Longer Route Alone Cannot Attract Section 129 GST Penalty: GSTAT Varanasi

Taking a Longer Route Is Not Tax Evasion: GSTAT Varanasi Sets Aside Section 129 GST Penalty

Can a goods vehicle be penalised under GST simply because it travelled a longer route than the shortest one available? In Bitchem Asphalt Technologies Limited v. Joint Commissioner (State Tax), Lucknow, the GST Appellate Tribunal (GSTAT), Varanasi Bench, answered no. The order was pronounced on 22 September 2026. It matters to transporters, manufacturers and traders who move goods across state borders and face detention on suspicion alone.

The ruling clarifies that the mere act of taking a longer route does not justify the imposition of a Section 129 GST penalty without substantial evidence of wrongdoing.

Quick Summary

• Case: Bitchem Asphalt Technologies Limited v. Prakash Yadav, Joint Commissioner (State Tax), Lucknow
• Forum: GSTAT, Varanasi
• Penalty imposed: ₹6,48,366 under Section 129 (IGST)
• Decision: Orders of the adjudicating authority (16.06.2025) and the first appellate authority (31.12.2025) were quashed, and the penalty was ordered to be refunded.

Facts of the Case

A truck carrying about 29 metric tonnes of “Tailor Made Cold Binder” in 145 drums was intercepted by a mobile squad on National Highway 2 at Chandauli, Uttar Pradesh, on 9 June 2025. The consignment travelled with valid documents, and the department did not dispute this.

The vehicle was still detained. The notice in Form MOV-07 gave the reasons as a deviation of about 150 km from the route to the destination and the vehicle’s entry into Uttar Pradesh without apparent need. The officer suspected that the goods might have been sold to a recipient inside Uttar Pradesh.

The company explained that the longer route was chosen to avoid hilly, difficult terrain on the shorter road, which is hard and unsafe for a heavily loaded commercial vehicle. The Proper Officer did not accept this and imposed a penalty of ₹6,48,366. The company paid it under protest to get the vehicle and goods released. The first appellate authority dismissed its appeal, and the company approached GSTAT.

Arguments Before the Tribunal

The taxpayer argued that:

• The documents were in order and no discrepancy was found.
• GST law does not require any particular route to be followed or declared, and the e-way bill carries only the places of supply and delivery.
• Section 129 cannot be applied on suspicion, conjecture or surmise.
• Without proof of intent to evade tax, no penalty can be imposed.
• It relied on several Allahabad High Court rulings and the Supreme Court’s decision in Hindustan Steel Ltd. v. State of Orissa on the levy of penalties.

The State argued that:

• A shorter route was available, so choosing a much longer one that passed through another state created reasonable doubt.
• The detour pointed to an intention to deliver goods inside Uttar Pradesh without tax.
• It relied on an order of the Madras High Court in J.R. Metal Chennai Ltd.

Findings of GSTAT Varanasi

1. The State could not name any destination. The department failed to identify where in Uttar Pradesh the goods were supposedly to be diverted. The route here was a roughly 70 km direct road through hilly terrain against a much longer alternative. The company’s explanation was therefore plausible, and the department had not rebutted it.

2. GST law does not prescribe a route. The Tribunal noted that the earlier VAT regime required dealers to declare the transit route. The GST Act and Rules contain no such requirement, so a taxpayer cannot be faulted for a route the law never asked them to declare or follow.

3. The Allahabad High Court has already settled the principle. The Tribunal applied Om Prakash Kuldeep Kumar v. Additional Commissioner Grade-II (2023). That ruling held that using an alternative or longer route for logistical reasons is not, by itself, a statutory ground for detention under GST.

4. Suspicion is not proof of evasion. The goods moved with all the required documents, no provision had been violated, and nothing on record showed intent to evade tax. Diverting for difficult terrain was not mala fide conduct.

5. The State’s authority did not help it. The Tribunal recorded that in J.R. Metal Chennai Ltd. the Madras High Court only directed the petitioner to file an appeal before the proper forum. It did not rule that a longer route justifies a penalty.

Final Order

GSTAT allowed the appeal and quashed both orders. It directed that the ₹6,48,366 deposited under protest be refunded in accordance with law, and each side bore its own costs.

Practical Takeaways for Businesses and Transporters

1. Keep documents complete and consistent. Valid invoices and e-way bills were the foundation of this defence.
2. Record the reason for any detour. A driver’s statement, weather or road-condition evidence, or a transporter’s note can support a safety-based diversion.
3. Reply to the show-cause notice in detail. The Tribunal treated the taxpayer’s explanation as unrebutted. A clear, early reply strengthens your position on appeal.
4. Challenge penalties that rest on suspicion alone. If the department cannot show where the goods were headed or any intent to evade, the penalty may not survive.
5. Pay under protest when you must, and appeal. The company released its goods first and recovered the penalty later through the appeal route.

Frequently Asked Questions

Does GST law require a vehicle to follow a specific route?
No. As noted in this ruling and the Allahabad High Court decision it applied, the GST Act and Rules have no provision requiring a route to be declared or followed.

Can goods be detained under Section 129 just because the vehicle took a longer route?
Not on that ground alone. Without evidence of intent to evade tax or a violation of a statutory requirement, suspicion about the route is not enough.

What if I have already paid the penalty to release my vehicle?
Paying under protest does not stop you from challenging the order. In this case the Tribunal ordered a refund after the penalty was quashed.

Is this ruling binding on all cases?
It is a Tribunal decision on specific facts. Each detention case depends on its own record, so professional advice is advisable.

Need Help With a GST Detention or Penalty Notice?

If your vehicle has been detained or you have received a notice or penalty order under Section 129, Sagar S Gupta & Co can help you prepare a reply, plan your appeal and seek a refund where the penalty was not justified. [Contact us for a consultation.]

Disclaimer: This article is for general information only and is not legal or tax advice. Outcomes depend on the facts of each case.