Detention is illegal where vehicle was found at location other than as mentioned in the e-way bill.

Kamlesh Steels v. Deputy State Tax Officer

High Court of Telangana

Writ Petition No. 2563 of 2020

Category: Detention of Goods – E-Way Bill / Penalty

Date of Judgment: 11 November 2020

Relevant Sections: Section 129, 107, 68 of CGST/TGST Act; Rule 138A, Circulars dated 13.04.2018 & 14.09.2018

Facts of the Case [¶1–9, ¶16–33]

1. The petitioner, a registered dealer in steel goods in Secunderabad, purchased goods from SAIL, Tamil Nadu, which were transported to Secunderabad.
2. While en route, the goods vehicle was detained on 22.01.2020 at Jeedimetla by the respondent who issued a detention order in Form GST MOV-06, citing a “defect” in documents and a “mismatch” in destination (IDA Jeedimetla vs. Distillery Road, Secunderabad) [¶4].
3. Petitioner replied on 23.01.2020 stating that Jeedimetla was a temporary assembly point and the driver awaited directions from SAIL to proceed [¶5].
4. Despite valid documents (invoice and e-way bill valid from 21–27 Jan), the vehicle was released only on 25.01.2020 after forced payment of ₹9.40 lakh (tax and penalty) under protest [¶7–8].
5. No formal reasoned order was passed by the respondent, nor was the petitioner’s reply considered [¶9, ¶36–37].
6. Respondent claimed the driver never mentioned Secunderabad as the destination, and that subsequent generation of an e-way bill to Nanabhai Steels in Jeedimetla suggested delivery intent there [¶17–21].

Question(s) in Consideration [¶34, ¶50]

1. Whether the detention of the vehicle and demand for tax and penalty was justified when the goods were accompanied by valid documents.
2. Whether the movement of goods to a temporary stop (Jeedimetla) could be construed as intent to evade tax under Section 129 of the Act.
3. Whether the payment of tax under protest and absence of a formal order violated principles of natural justice and statutory provisions.

Observations of the Court [¶35–69]

1. No formal adjudication or order was passed under Section 129(3), hence appellate remedy under Section 107 was not tenable [¶36–38].
2. Circulars dated 13.04.2018 and 14.09.2018 mandate that minor errors or procedural deviations without intent to evade tax should not trigger Section 129 proceedings [¶47–49].
3. No evidence was presented to show that petitioner intended to sell goods at Jeedimetla or evade tax [¶62–63].
4. Mere presence at Jeedimetla (a temporary stop) cannot be treated as an offence under CGST/TGST Acts or the Rules, or as a taxable event [¶59–61].
5. The explanation that Jeedimetla was a temporary regrouping point was plausible and supported by practice among SAIL vendors [¶56].
6. The driver’s forced statement and lack of language understanding further discredited the detention [¶57, ¶27].
7. Post-release e-way bill to Nanabhai Steels was for job work, not sale, and not a basis for penalty [¶67–68].
8. Citing Dabur India Ltd. v. State of UP, coercive tax recovery is impermissible and arbitrary [¶65].

Judgment of the Court [¶70]

• The detention and collection of ₹9,40,618 (tax and penalty) was declared illegal, arbitrary, and in violation of Articles 14, 265, and 301 of the Constitution as well as CGST/TGST provisions.
• Respondent was directed to refund the amount within six weeks with interest @7% p.a. from 25.01.2020 till payment.

Between Fine Lines

• Goods cannot be detained merely for being at a temporary stop if accompanied by valid e-way bill and invoice.
• The absence of adjudicatory order vitiates the penalty proceedings.
• Minor procedural deviations do not imply tax evasion.
• Forced payments under protest, especially without cause, are violative of constitutional rights.
• Refunds are warranted when tax is collected contrary to prescribed rules and circulars.

Summary of Referred Cases