In a recent judgment, the Karnataka High Court addressed the issue of whether minor discrepancies in transport documents can justify detention or penalties under Section 129 of the CGST Act without evidence of tax evasion. The case involved M/S. Bagalkot Nirmithi Kendra, whose goods were intercepted due to a minor mismatch in the description of goods between the invoice and physical verification. Despite all other statutory documents being in order, the authorities imposed tax and penalties, which were upheld by the appellate authority without any finding of intent to evade tax.
The petitioner argued that the discrepancy was a clerical error that did not impact the classification or taxability of the goods, nor did it indicate an attempt to evade taxes. The issue before the court was whether such a minor descriptive variation could justify proceedings under Section 129 when there was no evidence of tax evasion.
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The High Court ruled that a minor mismatch in description, which does not affect the classification, valuation, or tax liability, cannot justify detention or penalties under Section 129. It noted the absence of any findings of deliberate misdeclaration or intent to evade tax, which are necessary for such actions. Consequently, the court found the seizure and penalty proceedings to be without jurisdiction, setting aside the penalty and appellate orders as unsustainable. The court also ordered the refund of any amounts deposited by the petitioner in connection with the case.
Parties: M/s. Bagalkot Nirmithi Kendra vs. Union of India and others
Order Date: November 25, 2025
Facts
- The petitioner’s goods were intercepted solely on the allegation that the description of the goods in the invoice did not perfectly match the description noted during physical verification, even though all other statutory documents were valid.
- There was no discrepancy in the quantity, value, destination, tax rate, or e-way bill particulars, and the goods were accompanied by a proper invoice and e-way bill.
- The authorities nevertheless passed an order under Section 129(3) imposing tax and penalty, and the appellate authority affirmed the same without recording any finding of intent to evade.
- The petitioner contended that the mismatch was a clerical variation that did not affect classification or taxability and did not suggest any attempt at evasion.
Issue
- Whether a minor descriptive variation in the invoice, without any finding of intent to evade tax, can justify proceedings under Section 129 of the CGST Act?
Order
- The Court held that a minor mismatch in description that does not affect classification, valuation, or tax liability cannot attract detention or penalty under Section 129.
- It found that the authorities had not recorded any finding of deliberate misdeclaration or intent to evade tax, which is a mandatory prerequisite for action under Section 129.
- The Court observed that all essential documents were valid and consistent, and therefore the seizure and penalty proceedings lacked jurisdiction.
- The penalty order and the appellate order were set aside as unsustainable in law, and the detention was held to be illegal. The Court directed that any amount deposited by the petitioner be refunded in accordance with law.
