Applicability of Section 129
Section 129 of the CGST Act, 2017 deals with detention and seizure of goods and conveyance in transit. It is applicable if the following activities are performed in contravention of the Act or the rules made thereunder:
- transportation of goods; or
- storage of goods while in transit.
Quantum of Penalty
With effect from 01.01.2022, penalty under Section 129 ibid is as follows:
- where the owner of the goods agrees to pays the penalty:
- 200% of tax payable on such goods;
- 2% of value of such goods (or) ₹ 50,000, whichever is less (in case of exempt goods).
- where the owner of the goods does not agree to pays the penalty:
- 50% of value of such goods (or) 200% of tax payable on such goods, whichever is higher;
- 5% of value of such goods (or) ₹ 50,000, whichever is less (in case of exempt goods).
Mens rea - Required or not?
It is important to note that Section 129 ibid does not impose the existence of mens rea, viz., intent to evade tax, as a condition to impose penalty. This has been watered-down, to an extent, with the issue of Circular No.64/38/2018-GST dated 14.09.2018, which specifies minimum penalty for minor offences. Yet, roving squad officers have been imposing the maximum penalty for any violation under Section 129 ibid. Therefore, the judiciary has come to the rescue of innocent taxpayers from the clutches of Section 129 ibid.
Does non-updation of replacement vehicle no. in EWB warrant maximum penalty?
[Order of the High Court of Gujarat dated June 14, 2024 from R/Special Civil Application No. 1487 of 2020 in Landmark Cars Private Limited v. Union of India]
The petitioner had moved goods under the cover of an E-Way Bill (EWB). The conveyance broke down and a replacement conveyance was arranged. However, Part-B of the E-Way Bill was not updated. The goods were consequently detained and maximum penalty was imposed.
It was held that the discrepancy was minor as per Circular No.64 specified above since there was no intent to evade taxes.
