Detention is illegal on the ground that price at which product was sold to the customer was not matching the MRP of the product, which reflected in the packet transported.

Case Title: K.P. Sugandh Ltd. v. State of Chhattisgarh

Court: High Court of Chhattisgarh

Petition Number: W.P.T. Nos. 36 and 49 of 2020

Date of Judgment: 16 March 2020

Category of Dispute: Detention of Goods under E-Way Bill – Discrepancy in Valuation

Relevant Sections:

Section 68 and 129(3) of CGST Act, 2017

Rule 138 and 139 of CGST Rules, 2017

Facts of the Case

• The petitioner, a manufacturer of pan masala and tobacco products, transported goods from its factory to a customer via a vehicle accompanied by proper tax invoice and e-way bill. [Para 3–4]
• Despite compliance with documentation requirements, the vehicle was intercepted and detained by the department alleging valuation discrepancies in the goods. [Para 4]
• A notice under Form GST MOV-07 (Section 129(3)) was issued and, subsequently, an order was passed demanding tax and penalty for release. [Para 4]
• The petitioner contended that valuation discrepancies do not authorize seizure/detention under Section 129 and insisted that they had complied with Section 68 and Rules 138 & 139. [Para 5–6]

Questions in Consideration

1. Whether a discrepancy in the valuation of goods (selling below MRP) justifies detention and seizure under Section 129 of the CGST Act, 2017? [Para 5–6]
2. Whether availability of an appellate remedy under Section 107 bars the maintainability of writ petition against such detention? [Para 7, 13]

Observation of the Court

• The Court held that the petitioner was in possession of all required documents — e-way bill and invoice — and the details matched the consignment. [Para 8–9]
• It was held that merely selling below MRP is not a valid ground for detention under Section 129; any alleged undervaluation must be pursued through proper legal proceedings separately. [Para 10]
• Reliance was placed on the judgment of Alfa Group v. Asst. STO (Kerala HC) and Sakul Naza Mohmd v. State of Gujarat, which had quashed similar detentions. [Para 11–12]
• The Court rejected the argument that availability of appellate remedy (Section 107) bars writ jurisdiction, especially when the very initiation of proceedings is contrary to law. [Para 13]

Judgment of the Court

• The Court quashed the impugned order under Section 129 and directed immediate release of goods and vehicle. [Para 14]
• It clarified that quashing the order does not prevent the State from initiating proceedings under other provisions for undervaluation, if so advised. [Para 15]
• Writ petitions were allowed. [Para 16]

Between Fine Lines

• GST authorities cannot detain goods for valuation issues if e-way bill and invoice are valid.
• Selling below MRP is not illegal under GST unless it leads to tax evasion.
• Vehicle detention under Section 129 requires more than mere price discrepancy.
• Alternative remedy doesn’t bar writ relief if the action is without legal authority.
• Legal recourse for valuation must be pursued separately, not through seizure.

Summary of Referred Cases