Facts of the Case:
The petitioner had placed an order for supply of M.S. Scrap to its customer M/s Maa Sharda Enterprises. The goods were being transported from West Bengal to Mughalsarai, Uttar Pradesh. During transit, the goods were intercepted by the GST authorities. At the time of interception, the driver produced all relevant documents, including E-tax invoice, E-way bill, Builty (lorry receipt).
Despite this, the goods were detained and seized on the allegation of misclassification of goods, and penalty proceedings were initiated under Section 129 of the CGST Act, 2017 / UPGST Act, 2017.
The petitioner contended that there was no discrepancy in quality or quantity of goods and that detention merely on the ground of alleged misclassification was unlawful.
Issue:
Whether goods can be detained, seized, and penalty imposed under Section 129 of the GST Acts solely on the ground of alleged misclassification of goods, despite all valid documents (invoice, e-way bill, and builty) being produced at the time of interception?
Held that:
The Allahabad High Court allowed the writ petition in favour of the assessee and quashed the detention and penalty orders.
The Court observed that the penalty in the present case was imposed solely on the ground of misclassification of goods. There was no dispute regarding the quality or quantity of the goods, and all requisite documents (e-invoice, e-way bill, builty) accompanied the goods at the time of detention.
The Court relied on its earlier ruling in Tirupati Agro Commodities v. State of U.P (Allahabad), where it was categorically held that penalty under Section 129 cannot be imposed on mere speculation of undervaluation or misclassification.
Since detention was not on account of any defect in documents or discrepancy in goods but only on classification dispute, the impugned orders of detention and penalty were quashed.
The Court ordered that any amount deposited by the petitioner was directed to be refunded in accordance with law.
Case Name: Maa Tara Enterprises v. State of U.P. dated 13.08.2025
To read the complete judgment 2025 Taxo.online 1888
