TaxTMI 
TaxTMI 
TaxTMI 
1. Section 129 of the CGST Act 2017 is invoked in many cases wherein the invocation on real contravention of the Section 129 is very rare. In order to curb such happenings and to avoid the burden which is artificially imposed on the tax payer as well as the High Courts, by learning from the experience during 2017-18, CBIC issued a detailed circular on 14/09/2018.
2. Despite the fact that such CBIC Circulars are binding on the tax officials, the illegal invocation of section 129 still continues and as the transportation of goods in time is a contractual obligation in the trade, penalties as levied by the officer is immediately paid to save time.
3. Even though the Circular Number 64/38/2018 GST dated 14/09/2018 in para 5 have identified six minor procedural lapses for which a lenient view is required and a maximum penalty of Rs 1,000 is prescribed vide para 6 of the Circular, field formation continue to impose huge penalties by totally disregarding their own circular.
4. The Allahabad High Court passed orders on 17/07/2025 in case covered under illegal invocation of Section 129. Though the Court has quashed the orders passed under section 129, No cost was imposed and only a very nominal interest of 4% P A was ordered to be paid with refund of all amount deposited by the petitioner from date of deposit till date of actual refund.
5. In the matter of M/s Gaylord Packers India Pvt. Ltd. Versus State Of U.P. And 3 Others - 2025 (7) TMI 1327 - ALLAHABAD HIGH COURT, the Allahabad High Court has observed that when the goods were transported from Gaziabad to Delhi on 12/02/2019 (After issuance of CBIC Circular on 14/09/2018) the tax officer detained the goods for the simple reason that there was an error in one digit wherein 4670 being the right one, it was typed as 4671.
6. The authorities, knowing it very well that it is a case of minor error which is covered as per circular wherein a maximum penalty should not exceed Rs.1000, treated this case as if goods were transported with an intention to evade the payment of applicable GST and levied maximum penalty.
7. The High Court vide para 8 made certain observations as below: Upon perusal of the judgments, the principle that emerges is that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to imposition of penalty. In the case of M/s. Varun Beverages Limited there was a typographical error in the e-way bill of 4 letters. In the present case, instead of 5332,3552 was incorrectly entered into the e-way bill which clearly appears to be a typographical error. In certain cases where lapses by the dealers are major, it may be deemed that there is an intention to evade tax but not so in every case. Typically when the error is a minor error of the nature found in this particular case, I am of the view that imposition of penalty under Section 129 of the Act is without jurisdiction and illegal in law.
8. Vide para 9 of the order dated 17/07/2025, the penalty order was quashed. Vide para 10, writ petition allowed. Vide para 11, all amount deposited by the petitioner were ordered to be refunded with 4% interest per annum.
9. The mute question here is when an order passed by a tax officer is subsequently quashed by the jurisdictional High court, whether the tax officer is sensitized so as to stop all such further orders in future.
10. If the departmental officer completely disregards their own circular, (which allows error up to two digits ) to be lenient, then what is the sanctity of such circular?
11. As the number of cases which knock the jurisdictional High Courts due to non functional of GSTAT as of now on cases connected with illegal detention of goods in gross violation of Section 129 of the CGST Act, 2017, it is high time that CBIC may come out with one more circular on the same issue.
12. All tax payers are kindly requested to ensure that the goods are transported with required documents such as invoice, e way bill etc as per requirements and there are no errors on the documents. It is also suggested that the Circular dated 14/09/2018 may be downloaded from CBIC website and handed over to the person who is transporting the goods along with the required documents.