Detention and Penalty Under Section 129 Unjustified for Mere Expired E-Way Bill Without Intent to Evade Tax

By | October 2, 2026
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Detention and Penalty Under Section 129 Unjustified for Mere Expired E-Way Bill Without Intent to Evade Tax

Issue

Whether detention of goods and imposition of tax and penalty under Section 129(3) are sustainable solely on account of the expiry of an e-way bill during transit, where all underlying documents are genuine and no intent to evade tax is established.

Facts

  • Transaction Details: The petitioner, a registered company trading in oil and chemicals at Mathura, sold 12,000 liters of mineral oil to a registered dealer under a valid tax invoice and builty (consignment note).
  • Generation of E-Way Bill: A valid e-way bill was generated prior to dispatch, matching all details of the consignment.
  • Transit Delay & Expiry: During transit, the validity of the e-way bill expired due to a driver change and mechanical breakdown amid the COVID-19 lockdown.
  • Lack of Extension: The transporter failed to intimate the petitioner about the breakdown, leading to non-extension of the e-way bill within the permissible time.
  • Interception & Verification: The vehicle was intercepted at Aligarh solely due to the expired e-way bill; physical verification confirmed no discrepancy in description, quantity, value, or tax in the accompanying documents.
  • Imposition of Penalty: Proceedings under Section 129(3) were initiated, and tax with penalty was collected to obtain release of the goods and conveyance. The statutory appeal filed by the petitioner was subsequently dismissed.

Decision

  • Held in favor of the assessee.
  • The invoice and builty accurately reflected all transaction particulars, and the e-way bill matched the consignment details in all respects.
  • The explanation regarding mechanical breakdown and transporter default during the lockdown was supported by the record and remained unrebutted by the Revenue.
  • In the absence of an independent inquiry or any material demonstrating an intent to evade payment of tax, the mere expiry of an e-way bill’s validity period does not justify detention or the levy of tax and penalty under Section 129(3).
  • The impugned orders were quashed, the writ petition was allowed, and the amount deposited was directed to be refunded as per law.

Key Takeaways

  1. Intent to Evade Is Essential: Detention, seizure, and penalty under Section 129 cannot be levied automatically for technical or minor procedural lapses without establishing a deliberate intent to evade tax.
  2. Expired E-Way Bill Not Conclusive Proof of Evasion: A mere expiry of the validity period of an e-way bill during transit—especially when backed by valid explanations like mechanical breakdown—does not render the consignment illegal.
  3. Refund of Coerced Deposits: Penalty and tax amounts collected under Section 129 for minor technical infractions are legally unsustainable and subject to complete refund.
HIGH COURT OF ALLAHABAD
J.M. Petrochemicals (P.) Ltd.
v.
State of U.P.
Piyush Agrawal, J.
WRIT TAX No. 590 of 2022
SEPTEMBER  22, 2026
Rishi Raj Kapoor for the Petitioner.
ORDER
1. Heard Sri Rishi Raj Kapoor, learned counsel for the petitioner and learned Additional Chief Standing Counsel for the opposite parties.
2. By means of the present writ petition, the petitioner is assailing the order dated 24.6.2021 passed by respondent no. 2 in Appeal No. 0064/2020 as well as the order dated 02.6.2020 passed by respondent no. 3 (MOV-09 No. 2021609X3042001) under Section 129(3) of the U.P. Goods and Services Tax Act, 2017.
3. Learned Counsel for the petitioner submits that the petitioner, a private limited company registered at Mathura and is engaged in the trading of oil and chemicals. He submits that it sold 12,000 litres of mineral oil valuing Rs. 5,52,240/-, inclusive of CGST and SGST @ 9% each amounting to Rs. 42,120/- apiece, to M/s Indian International, Sikandarabad, U.P., a registered dealer, vide Tax Invoice No. 82 dated 26.5.2020 and builty dated 26.5.2020, for transshipment from Mathura to Sikandarabad. An E-way Bill No. 421119023245 dated 26.5.2020, valid up to 28.5.2020, was duly generated for the consignment. He further submits that after loading of the goods, the original driver became unavailable on account of the Covid-19 lockdown, whereupon the transporter engaged another driver. During transit, the vehicle developed a mechanical snag and its repair consumed three days on account of the lockdown restrictions then in force. The transporter failed to apprise the petitioner of the delay, in consequence whereof the validity of the e-way bill could not be extended, although the invoice, builty, vehicle number and consignment particulars remained correctly and consistently reflected in both the tax invoice and the e-way bill. He further submits that while the consignment was in transit from Mathura to Sikandarabad via Aligarh, the vehicle was intercepted by respondent no. 3 on the sole ground that the e-way bill had expired. Upon physical verification, no discrepancy whatsoever was found in the description, quantity or value of the goods, or in the accompanying documents except the expiry of the e-way bill. Notwithstanding this, an order of detention followed by proceedings u/s 129(3) of the Act was passed, and tax and penalty of Rs. 1,68,480/- were levied and realised as a condition for release of the goods and vehicle against ehich an appeal has been filed which was dismissed by respondent no. 2 vide order dated 24.6.2021, giving rise to the present petition.
4. Learned counsel for the petitioner submits that there is no intention for evasion of tax as the goods were acceompained with all the requisite documents but owing to a bona fide vehicle breakdown during the nationwide Covid-19 lockdown, the validity period of the e-way bill had lapsed. He submits that mere expiry of the e-way bill, unaccompanied by any other material pointing to an intention to evade tax, cannot found an order of detention, seizure or penalty under Section 129 of the Act, the touchstone for invoking that provision being “reason to believe” of tax evasion, which must rest on cogent material and not surmise.
5. In support of his submission, learned counsel for the petitioner has relied upon the judgements of this court in the cases of Agrim Wholesale (P.) Ltd. v. State of U.P. [Writ Tax No. 2375 of 2024, dated 19-12-2024], Deepam Packaging and Food (P) Ltd. v. Additional Commissioner Grade -2  112 GST 725/[2026] 104 GSTL 180 (Allahabad)/Writ Tax No. 885 of 2023 andCJ Darcl Logistics Ltd. v. State of U.P. 102 GSTL 229 (Allahabad)/Writ Tax No. 193 of 2021.
6. Per Contra, learned Standing Counsel submits that when the vehicle (Tanker) No. UP80CT9421 was intercepted during road inspection, the e-way bill produced by the driver had already lost its validity, rendering it invalid for transit of the goods and in contravention of Rule 138 of the Rules; consequently, the order dated 24.6.2021 affirming the order dated 2.6.2020 warrants no interference by this Court.
7. After hearing learned counsel for the parties, the court has perused thr records.
8. It is not in dispute that the goods in question were accompanied by a valid tax invoice and builty correctly reflecting the description, quantity, value and tax charged, that the e-way bill particulars tallied with the tax invoice, and that no discrepancy was found on physical verification save the expired validity of the e-way bill. It is equally not in dispute that the transporter, upon encountering a mechanical breakdown of the vehicle during transit, failed to intimate the petitioner of the delay, and that this default of the transporter, occurring during the period of the Covid-19 lockdown, is what occasioned the lapse in extending the validity of the e-way bill. This explanation finds support from the record and has not been controverted by any finding recorded by respondent no. 3 or respondent no. 2. Where the assessee’s explanation for expiry of the eway bill remains unrebutted, and no independent enquiry is conducted to test its veracity, the authorities cannot, merely on the strength of the expired document, draw an adverse inference of intention to evade tax.
9. This court in the cases of Agrim Wholesale (P.) Ltd. (supra) and CJ Darcl Logistics Ltd. (supra) have held that absence of any material to establish the intent to evade payment of tax does not attract the rigours under section 129(3) of the Act.
10. In view of the above, this Court is of the considered opinion that the order dated 2.6.2020 passed by respondent no. 3 and order dated 24.6.2021 passed in Appeal No. 0064/2020, cannot be sustained in the eyes of law and the same are hereby quashed.
11. The writ petition is allowed.
12. Any amount deposited by the petitioner shall be refunded to him in accordance with the law.