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Detention of Goods under the CGST Act – Striking a Balance Between Compliance and Fairness


The Electronic Way Bill (E-way bill), which is intended to prevent tax evasion and ensure transparency in the movement of products, has become an integral component of the products and Services Tax (GST) system. Nevertheless, numerous legal complexities have emerged due to the rigorous regulations pertaining to E-way invoices, specifically concerning detention and seizure as outlined in Section 129 of the Central Goods and Services Tax (CGST) Act. This article conducts an examination of the complex legal framework pertaining to the E-way bill violations and the subsequent detention orders under the GST. It provides an analysis of pertinent judicial precedents and regulatory guidance in this regard.

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E-way Bill: A Digital Trail for Every Ton

Rule 138 of the CGST Rules, 2017 stipulates that “information shall be provided prior to the initiation of goods movement” and “shall be issued regardless of whether the movement pertains to a supply or other motives.”[1] An electronic waybill, also known as an E-Way bill, serves as documentary proof of a transaction involving the transportation of products from one location to another, with a value exceeding Rs. 50,000. Since the implementation of the GST, this document has become obligatory to ensure the seamless transfer of products between locations.

The objective of an E-way measure is to monitor the transit of goods in an effort to prevent tax evasion. When the primary purpose of taxation is guaranteed and the obligation to pay taxes is not at issue, concerns regarding tax evasion are unfounded conjecture and an abuse of power.[2]  For every intra-state movement of goods exceeding a specific value threshold, this document becomes mandatory, capturing details like consignor and consignee information, type and value of goods, and vehicle details. The streamlined logistics enabled by its online generation and real-time tracking facilitate the expedited transportation of products across state borders.

In the pre-e-way bill era, corrupt traders frequently employed counterfeit or unverifiable bills as a means to elude tax obligations. The electronic system functions as a  deterrent, rendering the transportation of goods without appropriate documentation virtually unattainable. Revenue authorities are able to monitor and intervene in cases of discrepancy due to the real-time monitoring, which reduces tax evasion and increases government revenue. Indeed, the tax invoice and the E-way Bill accurately document the particulars of the transported goods as well as the tax that is owed and must be remitted on said supplies. Consequently, while the validity of the E-way measure is significant, a procedural lapse does not provide sufficient grounds to infer an intention to evade taxes.[3] The failure to update the validity of the e-waybill is a mere procedural noncompliance and bona fide mistake on part of the Transporter.[4]

Grounds for Detention: Beyond Mere Lapses

Section 129 empowers proper officers to detain goods and conveyances in transit under specific circumstances.[5] The primary justification rests on suspicion of taxable supply without GST payment, coupled with an intent to evade tax. This necessitates clear evidence of both elements, not just a procedural misstep. Mere technical errors in the e-way bill, such as exceeding validity periods or minor discrepancies in vehicle details, cannot automatically trigger detention, especially in the absence of any indication of tax evasion. 

Recognizing this crucial distinction, High Courts across India have emphasized the principles of proportionality and due process in applying Section 129. In the landmark case of M/s Indus Towers Limited v. Assistant State Tax Officer (Intelligence), the Kerala High Court held that invocation of Section 129 requires the presence of elements justifying confiscation under Section 130.[6] Mere procedural infractions, without intent to evade tax, cannot warrant detention, highlighting the need for a balanced approach. A combined reading of Sections 129 and 130, especially the provision contained in sub section (6) of Section 129 indicates that the detention of the goods is contemplated under the statutes only when it is suspected that the goods are liable to confiscation. Section 130 dealing with the confiscation of goods indicates beyond doubt that the confiscation of goods is contemplated under the statutes only when a taxable supply is made otherwise than in accordance with the provisions contained in the statutes and the Rules made thereunder with the intent to evade payment of tax. If that be so, mere infraction of the procedural Rules like Rules 55 and 138 of the State GST Rules[7] cannot result in detention of goods, though they may result in imposition of penalty.[8]

If the detention or seizure under section 129(1) of the CGST Act and issuance of demand under section 129(3) in absence of proof that there was an intention to evade payment of tax is without the authority of law. Given this, where there is no intention to evade tax no penalty can be imposed under section 129 of the CGST Act and penalty (if any) can be imposed only under the provisions of section 122(xiv) or section 125 of the CGST Act,[9] which provide for Rs. 10,000/- and Rs. 25,000/- as penalty, respectively.[10]

Similarly, in VSL Alloys (India) Pvt. Ltd. vs. State of UP and Ors[11]., the Allahabad High Court quashed a seizure order based on a missing vehicle number in the e-way bill. They asserted that when all other documents are present and reflect no attempt to conceal facts or evade taxes, such minor lapse cannot justify such drastic action. These precedents remind us that the power under Section 129 is not a carte blanche for arbitrary detentions but a tool to be wielded with restraint and due consideration. the error can be construed as a bona fide mistake with neither any intention to conceal facts nor as an attempt to evade the payment of taxes. Errors of not extending the validity of the e-waybill is trivial in nature and has no tax consequence.

Taxpayers navigating this landscape need to understand the procedures surrounding detention. When confronted with a detention order, they have the right to demand a written explanation for the grounds and access copies of relevant documents. Additionally, a crucial safeguard is the provision for a hearing within seven days, where they can present their case to the officer seeking release of the goods. If dissatisfied with the outcome, they can appeal to the adjudicating authority and pursue further legal remedies, if necessary.

While upholding compliance with the e-way bill system is crucial for curbing tax evasion, it’s equally important to protect genuine businesses from undue hardship caused by inadvertent procedural errors. High Courts, by stressing due process and proportionality, are ensuring that the

power under Section 129 is not misused. This creates a much-needed equilibrium between enforcing compliance and safeguarding the rights of taxpayers.

Regulatory Guidance and Perspectives:

CBIC Flyer and E-way Bill Manual:

The article references the Central Board of Indirect Taxes and Customs (CBIC) flyer and E-way Bill Manual to highlight the intended purpose of E-way bills. Both sources emphasize the goal of preventing tax evasion and ensuring compliance with the GST law, underscoring that the primary objective is not to harass genuine taxpayers.

Principle of Mens Rea in Penalty Proceedings:

The penalty provided under section 129(1) of the CGST Act is governed by the principle of mens rea / culpable mental health. In other words, penalty cannot be levied merely because it is lawful to do so, in the absence of finding as to malicious/ wilful default.

Validity Period and Extension:

CBIC guidelines regarding the validity period of E-Way Bills and the process of extending the validity are examined. Understanding these guidelines is crucial for businesses to avoid disruptions in the movement of goods. By adhering to CBIC guidelines, businesses can navigate compliance complexities, enhance operational efficiency, and contribute to the overarching goals of transparency and tax accountability set by the GST regime.


This article navigates through the complexities of the detention of goods under the CGST Act, dissecting the thin line between procedural lapses and intentional tax evasion. Through an in-depth analysis of judicial precedents, legislative intent, and regulatory guidance, it aims to provide a nuanced understanding of how the law should balance the need for compliance with the necessity of proving an intent to evade taxes. As businesses strive to meet GST obligations, clarity on these issues becomes paramount for both taxpayers and the enforcing authorities.

In conclusion, the power to detain under Section 129 of the CGST Act, while essential for combating tax evasion, should not be wielded at the cost of fair and proportionate action. As High Courts increasingly emphasize due process and proportionality, taxpayers gain much-needed protection from arbitrary detentions triggered by mere procedural pitfalls. By striking a balance between compliance and fairness, we can ensure that the e-way bill system facilitates seamless movement of goods while safeguarding the rights of genuine businesses.

Written by : Shailja Mantri, 3rd year student of Institute of Law, Nirma University

[1] The CGST Rule, 2017, Rule 38, No. 12, Acts of Parliament (2017).

[2] Hindustan Steels Limited v. State of Orissa, (1978) (2) E.L.T.

[3] M/s. Satyam Shivam Papers Pvt Ltd v. Asst. Commissioner ST, (2022) 2 SCC 430.

[4] Shah Precicast Pvt. Ltd. v. Commissioner Of Cus. (Import), Nhava Sheva, (2019) (369) E.L.T.

[5] The CGST Act, 2017, § 29, No. 12, Acts of Parliament (2017).

[6] The CGST Act, 2017, § 30, No. 12, Acts of Parliament (2017).

[7] The State GST Rules, 2017, Rule 55& 138, No. 12, Acts of Parliament (2017).

[8] M/s Indus Towers Limited v. Assistant State Tax Officer (Intelligence), (2018) (01) LCX 0010.

[9] The CGST Act, 2017, § 125, No. 12, Acts of Parliament (2017).

[10]M/S Sri Gopikrishna Infrastructure Pvt. Ltd. v. THE The State of Tripura & ors. (2021) (1) TMI 489.

[11] VSL Alloys (India) Pvt. Ltd. vs. State of UP and Ors, (2018) 67 GST 688.




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