Penalty under GST quashed as High Court held that presentation of valid invoice rules out applicability of Section 129(1)(b) meant for non-owners

Case Details

• Case Title: M. A. Traders and 7 Others v. State of U.P. and Another

• Court: High Court of Judicature at Allahabad, Court No. 3

• Petition No.: Writ Tax No. 3002 of 2025

• Judgment Date: 9 July 2025

• Category of Dispute: Penalty under Section 129 – Detention of Goods in Transit

• Relevant Sections: Sections 129(1)(a), 129(1)(b), 129(3), 161 of the UP GST Act, 2017 (parallel provisions under CGST Act also applicable)

Facts (Para 1–3)

The petitioners challenged an order dated 30.05.2025 passed under Section 129(3) of the UP GST Act imposing penalty on goods detained in transit, along with a rectification order dated 05.06.2025 passed under Section 161. The goods and vehicle had been seized under Section 129(1)(a). The Assistant Commissioner imposed penalty under Section 129(1)(b) treating the petitioners as “not being owners of goods,” even though a valid tax invoice was presented at the time of interception.

Questions / Dispute (Para 2–3)

The core question was whether penalty under Section 129(1)(b), which applies to transporters or non-owners of goods, could be imposed despite the petitioners producing the tax invoice showing ownership of goods.

Observations (Para 3–5)

The Court noted that the penalty was incorrectly imposed under Section 129(1)(b). It relied on the precedent laid down in M/s Halder Enterprises v. State of U.P. [2024 (2) ADJ 660 (DB)], where the Court had clarified that once the owner produces a valid invoice, penalty should be considered only under Section 129(1)(a). The department’s circular explaining the distinction between Section 129(1)(a) (owners) and Section 129(1)(b) (non-owners) was also considered.

Thus, since the invoice was presented in this case, the imposition of penalty under Section 129(1)(b) was held erroneous.

Judgment (Para 6–7)

The High Court quashed the penalty order dated 30.05.2025 and directed the authority to grant an opportunity of hearing to the petitioners and pass a fresh, reasoned order in line with the ratio in Halder Enterprises within eight weeks. The writ petition was accordingly disposed of.

Table of Cases Referred

Between Fine Lines

For businesses, this judgment reinforces that if a valid GST invoice accompanies goods in transit, authorities cannot arbitrarily impose penalty under Section 129(1)(b) by treating the dealer as a non-owner. Proper documentation ensures protection against wrongful detention and penalties.

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