2025 (9) TMI 594 - HC - GST

Orders under Section 129(3) quashed where consignor's contemporaneous documents showed truck breakdown and no tax evasion

The HC quashed the orders detaining goods and imposing penalties under Section 129(3), finding no evidence of tax evasion where the consignor produced ... Detention and seizure of goods - during course of repair, the e-way bill was expired - intention for evasion of tax present or not - HELD THAT:- It is not in dispute that the goods were being transported from Kanpur to Punjab and same was intercepted on the ground that e-way bill has been expired. The petitioner has explained the reason for delay to which supporting materials have also been brought on record but without adverting / rebutting the said evidence of truck break down, the impugned orders have been passed. The petitioner has filed supporting evidence of his stand and explained the reason of delay but without recording any cogent finding, the same has been disbelieved though all the relevant documents were accompanied with the goods in question and there was no discrepancy with regard to quality / quantity of the goods. Therefore, the intent of tax evasion is not attracted in the facts of the present case. This Court in the cases of M/s Shyam Sel and Power Ltd. [2023 (10) TMI 218 - ALLAHABAD HIGH COURT], M/s Harley Foods Products [2018 (11) TMI 704 - ALLAHABAD HIGH COURT] and M/s OSR Creation [2025 (1) TMI 1311 - ALLAHABAD HIGH COURT] have categorically held that in the absence of any material with regard to evasion of tax, the proceedings under Section 129 (3) cannot be sustained. The impugned orders cannot be sustained in the eyes of law and same is hereby quashed - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether detention and seizure of goods and initiation of proceedings under Section 129(3) are sustainable where the e-way bill accompanying the consignment has expired during transit due to an alleged vehicle breakdown and documentary evidence of the breakdown and repair is produced. 2. Whether absence of any material indicating intention to evade tax precludes sustaining proceedings under Section 129(3) and confiscation/detention orders when goods and invoices match and there is no discrepancy in quality/quantity. 3. Whether failure of the transporter/driver to intimate parties or to update the e-way bill after repair is a conclusive basis to disbelieve documentary proof of compelling circumstances and uphold detention/seizure. ISSUE-WISE DETAILED ANALYSIS Issue 1: Sustainabiity of detention/seizure and Section 129(3) proceedings where e-way bill expired in transit due to vehicle breakdown. Legal framework: Section 129(3) (statutory provision under the GST/State tax regime) permits detention, seizure and recovery of tax where goods are transported without prescribed documents or in contravention of the law; compliance with e-way bill requirements is material to lawful interstate transport of taxable goods. Precedent Treatment: The Court relied on and followed prior decisions of the same High Court which held that, in the absence of material pointing to tax evasion, proceedings under Section 129(3) cannot be sustained merely because of expired e-way bills (cited High Court precedents addressing similar facts). Interpretation and reasoning: The Court examined documentary evidence showing a vehicle breakdown during transit, contemporaneous repair bills and the fact that invoices and e-way bills were initially generated and accompanied the goods. The Court reasoned that where a logistical contingency (vehicle breakdown) interrupts transit and evidence of repair/continuation exists, mere expiry of an e-way bill during that interruption does not automatically validate detention/seizure. The Court emphasized the need to adjudicate the factual explanation and assess whether the expiry reflects evasive conduct or bona fide delay caused by compelling circumstances. Ratio vs. Obiter: Ratio - Detention/seizure under Section 129(3) is not automatically sustainable solely on expiry of e-way bill if there is cogent documentary evidence of an intervening event (e.g., vehicle breakdown) causing delay and no indication of tax evasion. Obiter - Observations regarding best practices for drivers/transporter to inform parties or update e-way bills, while persuasive, are ancillary to the core legal holding. Conclusions: The Court concluded that in the present facts the impugned detention/seizure cannot be sustained because the petitioner produced supporting evidence of breakdown and repair; therefore, mere expiry of the e-way bill did not justify the order under Section 129(3). Issue 2: Role of intention/evidence of tax evasion in upholding Section 129(3) actions where invoices and goods conform to records. Legal framework: Confiscation/detention under the relevant provision contemplates preventing tax evasion; the existence of documentary evidence showing legitimate transaction and matching quantity/quality weakens a presumption of evasion. Precedent Treatment: The Court expressly followed earlier High Court rulings holding that absent material evidencing intention to evade tax, punitive measures under Section 129(3) are not sustainable. Interpretation and reasoning: The Court analyzed whether evidence on record indicated any discrepancy between invoice and goods, or any other indicia of tax evasion. Finding none - invoices were produced, goods matched description and quantity/quality showed no inconsistency - the Court held the intent to evade tax was not attracted. The Court criticized the impugned orders for disbelieving petitioner's explanation without recording cogent findings or rebutting the documentary evidence of breakdown. Ratio vs. Obiter: Ratio - Where documentary evidence demonstrates legitimate supply (invoices, matching goods) and there is no material indicating evasion, proceedings under Section 129(3) and consequent detention/seizure are liable to be quashed. Obiter - The Court's remarks that parties ought to update e-way bills where possible are non-essential observations. Conclusions: The Court concluded that the absence of material pointing to tax evasion renders the impugned orders unsustainable and warranted quashing of the detention/seizure and related proceedings. Issue 3: Effect of failure by transporter/driver to intimate parties or update e-way bill after repair on the credibility of the breakdown explanation. Legal framework: Compliance obligations (informing consignor/consignee, updating e-way bill) are relevant to the reasonableness and conformity of transit procedures but must be weighed against substantive evidence of interruption; procedural lapse does not ipso facto establish evasion. Precedent Treatment: Prior rulings relied upon by the Court recognize that procedural lapses, standing alone, are insufficient to sustain confiscatory action where bona fide reasons and supporting documents for delay exist and there is no evasion. Interpretation and reasoning: The Court acknowledged submissions that the driver/transporter had duties to inform and update documentation; however, it found that the impugned orders failed to confront or rebut the documentary proof of breakdown and repair. The Court observed that speculation about what the driver or parties ought to have done cannot substitute for an evidentiary finding that the breakdown story is false or that tax evasion was intended. The Court required cogent findings to disbelieve the furnished evidence but found none recorded. Ratio vs. Obiter: Ratio - Procedural failures (non-intimation, not updating e-way bill) do not automatically negate contemporaneous documentary evidence of compelling circumstances and cannot alone sustain confiscation without findings impeaching the facts. Obiter - The Court's view that drivers and consignors should notify and update e-way bills where feasible is advisory. Conclusions: The Court held that the absence of intimation or failure to update the e-way bill did not justify detention/seizure where the petitioner produced credible supporting documents and there was no recorded, cogent finding disbelieving those documents. Relief and ancillary outcome Interpretation and reasoning: On the combined application of the above principles, the Court determined that the impugned orders could not stand in law and hence quashed them. The Court ordered that any amount deposited be refunded in accordance with law. Ratio vs. Obiter: Ratio - Where documented compelling circumstances interrupt transit and no material exhibits intent to evade tax, confiscatory proceedings and detention/seizure under Section 129(3) must be set aside and any sums deposited refunded. Obiter - Administrative admonitions about updating e-way bills and informing parties do not alter the legal conclusion where evidence is uncontradicted.