Incorrect PIN Code Alone Cannot Justify Goods Seizure or Penalty Under Section 129 of CGST Act

HC held that seizure of goods and penalty under s.129 CGST Act were unjustified where the only discrepancy was an incorrect PIN code in the "ship to" address on the tax invoice, while the full address was otherwise correct. Relying on the circular dated 14.09.2018, the Court noted that when consignor/consignee addresses are correct and only the PIN code is wrong, s.129 proceedings should not be initiated. As all requisite documents were in order and no intent to evade tax was shown, the impugned orders were set aside and the petition allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether initiation of proceedings and imposition of penalty under Section 129 of the Act were legally sustainable when the only discrepancy in the transit documents was an incorrect PIN code in the address of the "ship to" party, while all other particulars and documents were in order.

1.2 Whether the circular dated 14.09.2018 issued by the Central Board of Indirect Taxes and Customs, particularly Clause 5(b), was binding on the authorities and precluded initiation of proceedings under Section 129 in the circumstances of the case.

1.3 Whether a mere human/technical error in mentioning one digit of the PIN code, without any indication of intent to evade tax and without any other discrepancy in documents, could justify seizure of goods and levy of penalty under Section 129.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Legality of proceedings under Section 129 in light of CBIC Circular dated 14.09.2018

Legal framework

2.1 The Court considered Section 129 of the Act relating to detention, seizure and release of goods in transit, and Clause 5(b) of CBIC Circular No. 64/38/2018-GST dated 14.09.2018, which stipulates that where a consignment is accompanied with an invoice/other specified document and an e-way bill, proceedings under Section 129 may not be initiated in specified situations, including an "error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill."

2.2 The Court also took note of the principle laid down by the Supreme Court in Usha Martin Industries that circulars issued by higher authorities are binding on subordinate authorities.

Interpretation and reasoning

2.3 It was undisputed that the goods were in transit from Gujarat to West Bengal in a "bill to ship to" transaction and that the consignment was accompanied by tax invoice, e-way bill and railway receipt, and that no discrepancy was found in these documents except that one digit of the PIN code in the "ship to" address was wrongly mentioned, while the address itself was correct.

2.4 The Court observed that in terms of Clause 5(b) of the circular dated 14.09.2018, where the address of the consignor/consignee is correct and only the PIN code is erroneous, proceedings under Section 129 "may not be initiated," provided such error does not extend the validity period of the e-way bill.

2.5 The Court read the circular as clearly covering the situation where an incorrect PIN code is the only defect, and held that the authorities were bound by this circular and were not justified in seizing the goods or initiating penalty proceedings on that sole ground.

2.6 Relying on the binding nature of departmental circulars as affirmed by the Supreme Court, the Court held that non-adherence to the circular by the respondent authorities rendered the initiation of proceedings contrary to the intent of the statute and the administrative instructions governing its implementation.

Conclusions

2.7 The seizure of goods and initiation of proceedings under Section 129 based solely on an incorrect PIN code in the "ship to" address, despite all other particulars and documents being in order, were held to be illegal and against the circular dated 14.09.2018.

2.8 The impugned orders imposing penalty and sustaining such action in appeal were set aside as the initiation of proceedings itself was found bad in law and contrary to the binding circular.

Issue 3: Effect of human/technical error and absence of intent to evade tax

Interpretation and reasoning

3.1 The Court noted that the record disclosed no discrepancy other than the wrong mention of one digit in the PIN code and that the consignment was accompanied with all proper and prescribed documents.

3.2 The Court accepted the contention that the wrong PIN code was a human/technical error and held that no evasion of tax could be inferred merely on this basis, particularly in the absence of any other adverse material.

3.3 The Court emphasised that when goods are duly covered by valid documents and there is no indication of intent to evade tax, mere technical errors such as an incorrect PIN code cannot justify coercive measures like seizure and imposition of penalty under Section 129.

Conclusions

3.4 The Court concluded that the proceedings under Section 129 in the facts of the case were unjustified and unsustainable in law, as they were founded only on a minor technical error without any element of tax evasion.

3.5 The writ petition was allowed, the impugned orders were quashed, and it was directed that any amount deposited by the petitioner be refunded in accordance with law.

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