Validity of Detention & Penalty under Section 129 – Recent High Court Trends

The Goods and Services Tax (GST) regime mandates strict compliance in the movement of goods to curb tax evasion.

One of the key enforcement provisions in this regard is Section 129 of the Central Goods and Services Tax Act, 2017, which deals with detention, seizure, and release of goods and conveyances in transit.

However, in practice, numerous disputes have arisen concerning the validity of detention, the imposition of penalty, and whether minor procedural lapses justify such harsh measures.

Legal Framework

Section 129 empowers the proper officer to detain or seize goods and the conveyance carrying them if they are transported in contravention of GST law, such as:

• Without valid tax invoice or e-way bill, or

• With incorrect or mismatched documentation.

Such detention is meant to secure payment of tax and penalty in different situations which are as follows-

Common Scenarios Where Detention Declared Invalid

• Minor e-way bill mistakes

• Expired e-way bill due to genuine circumstances

• Failure to update a vehicle change

• Bonafide classification disputes

• Goods Transported for Job Work or Branch Transfer

• Detention Without Jurisdiction / by Wrong Officer

The object of the legislature in levying a severe penalty is to provide deterrence against tax evasion and to put a stop to a practice, which the legislature considers to be against the public interest. The object of the legislature in enacting a penalty provision is not to provide for punishment under criminal law but to provide a penalty for concealment of income and that too by providing a deterrent penalty.

Section 129 serves as a deterrent against evasion, but its purpose is not punitive. Judicial precedents clearly emphasize that detention and penalty must be based on substantive contravention with intent to evade, not on mere procedural errors.

Accordingly, the applicability of Section 129 would only be in respect of a “substantial contravention and which may have resulted in a loss of tax revenue”.

Every contravention, even if it be minor or technical in character, would not justify the imposition of a penalty under Section 129.

Some of the recent significant decisions of various High Courts are as follows—

• The Allahabad High Court set aside the penalty and tax imposed under Section 129(3) of the GST Act due to a minor clerical mistake in the e-way bill. The court held that a mere human error, without intent to evade tax, does not justify penalty proceedings. Relying on past judgments, it ruled that the e-way bill’s purpose is to track goods movement, not penalize minor discrepancies. [2025] 81 TAXLOK.COM 059 (Allahabad)

• The Allahabad High Court quashed the penalty imposed under Section 129 of the GST Act for the absence of an e-tax invoice during transit. The court held that if the deficiency is rectified before the detention order, no penalty can be imposed. Since there was no intent to evade tax and all valid documents are produced, the proceedings are unjustified. [2025] 81 TAXLOK.COM 061 (Allahabad)

• The High Court quashed the seizure and penalty imposed on the petitioner for transporting goods with an expired e-way bill, ruling that there was no intent to evade tax. The petitioner’s goods were intra-state stock transfers and the delay occurred due to the driver’s emergency. Since tax evasion is not established, invoking Section 129 is unjustified. The Court directed a refund of any amount deposited by the petitioner. [2025] 81 TAXLOK.COM 105 (Allahabad)

• The High Court quashed the demands raised under Section 129 of the CGST Act, holding that the detention and penal levy for incomplete E-way Bills lacked basis when the discrepancies were rectified promptly. The Court emphasized that minor procedural lapses without fraudulent intent should not attract excessive penalties. [2025] 80 TAXLOK.COM 043 (Delhi)

• The Calcutta High Court addressed a penalty imposed under Section 129(1) of the GST Act. The appellants were penalized for incomplete details on an e-way bill, despite no evidence of tax evasion. The court observed that the e-way bill was correctly generated and the omission reflected a trade practice to protect supplier details. It held that Section 129 could not be invoked in such circumstances, directing a refund of the penalty. [2025] 80 TAXLOK.COM 061 (Calcutta)

• The High Court quashed the penalty imposed under Section 129 of the GST Act, ruling that the e-way bill produced before passing the seizure order cured any discrepancy. The absence of intent to evade tax is emphasized. [2025] 80 TAXLOK.COM 075 (Allahabad)

• The Allahabad High Court quashed a penalty imposed under Section 129(3) CGST Act where goods were detained for carrying a photocopy of the invoice instead of the original. As the e-way bill and invoice copy matched and no tax evasion intent was found, the penalty and detention orders are declared arbitrary and unsustainable in law. [2025] 82 TAXLOK.COM 112 (Allahabad)

• The Allahabad High Court quashed penalty and seizure orders passed under Section 129 of the CGST Act for transportation of a compactor machine between petitioner’s own offices. It held that no sale or tax evasion is involved. Once documents like e-way bill and challan are submitted, proceedings under Section 129 are unjustified. The Court directed refund of the deposited penalty with interest within a stipulated time. [2025] 83 TAXLOK.COM 037 (Allahabad)

• The Calcutta High Court set aside the penalty imposed under Section 129 of the GST Act, ruling that non-carrying of a physical tax invoice does not constitute evasion if electronic evidence exists and mere deviation from the declared route is not sufficient to invoke penal action. The Court emphasized that absence of tax evasion intent nullifies proceedings under Section 129. [2025] 83 TAXLOK.COM 079 (Calcutta)

• Allahabad High Court quashed penalty orders passed under Section 129 of the GST Act for non-mention of transporter’s name in the e-way bill. The Court held that movement of goods within Delhi with valid invoices and absence of tax evasion intention cannot attract penalty under Section 129. [2025] 86 TAXLOK.COM 197 (Allahabad)

• Goods in transit under a valid e-way bill were delayed due to vehicle breakdown, leading to expiry before delivery. The assessee generated a new e-way bill before penalty order under Section 129(3). The Court held expiry alone doesn’t indicate tax evasion intent and quashed the penalty, following Satyam Shivam Papers and similar rulings. [2025] 89 TAXLOK.COM 008 (Allahabad)

The consistent judicial approach is that Section 129 cannot be used as a tool for punitive action in the absence of tax evasion.

Minor clerical lapses, genuine delays, or technical glitches do not justify detention or penalty. The focus must remain on substance over form — i.e., whether tax was actually evaded.