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 valid tax invoice and no discrepancy was found in the goods or documents. The HC held that mere change of route, without cogent material proving deliberate tax evasion, cannot justify invoking s.129; the authorities relied only on a cyclostyled driver statement and ignored the consignor's prompt, plausible explanation of an inadvertent wrong turn. In the absence of evidence that the dealer instructed a deliberate deviation, resort to s.129 was impermissible and, at most, a general penalty under s.125 could be considered. The impugned penalty order was set aside and the petition was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether mere deviation/change of route during transit, despite the consignment being accompanied by valid tax invoice, e-invoice and e-way bill and in the absence of any mismatch in goods/documents, constitutes "contravention" justifying detention and penalty under Section 129 of the KGST/CGST regime.

(ii) Whether, on the facts found, the proper legal consequence was imposition of only a general penalty under Section 125 (treating the lapse as technical/minor) rather than penalty under Section 129; and whether the appellate and original penalty orders therefore required to be set aside.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Route deviation as a ground for invoking Section 129 (detention/penalty)

Legal framework (as applied by the Court): The Court examined the departmental Circular dated 14.09.2018 and applied its principle that where goods move with proper documents and there are only minor/technical lapses, authorities should not invoke Section 129 and should instead proceed with a general penalty. The Court also applied the binding principle from the Karnataka High Court decision referred to in the judgment that, in the absence of any law mandating strict adherence to a particular route, mere route change by itself cannot sustain penal action as if goods were moved without valid documents.

Interpretation and reasoning: The Court found that the consignment had been duly accompanied by the relevant documents, and that no mismatch or discrepancy in the goods or documents was shown. The interception was premised on an alleged route deviation and an alleged cyclostyled statement of the driver. The Court held that, except for such alleged statement, there was no material to establish that the consignor/consignee deliberately deviated the route or that the deviation was with any intention to evade tax. The Court accepted that the petitioner had offered a reasonable and probable explanation at the earliest point (that the driver missed the route and stopped without mala fide intention). On these facts, the Court held that mere change of route "without anything more" is insufficient to infer intention to evade tax and cannot justify detention/penalty under Section 129.

Conclusion: Invocation of Section 129 solely on the footing of route deviation, when documents are in order and no evidence of deliberate evasion is shown, was held impermissible in law. The contrary conclusions in the impugned orders were held erroneous.

Issue (ii): Proper consequence-Section 125 general penalty and validity of impugned orders

Legal framework (as applied by the Court): Relying on the Circular dated 14.09.2018 (as extracted and applied), the Court held that technical/minor lapses should attract general penalty under Section 125 rather than Section 129, particularly where the movement is supported by required documents and there is no substantive contravention indicating evasion.

Interpretation and reasoning: The Court held that both authorities proceeded on an erroneous premise that route change automatically attracts Section 129 penalty. Since the petitioner's explanation was plausible, offered promptly, and there was no material demonstrating that the petitioner instructed a deliberate diversion away from the intended destination, the Court held that the authorities were not justified in imposing Section 129 penalty. The lapse, if any, was treated as technical/minor in nature warranting only general penalty.

Conclusion: The Court set aside both impugned orders as illegal, arbitrary and contrary to law, and substituted the consequence by directing payment of general penalty of Rs. 25,000 under Section 125 within the time stipulated by the Court.

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