The Allahabad High Court has quashed a penalty of ₹18,15,902 imposed under Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 after finding that the GST department failed to consider the appearance of the person claiming ownership of the detained goods and the documents produced by him.
The Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary directed the authority to reconsider the documents submitted by the alleged owner, including the e-way bill, e-tax invoice and bilty, in accordance with law.
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The Court also directed the authority to take into account the clarification contained at Serial No. 6 of CBIC Circular No. 76/50/2018-GST dated December 31, 2018 while determining the ownership of the goods for proceedings under Section 129.
The dispute arose from the detention of a vehicle bearing registration number UP53DT1358 carrying 14,130 kilograms of old battery scrap.
According to the petitioners, the consignment was covered by Tax Invoice No. SSB/26-27/857 dated August 11, 2026 and E-Way Bill No. 8017 2550 6804.
The GST authorities detained the goods and the vehicle on August 14, 2026 and issued an order in Form GST MOV-06. A notice in Form GST MOV-07 read with Form GST DRC-01 was also issued on the same date.
The proceedings were initiated by treating the case as one falling under Section 129(1)(b) of the UPGST Act. That provision deals with the release of detained goods and conveyances where the owner of the goods does not come forward for payment of the applicable penalty.
The petitioners initially approached the High Court to challenge the detention order and the show-cause notice.
During the pendency of the writ petition, the GST authority passed a final order in Form GST MOV-09 on August 20, 2026 under Section 129(3) of the Act, imposing a penalty of ₹18,15,902.
The petitioners consequently challenged the penalty order as arbitrary, non-speaking, unreasoned and contrary to Section 129(1). They alleged that it had been passed without proper application of mind and in violation of the constitutional protections under Articles 14 and 19(1)(g).
They also sought the immediate release of the vehicle and the old battery scrap without the requirement of furnishing any further tax, penalty or security.
The principal contention raised before the High Court was that petitioner No. 2 had personally appeared before the GST authority and had expressly claimed ownership of the goods.
Despite his appearance, the authority allegedly neither recorded his submissions nor considered the documents produced by him. Those documents included the e-way bill, e-tax invoice and bilty relating to the detained consignment.
The petitioners argued that the entire sequence—from the detention of the goods and issuance of the notice to the passing of the final penalty order—was arbitrary and unsupported by law because the claim of ownership and the supporting transportation documents had been disregarded.
The State authorities defended the proceedings and relied upon the penalty order dated August 20, 2026.
After examining the detention notice, the subsequent show-cause notice and the final penalty order, the High Court found that the authorities had proceeded without considering that the alleged owner had appeared before them and produced the relevant documents.
The Bench observed, “Since the owner has appeared and produced the e-way bill, e-tax invoice and bilty, the same ought to be considered by the authority in accordance with law.”
The Court consequently quashed and set aside the impugned penalty order. It directed the concerned authority to consider the documents produced by petitioner No. 2, who claimed to be the owner of the goods, and decide the matter in accordance with law.
The High Court directed the authority to keep in mind Serial No. 6 of CBIC Circular No. 76/50/2018-GST dated December 31, 2018.
The circular clarifies the expression “owner of the goods” for determining the applicable penalty under Section 129. It states that where an invoice or another specified document accompanying the goods identifies a person as the owner, that person should be treated as having come forward to make payment under Section 129(1)(a).
Where such documents do not identify the owner, the matter may be treated under Section 129(1)(b), which applies when the owner does not come forward.
The petitioners had specifically sought a declaration that petitioner No. 2, being the owner and consignor who generated the tax invoice and e-way bill accompanying the consignment, was required to be treated as the owner for the purposes of Section 129.
Although the High Court did not itself finally determine that question, it directed the GST authority to reconsider the claim of ownership by examining the documents and applying the CBIC circular.
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