2026 (1) TMI 197 - HC - GST

Goods detention for alleged route deviation despite valid invoice-s.129 penalty set aside for lack of evasion proof

Detention of goods and imposition of penalty under s.129 CGST/KGST for alleged route deviation was examined where the consignment was accompanied by a ... Levy of penalty u/s 129 of the CGST Act - Imposition of general penalty under Section 125 of the CGST / KGST Act - deliberate tax evasion - mere deviation/change of route during transit, despite the consignment being accompanied by valid tax invoice - HELD THAT:- A perusal of the material on record in the instant case will indicate that though the subject vehicle and goods were intercepted at Moodabidire from the driver of the vehicle, except the alleged statement of the driver in a cyclostyled form, the respondents have not placed any material to establish that there was deviation in the route by the petitioner; on the other hand, at the earliest point in time, in its objection dated 01.02.2023, the petitioner has specifically stated that due to the driver missing the route, he went to Moodabidire and parked the subject vehicle along with the goods there without any mala fide intention and in the absence of any mismatch or discrepancies found either in the documents or in the goods under transport, the proceedings may be dropped by imposing general penalty against the petitioner. As held in the aforesaid judgments, mere change of route without anything more would not be sufficient to draw an inference against the petitioner that he had intention to evade tax and detention of goods and conveyance by the authorities is required only in the case of deliberate tax evasion and not on account of technical or minor defects including inadvertent change of route. A perusal of the impugned orders will indicate that both the respondents 1 and 2 have come to the erroneous conclusion that mere change in route would attract the penalty payable under Section 129 of the KGST Act without appreciating that the petitioner had offered a reasonable and probable explanation at the earliest point in time and in the absence of any material to establish that the petitioner had instructed his driver to deliberately change the route from its destination at Kannur, Mangalore to Moodabidire, it was impermissible in law to invoke Section 129 of the KGST Act and impose penalty instead of imposing general penalty under Section 125 of the KGST Act. The impugned orders passed by the respondents are illegal, arbitrary and contrary to law warranting interference by this Court in the present petition - the impugned order passed by the 2nd respondent is hereby set aside - petition allowed. Issues: Whether mere deviation or inadvertent change of route during movement of goods, without material establishing intent to evade tax, permits invocation of Section 129 (detention/seizure and penalty) of the KGST/CGST Act, or whether authorities ought to impose only a general penalty under Section 125 in terms of the Board's Circular dated 14.09.2018.Analysis: The Court examined the statutory scheme governing carriage of goods in transit, detention and seizure (Section 129), the limited document requirements (Section 68, Rule 138A/B) and the Central Board Circular (14.09.2018) directing differentiation between minor/procedural discrepancies and substantive contraventions. The material showed the vehicle carried invoice, e-way bill and related documents; the driver admitted missing the route and parking at Moodabidire; there was no evidence that the consignor instructed a deliberate diversion or that goods were intended to be sold locally to evade tax. Precedents of this Court and other High Courts establish that simple change of route without further indicia of intent to evade tax does not warrant mechanical detention or application of Section 129; minor/documentary lapses are to be treated as procedural and ordinarily attract nominal/general penalty under Section 125, consistent with the Board's circular.Conclusion: The Court held that invocation of Section 129 was impermissible on the facts; the impugned detention/penalty orders under Section 129 and the appellate order were set aside, and the petitioner was directed instead to pay a general penalty of Rs.25,000 under Section 125. The decision is therefore in favour of the assessee, subject to imposition of the stated general penalty.