Transporter vs. Tax Authority: Can a Transporter Claim Release of Detained Goods Under GST

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Case Name

TCI Freight (A Div. of Transport Corporation of India Ltd.) & Others vs. The Assistant Commissioner (ST) & Others

Court Name : High Court of Judicature at Madras

Case No.: WP.Nos. 18753, 20794 & 21690 of 2022

Decision on: 25th August 2022

Key Takeaways

1. Transporters cannot seek release of detained goods — only the owner of the goods (or their agent/representative) has the right to seek release of detained goods under Section 129(1) of the CGST/TNGST Act, 2017.

2. Transporters can only seek release of the conveyance (vehicle) — and that too, only upon payment of penalty or ₹1,00,000/-, whichever is less, as per the proviso to Section 129(6).

3. The phrase “person transporting the goods” in Sections 129(1) and (6) refers to the owner or their agent who contracted to supply the goods — NOT the transporter who physically carries them.

4. Appellate authority has implied power to grant interim relief — even though Section 107 of the Act does not expressly grant the appellate authority the power to grant interim protection, the court held (relying on the Supreme Court precedent) that such power is incidental and necessary to appellate jurisdiction.

5. Pre-deposit of 25% does NOT automatically result in release of goods — paying the mandatory pre-deposit under Section 107(6) only stays recovery proceedings for the balance amount. The question of releasing the detained goods is a separate matter to be decided by the appellate authority.

6. Statutory appeal is the right remedy — petitioners in WP.Nos. 20794 and 21690 of 2022 were directed to file appeals under Section 107 of the Act.

Issue

1. Can a transporter seek release of detained goods (not just the conveyance) under Section 129 of the CGST/TNGST Act, 2017?

2. Does the appellate authority under Section 107 have the power to grant interim relief (such as release of detained goods) even though the section does not expressly provide for it?

3. Does payment of the 25% pre-deposit under Section 107(6) automatically entitle the appellant to release of detained goods?

Facts

WP.No.20794 of 2022 — M/s. Prime Gold International Limited

• The petitioner (Prime Gold) was supplying TMT bars from Hosur to a consignee’s work site in Trichy.
• An e-way bill had been generated and the goods were being transported with proper documents.
• On 11.07.2022, the State Tax Officer intercepted the consignment.
• The officer issued Form GST MOV-2, noting that the delivery address — 84, Egai Town Paganur Road, Manikandam, Trichy-620012 — did not have a corresponding GSTIN or trade name.
• An order of detention was passed on 12.07.2022 under Section 129(1) of the TNGST Act, 2017 read with the CGST Act, 2017.
• A penalty proposal followed, the petitioner responded with an explanation, but an order of demand of penalty in GST MOV-09 was passed on 19.07.2022.
• The petitioner filed this writ petition challenging that order.

WP.No.21690 of 2022 — M/s. Chennai SSSS Equipments Pvt. Ltd.

• The petitioner had transported an excavator (Tata Hitachi Ex 210-7693) from Chennai to a branch of its customer in Salem.
• The consignment was intercepted by the State Tax Officer on the ground that the accompanying documents were deficient.
• A show cause notice (SCN) was issued, the petitioner gave an explanation, but the authority passed an impugned order of penalty dated 05.08.2022.
• The petitioner challenged this order, arguing that the 200% penalty under Section 129(1)(a) of the CGST/TNGST Act, 2017 should not be insisted upon for release of the excavator.

WP.No.18753 of 2022 — TCI Freight (A Div. of Transport Corporation of India Ltd.)

• TCI Freight is a transporter (not the owner of the goods). It was engaged by an entity in Madras to transport carbon electrodes to a consignee in Assam.
• A third-party vehicle was used for transportation.
• On 26.06.2022, the State Tax Officer intercepted the consignment, alleging discrepancies in the e-way bill and other documents.
• The consignments were detained at Manjabakkam check post on 27.06.2022, and an order of detention was passed the same day along with a show cause notice.
• After considering the response, a penalty order was confirmed on 06.07.2022.
• Importantly, the owner of the goods did NOT respond to either the SCN or the penalty order.
• TCI Freight (the transporter) then filed this writ petition, arguing that it should be allowed to furnish a bank guarantee equivalent to the disputed penalty amount under Section 129(1)(C) to get the goods AND the conveyance released.

Arguments

🟦Petitioner’s Arguments (TCI Freight — WP.No.18753 of 2022)

• The transporter argued that Section 129(6) uses the phrase “person transporting any goods or the owner of such goods”, which means the transporter also has the right to seek release of detained goods — not just the owner.
• Therefore, the transporter should be allowed to furnish a bank guarantee under Section 129(1)© to secure the release of both the goods and the conveyance.

🟥

Revenue’s Arguments

• The Revenue argued that the proviso to Section 129(6) specifically states that the “conveyance shall be released on payment by the transporter of penalty under sub-section (3) or one lakh rupees, whichever is less.”
• This means the legislature consciously limited the transporter’s right to seek release — only to the conveyance, not the goods.

Key Legal Precedents

1. Income Tax Officer, Cannanore vs. M.K. Mohammed Kunhi [(1969) 71 ITR 815]

• This is a three-judge Supreme Court bench decision.
• The court in that case considered whether the Income Tax Appellate Tribunal (ITAT) had the power to grant interim stay, even though the statute did not expressly confer such power.
• The Supreme Court held that the ITAT, though not a court, exercises judicial powers of the widest amplitude, and therefore must be held to have the power to grant stay as it is incidental and necessary to its appellate jurisdiction.
• The Madras High Court applied this ratio to the present case, holding that the appellate authority under Section 107 of the CGST/TNGST Act similarly has the implied power to grant interim relief, including ordering release of detained goods.

Judgment

On the Key Issue (WP.No.18753 of 2022 — Transporter’s Rights):

• The court ruled against the transporter (TCI Freight).
• The court held that Section 129(1) addresses “any person transporting any goods or storing any goods” — but the phrase “person transporting the goods” in this context means the owner or their agent who contracted to supply the goods, NOT the physical transporter.
• The legislature was conscious of the different roles — consignor, consignee, agent, and transporter — and deliberately limited the transporter’s right to seek release only to the conveyance, not the goods.
• The transporter may seek release of the conveyance upon payment of penalty or ₹1,00,000/-, whichever is less (as per the proviso to Section 129(6)).
• As for the goods, if the owner does not come forward after receiving notices, the revenue is free to take such steps as it deems fit.

On the Appellate Remedy (All Three Petitions):

• All three petitioners agreed to file statutory appeals under Section 107 of the Act.
• The court directed that upon filing appeals with applications seeking interim release of goods, the appellate authority shall hear the petitioners and pass orders within one week.

On Pre-Deposit and Automatic Release:

• The court clarified that payment of 25% pre-deposit under Section 107(6) does NOT automatically result in release of detained goods.
• The question of release must be decided by the appellate authority based on prima facie case, financial stringency, and balance of convenience.

Special Note on WP.No.21690 of 2022:

• The petitioner (Chennai SSSS Equipments) stated willingness to furnish a bank guarantee under Section 129(1)© to the satisfaction of the authority. The court said it was at liberty to do so if it chose.

Final Order:

• All three writ petitions were disposed of in the above terms.
• No costs were awarded.

FAQs

Q1: What is Section 129 of the CGST/TNGST Act about?

Section 129 deals with the detention, seizure, and release of goods and conveyances in transit. If goods are being transported in violation of GST provisions, they can be detained and released only upon payment of penalty or furnishing of security.

Q2: Can a transporter get the detained goods released by paying penalty?

No! The court clearly held that a transporter cannot seek release of the goods. Only the owner of the goods or their agent/representative can do so. The transporter’s right is limited to seeking release of the conveyance (vehicle) only.

Q3: What can a transporter do to get the vehicle released?

The transporter can pay penalty under Section 129(3) or ₹1,00,000/-, whichever is less, as per the proviso to Section 129(6), to get the conveyance released.

Q4: What happens if the owner of the goods doesn’t respond to the notices?

If the owner does not come forward after receiving notices from the department, the revenue is free to take such steps as it deems fit regarding the goods — which could include selling or disposing of them.

Q5: Does paying the 25% pre-deposit automatically release the detained goods?

No. Paying the 25% pre-deposit under Section 107(6) only stays the recovery proceedings for the balance penalty amount. The release of detained goods is a separate question that the appellate authority must decide based on the merits of the case.

Q6: Does the appellate authority have the power to grant interim relief like releasing detained goods?

Yes! Even though Section 107 does not expressly grant this power, the court held — relying on the Supreme Court’s decision in Income Tax Officer, Cannanore vs. M.K. Mohammed Kunhi [(1969) 71 ITR 815] — that such power is incidental and necessary to the appellate authority’s jurisdiction.

Q7: What is the timeline for the appellate authority to decide on interim release?

The court directed that upon receipt of appeals and applications for interim release, the appellate authority must hear the petitioners and pass orders within one week.

Q8: What was the outcome for the other two petitioners (Prime Gold and Chennai SSSS Equipments)?

Both petitioners agreed to file statutory appeals under Section 107 of the Act. Chennai SSSS Equipments also expressed willingness to furnish a bank guarantee under Section 129(1)©, which the court permitted.

These writ petitions give rise to a common question. The petitioners in

WP.Nos.20794 and 21690 of 2022 are owners of consignments that had been

transported by road. In light of the decision taken finally in these matters, we are not concerned with the merits of the matter or the explanation that has been furnished by the petitioner. Peripheral facts, as relevant to decide the issue that arises, are alone recorded below.

Facts in WP.No.20794 of 2022

2. The petitioner had been engaged to supply TMT bars from Hosur at the

address of the consignee work site at Trichy. An e-way bill had been generated for the movement of goods and the goods were being transported accompanied by documents. The State Tax Officer had intercepted the consignment on 11.07.2022 and detained the same.

3. Form GST Mov-2 was issued on the ground that the address for delivery, 84,Egai Town Paganur Road, Manikandam, Trichy-620012 did not have a

corresponding GSTIN or trade name. Thereafter, an order of detention dated

12.07.2022 has been passed under Section 129(1) of the Tamil Nadu Goods and

Services Tax Act, 2017 (in short 'Act') read with Central Goods and Services Tax Act, 2017.

4. A proposal for levy of penalty followed, that the petitioner responded to, with an explanation. An order of demand of penalty in GST MOV-09 has come to be passed on 19.07.2022 as against which the present writ petition has been filed.

F acts in W P.No.21690 of 2020

5. The petitioner had transported an excavator from Chennai to the branch of

its customer, at Salem. The consignment was intercepted by the State Tax Officer on the ground that the documents accompanying the consignment were deficient. A show cause notice was issued and explanation called for from the petitioner that culminated in the impugned order of penalty dated 05.08.2022.

6. Both the petitioners as above, accede to the position that their explanations to the SCN touch upon the determination of various facts that would be best left to the appellate authority to decide. The provisions of Section 107 of the Act provides for an efficacious alternate remedy by way of an appeal to the appellate authority and hence the petitioners would agree that appeals would be filed challenging the impugned orders.

Facts in WP.No.18753 of 2022

7. The petitioner herein is the transporter of the consignee. The petitioner was engaged by an entity in Madras for transportation of carbon electrodes to the consignee in Assam. The services of a third party vehicle was engaged and the consignments transported. The said consignments were intercepted on 26.06.2022 by the State Tax Officer, who alleged discrepancies in the e-way bill and other documents.

8. The consignments have been detained at Manjabakkam check post on

27.06.2022. An order of detention has been passed on 27.06.2022 accompanied by a show cause notice calling for the petitioner's response. After consideration of the response, an order has come to be passed confirming the penalty on 06.07.2022. In the present case, the owner has responded neither to the show cause notice nor to the order levying penalty, both of which have been served upon it.

9. Thus, it falls upon the transporter to take appropriate action, at the least to safeguard the conveyance, in which the consignment had been transported. However, the transporter goes one step forward and argues that the provision of Section 129 of the Act, that deal with ‘detention, seizure and release of goods and conveyances in transit’, and permit the release of detained goods upon compliance with the conditions set out therein, would be equally applicable to it.

10. I will first decide the above issue, that arises only in WP.No.18753 of 2022 before passing a final consolidated set of directions that would be applicable to all petitioners. The provisions of Section 129 read as follows:

129. Detention, seizure and release of goods and conveyances in

transit.—

(1) Notwithstanding anything contained in this Act, where any

person transports any goods or stores any goods while they are in

transit in contravention of the provisions of this Act or the rules

made thereunder, all such goods and conveyance used as a means of

transport for carrying the said goods and documents relating to such

goods and conveyance shall be liable to detention or seizure and

after detention or seizure, shall be released,

(a) on payment of penalty equal to two hundred per cent. of the tax

payable on such goods and, in case of exempted goods, on payment

of an amount equal to two per cent. of the value of goods or twenty-

five thousand rupees, whichever is less, where the owner of the

goods comes forward for payment of such penalty;

(b) on payment of penalty equal to fifty per cent. of the value of the

goods or two hundred per cent. of the tax payable on such goods,

whichever is higher, and in case of exempted goods, on payment of

an amount equal to five per cent. of the value of goods or twenty-five

thousand rupees, whichever is less, where the owner of the goods

does not come forward for payment of such penalty;

(c) upon furnishing a security equivalent to the amount payable

under clause (a) or clause (b) in such form and manner as may be

prescribed:

11. The case of the petitioner is that the benefit granted to the owner of the goods to seek release of the detained goods on payment of penalty or furnishing of security, would be equally applicable to the case of a transporter as well. In this context, my attention is drawn to the provisions of Section 129(6) that deploys the phrase 'person transporting any goods or the owner of such goods' and reads thus:

'129.Detention, Seizure and release of goods and conveyances

in transit.

(6) Where the person transporting any goods or the owner of such

goods fails to pay the amount of penalty under sub-section (1) within

fifteen days from the date of receipt of the copy of the order passed under

sub-section (3), the goods or conveyance so detained or seized shall be

liable to be sold or disposed of otherwise, in such manner and within

such time as may be prescribed, to recover the penalty payable under

sub-section (3):

Provided that the conveyance shall be released on payment by the

transporter of penalty under sub-section (3) or one lakh rupees,

whichever is less:

Provided further that where the detained or seized goods are

perishable or hazardous in nature or are likely to depreciate in value

with passage of time, the said period of fifteen days may be reduced by

the proper officer.

Thus, learned counsel would argue that the statute permits not just the owner, but also the transporter, to seek release of the goods.

12. The stand of the revenue hinges upon the proviso to Section 129(6) which

states that the ‘conveyance’ shall be released on payment by the transporter of penalty or a sum of Rs.1,00,000/- whichever is less.

13. Upon a consideration of Section 129, read with other relevant provisions of the Act, I would agree with the revenue. Section 129(1) specifically addresses any person transporting any goods or storing any goods. This aligns with the use of the phraseology, ‘person transporting any goods or the owner of such goods’ that is used in sub-Section 6.

14. Thus, the entitlement to seek release under Section 129 is only qua the

owner/agent/representative of the owner. This interpretation is supported by the language used in the first proviso that specifically uses the term 'transporter' and states that such transporter may seek release of the conveyance on payment of penalty or of a sum of Rs.1,00,000/- whichever was less.

15. Thus, legislature has been conscious of the roles of the various persons

involved in a transaction of carriage of goods such as the consignor/agents/representatives, the consignee/purchasers and transporter. The entitlement to seek release has also been carefully and consciously sculpted. While the owner or any person transporting the goods has been granted the right to seek release, only a limited benefit has been made available to a transporter, and that too, qua the release of conveyance alone.

16. At this juncture, I clarify my understanding of the phrase ‘person

transporting the goods’ in Sections 129(1) and (6) to mean the owner or his agent who has contracted to supply the goods, and not the transporter who will provide the carriage for the same. Both sub-Sections (1) and (6) use the phrase 'goods or conveyance' whereas the proviso extends the benefit of release, upon terms, to the transporter, but restricted to the conveyance alone. Thus, I conclude that the transporter may seek release of only the conveyance, upon satisfaction of the statutory conditions.

17. As far as the goods are concerned, if the owner/agent/representative does not come forward to claim the same after receipt of notices from the department and upon satisfaction of the conditions under Section 129, it is open to the revenue to take such steps as it may deem fit in that regard. This question is answered accordingly, and adverse to the transporter, petitioner in W.P.No.18753 of 2022.

18. All three petitioners would accede to the position that statutory appeals would be filed by them in terms of Section 107 of the Act. This brings us to the question of release. Section 107 does not specifically grant any power of interim protection to the appellate authority.

19. However, in the case of Income Tax Officer, Cannanore Vs.

M.K.Mohammed Kunhi, [(1969) 711 ITR 815], three Judges of the Hon'ble Supreme Court had occasion to consider the powers of the Income Tax Appellate Tribunal (ITAT/Tribunal) which, at that point in time had not been conferred expressly with the power to grant interim relief.

20. Considering the matter in full conspectus, the Bench concluded that ITAT

is not a Court but it exercises judicial powers that have the widest amplitude. Thus, the conclusion was that the Tribunal must be held to have power to grant stay and such power was incidental and necessarily to its appellate jurisdiction. The ratio of the aforesaid order would be fully applicable to the present scenario as well.

21. Thus, the petitioners are permitted to file appeals accompanied by

applications seeking release of the goods. Upon receipt of such appeals/petitions seeking interim release, the appellate authority shall hear the petitioners and pass orders in regard to the interim applications within a period of one week.

22. One question that arises is in the context of Section 107(6) that requires the appellant to make a pre-deposit of a sum of 25% of the penalty. Upon remittance of the 25%, sub-section 7 of Section 107 states that the recovery proceedings for the balance amount of the penalty shall be deemed to be stayed. Can it thus be said that upon payment of the 25%, the seized goods become liable to be released automatically?

23. There is consensus on the position that this would not be the correct

position and that the question of release, is one that will have to be decided by the appellate authority upon the strength of the case made out by the asessees including, but not limited to prima facie case, financial stringency and balance of convenience.

24. In WP.No.21690 of 2022, upon conclusion of arguments, learned counsel

for the petitioner states that petitioner is willing to furnish a bank guarantee to the satisfaction of the authority under Section 129(1)(c). It is at liberty to do so, if so inclined.

25. These writ petitions are disposed in the above terms. No costs. Connected miscellaneous petitions are closed.

25.08.2022

Index:Yes

Speaking Order