GST detention penalty cannot rest on a mere classification dispute when invoice and e-way bill are available.

Penalty under section 129(3) of the Uttar Pradesh GST Act is not sustainable where the dispute is confined to classification of goods and the goods are supported by invoice and e-way bill. The note states that, absent any dispute on valuation, section 129 should not be used for a mere classification controversy; assessment-related issues such as undervaluation should instead be addressed under sections 73 or 74. On these facts, the penalty order was treated as legally unsustainable and the amount deposited towards penalty was directed to be refunded.

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Issues: Whether penalty under section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 could be sustained where the dispute related only to classification of goods and the accompanying tax documents were available.

Analysis: The penalty was founded on alleged misclassification of goods. The goods were supported by invoice and e-way bill, and there was no dispute regarding valuation. The legal position applied was that section 129 is not to be invoked on a mere dispute of this nature, and where the controversy concerns undervaluation or similar assessment-related questions, the proper course is to proceed under sections 73 or 74 of the Uttar Pradesh Goods and Services Tax Act, 2017. On these facts, the penalty was held to have no legal foundation.

Conclusion: The penalty order was unsustainable and was quashed. Any amount deposited towards penalty was directed to be refunded.

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