e-way bill have been raised without any movement of goods. Since it constituted an offence under the Act, penalty to the tune of Rs.5,63,078/- was levied.
4. The learned Government Counsel appearing for the respondents sought time to file counter. The main writ petition stands adjourned by four weeks. The learned counsel for the petitioner however insisted that since the vehicle is under detention for more than two months, the miscellaneous petition for release of vehicle may be taken up.
5. The power to detain vehicles is conferred on the Proper Officer under Section 129 of the CGST Act, 2017. The said provision reads as under:
“Section 129 – Detention, seizure and release of goods and conveyances in transit
(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,?.
(a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;
(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;
(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:
Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
6. Section 129 of CGST Act, 2017 is a penal provision. It provides for detention of goods and conveyances. In construing penal statues, the Courts have to apply strict rules of interpretation (vide Commissioner of Customs (Import), Mumbai -vs- Dilip Kumar and Company AIR 2018 SC 3606). A reading of the aforesaid provision leads me to the conclusion that the provision will kick in only when there is transportation of goods in contravention of the statutory provisions. It is a sine qua non. Only in that event, the goods and conveyance used as a means of transport as well as the related documents shall be liable to detention or seizure. In the case on hand, the vehicle has been detained only for the reason that the driver was in possession of a document without there being any corresponding movement of goods. When even according to the respondents, there was no movement of goods, Section 129(1) of the Act cannot be invoked for detaining the vehicle.
7. I am therefore of the view that the primary ingredient necessary to attract the statutory provision is absent in this case. There has been no seizure of goods. What was seized was only an e-way bill, whose contents have given rise to a genuine doubt if some fraud had been committed. On the strength of a mere recovery of an e-way bill, which appears to have been raised without any movement of the goods from the driver of the vehicle, the vehicle could not have been impounded.
9. The very detention of the vehicle is without jurisdiction. The respondents shall forthwith release the petition mentioned vehicle. The writ miscellaneous petitions are allowed. Post the writ petition after four weeks.