Penalty for Detained Goods Must Be Under Section 129(1)(a) When Registered Owner Comes Forward

Penalty for Detained Goods Must Be Under Section 129(1)(a) When Registered Owner Comes Forward

Issue

Whether the penalty for goods detained in transit should be calculated under Section 129(1)(a) (applicable when the owner comes forward) or under Section 129(1)(b) (applicable when the owner does not come forward), specifically when the goods are accompanied by a valid e-way bill and tax invoice identifying the registered owner.

Facts

• The Transport: The petitioner, a registered dealer, was transporting goods.

• The Documents: The goods in transit were accompanied by a valid E-way bill and a Tax Invoice. Crucially, these documents disclosed the full particulars of the owner.

• The Detention: The GST department detained the goods and initiated penalty proceedings.

• The Dispute: The Adjudicating Authority computed the penalty under Section 129(1)(b). This section applies “where the owner of the goods does not come forward for payment of such penalty.”

• Petitioner’s Plea: The petitioner argued that since they are the registered owner and their details are on the invoice, the penalty should be computed under Section 129(1)(a), which applies when the owner comes forward.

Decision

• The Allahabad High Court ruled in favour of the assessee.

• Owner Identified: The Court held that since the goods were accompanied by an e-way bill and tax invoice carrying the full particulars of the registered owner, it is evident that the owner has “come forward.”

• Wrong Provision Applied: Consequently, the infringement attracted penalty only under Section 129(1)(a). The Adjudicating Authority’s computation under Section 129(1)(b) was held to be erroneous.

• Order Set Aside: The impugned penalty order was set aside.

• Direction: The Court directed the authority to determine the quantum of penalty strictly under Section 129(1)(a). Subject to the deposit of this corrected penalty amount, the goods were ordered to be released forthwith.

Key Takeaways

• Section 129(1)(a) vs. 129(1)(b): This is a critical distinction in GST detention cases.

  • 129(1)(a): Owner comes forward. Penalty = 200% of the tax payable.

  • 129(1)(b): Owner does not come forward. Penalty = 50% of the value of goods (or 200% of tax, whichever is higher).

• Documents Prove Ownership: If valid documents (invoice/e-way bill) accompany the goods and identify the registered person, the department cannot invoke Section 129(1)(b). Invoking the harsher provision in such cases is legally unsustainable.

• Substantial Financial Relief: The penalty under clause (a) is usually significantly lower than under clause (b) (which is based on the value of goods). Ensuring the correct section is applied is vital for the taxpayer.