Detention of Goods due to E-Way Bill Errors – Legal Remedies

Section 68 of the CGST Act read with rule 138A of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as ‘the CGST Rules’) requires that the person in charge of a conveyance carrying any consignment of goods of value exceeding Rs.50,000/- should carry a copy of documents viz., invoice/bill of supply/delivery challan/bill of entry and a valid E-way bill in physical or electronic form for verification.

Section 129 of the CGST Act provides for detention and seizure of goods and conveyances and their release on the payment of requisite tax and penalty in cases where such goods are transported in contravention of the provisions of the CGST Act or the rules made thereunder.

It has been informed that proceedings under section 129 of the CGST Act are being initiated for every mistake in the documents.

Types of Errors in E-Way Bills & Their Implications

Not all errors are treated equally. The jurisprudence distinguishes between major non-compliance (inviting detention and penalty) and minor/technical errors (entitling to leniency).

(a) Major Errors/ Non-Compliance

• No E-Way Bill generated when required.

• E-Way Bill invalid or expired.

• Goods moved not as per the description in the EWB (mismatch of goods).

• Tax unpaid or documents wholly missing.

In such cases, detention/seizure under Section 129 is clearly sustainable and heavy penalties may follow.

(b) Minor/Typographical/Clerical Errors

• Spelling mistakes in consignor/consignee name (GSTIN correct).

• Incorrect PIN code but locality otherwise correct (and validity period unaffected).

• Slight error in document number or vehicle number (one or two digits).

• HSN code wrong at 4 or 6 digit level but first 2 digits correct and tax rate correct.

As per Circular No. 64/38/2018, in case a consignment of goods is accompanied with an invoice or any other specified document and also an E-way bill, proceedings under section 129 of the CGST Act may not be initiated, inter alia, in the following situations:

1. Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is correct;

2. Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the E-way bill;

3. Error in the address of the consignee to the extent that the locality and other details of the consignee are correct;

4. Error in one or two digits of the document number mentioned in the E-way bill;

5. Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned is correct;

6. Error in one or two digits/characters of the vehicle number.

In case of the above situations, penalty to the tune of Rs.500/- each under section 125 of the CGST Act and the respective State GST Act should be imposed (Rs.1000/- under the IGST Act) in FORM GST DRC-07 for every consignment.

Legal Remedies when Goods are detained Due to E-Way Bill Errors

When goods are detained, the affected party (owner/consignor/consignee/transporter) has several remedies:

(i) Respond at the Detention Stage

When goods are detained, the officer issues a detention memo (often Form MOV-06 or MOV-07). Recognize the grounds listed and respond promptly with documents (invoice, EWB, transporter’s bill, proof of tax payment).

If the error is minor (as per Circular 64/38/2018) and no tax evasion is alleged, argue for release of goods without heavy penalty or seizure.

(ii) Application for Release & Appeal

You can apply for release of goods by paying the required tax/penalty under Section 129, or by contesting the detention if improper.

If unsatisfied, you can file an appeal to the Appellate Authority (as per Section 107 CGST Act) against the detention/seizure order or penalty.

In suitable cases, you may file a Writ Petition before the High Court challenging the detention/seizure on grounds of arbitrary action, breach of natural justice, or absence of mens rea (intent).

(iii) Refund of Deposited Amount

If you challenged and succeeded in contesting the detention/penalty, you may get a refund of amounts paid.

(iv)Preventive/ Compliance Measures

• Maintain accurate record and generate EWB timely.

• When errors occur, correct if allowed (cancellation/re-generation if within time limit) or document the reasons.

• If detained, keep records of all correspondence, facts (technical glitch, minor error) and evidence of tax payment.

• Involve transporter agreements to allocate risk of EWB errors.

Relevant Case Laws Illustrating the Distinction

1. In case of Falguni steels v/s State of U.P. and Others [2024] 68 TAXLOK.COM 111 (Allahabad), although the petitioner failed to generate the E-way bill on time, the Tax Invoices issued contained all the relevant details including the detail of the vehicle transporting the goods. ALLAHABAD HIGH COURT directed the Respondent to refund the amount of tax and penalty deposited by the petitioner.

2. In M/s Hindustan Herbal Cosmetics v. State of U.P. and Others (Writ Tax No.1400 of 2019 decided on January 2, 2024) [2024] 68 TAXLOK.COM 010 (Allahabad), the court held that mens rea to Evade tax is essential for imposition of penalty. The factual aspect in the present case clearly does not indicate any mens rea whatsoever for Evasion of tax.

3. The main issue was the imposition of tax and penalty for transporting goods without a valid e-way bill after a vehicle breakdown necessitated transferring goods to another vehicle. The court found that there was no intent to evade tax, and the transporter could not amend the e-way bill during midnight hours. Consequently, the court ruled that the tax and penalty imposed by the authorities were unjustified and ordered a refund within 12 weeks. [2024] 71 TAXLOK.COM 250 (Calcutta)

4. In absence of any intention on the part of the petitioner to either contravene the provisions of the CGST Act or avoid / evade payment of tax and on account of non-extension of the validity of the e-way bill by the petitioner due to breakdown of the vehicle, no presumption or inference can be drawn against the petitioner as regards its intent to avoid / evade payment of tax. This court deem it just and proper to invoke Section 125 of CGST Act and impose maximum penalty of Rs. 25,000/- on the petitioner. [2024] 70 TAXLOK.COM 258 (Karnataka)

5. The offence in this case is only the lapsing of e-way bill, and that too for bonafide reasons, and this offence may not be viewed very harshly. [2020] 20 TAXLOK.COM 052 (Madras)

6. There was no material before the 2nd respondent to come to the conclusion that there was evasion of tax by the petitioner merely on account of lapsing of time mentioned in the e-way bill. On account of non-extension of the validity of the e-way bill by petitioner or the auto trolley driver, no presumption can be drawn that there was an intention to evade tax. [2021] 37 TAXLOK.COM 002 (Telangana)

While GST has streamlined the indirect tax regime, compliance during goods movement remains a critical and sensitive area. Businesses must proactively ensure correct documentation and procedural adherence to avoid punitive actions under Section 129.

Judicial interpretations have shown a balanced approach, emphasizing the need for proportionality and intent in enforcement actions.