Vehicle Detention under GST: Complete Guide to Appeal, Detention & Refund

Introduction

The detention of goods and vehicles under the Goods and Services Tax (GST) regime remains one of the most contentious enforcement mechanisms, engaging both the taxpayers and the administration in a complex interplay of compliance, procedure, and legal safeguards. Despite the ease and procedural circulars issued by CBIC and various high court ruling in favor of assessee, still the issue remains the same. Case law indicates that High Courts have consistently frowned upon mechanical detention where goods were otherwise accompanied by substantial compliance documents. If the vehicle gets detained at far off place, it is the compulsion or helplessness of the assessee and consultants to get release of vehicle and goods on the terms of department. Today also majority of the appeal filed relates to the detention of vehicle. And it would not be orthodox to mention that still the total guidance to the process from Generation of E-Way Bill, Dispatch of vehicle, Procedure of the detention, Process to follow for the release of vehicle and refund of penalty paid under protest remains the unsolved issue. For practitioners, an in-depth understanding of the legal framework, operational challenges, and evolving jurisprudence is essential to defend clients effectively.

For businesses engaged in regular movement of goods, even minor lapses—such as an error in vehicle number, wrong invoice reference, or e-way bill mismatch— can result in detention of vehicles, imposition of penalties, and disruption of supply chains. For practitioners, the ability to quickly analyse the grounds of detention, identify procedural lapses by the department, and strategise the response is critical. Practitioners must differentiate between bona fide errors (clerical/documentary) and malafide transactions (fake invoicing, nonexistent suppliers), as the legal strategies differ significantly.

Lets have a glance at the statutory provisions relevant to detention of goods and conveyances. These provisions, when read together, establish the procedural and substantive requirements for lawful transportation and the consequences of deviations:

This article is designed to serve as a comprehensive guide , not only walking through the statutory framework and procedures but also equipping practitioners with case studies, appeal strategies, and refund mechanisms. The emphasis is on providing a ready reference that balances doctrinal clarity with practical utility.

1. Why the Vehicle Could Be Held – Process, Documentation, and Triggers for Detention

The detention of goods and conveyance is primarily anchored in Section 68 of the CGST Act, Rule 138 of the CGST Rules, and the scheme of e-way bill compliance. These provisions mandate that every movement of goods above the prescribed threshold must be accompanied by appropriate documents, failing which the goods and vehicle may be intercepted and detained.

Every assesseee transporting goods must follow a compliance checklist. A simplified workflow is presented below:

• The Person in Charge of the Vehicle, i.e., the driver must carry tax invoice/bill of supply/delivery challan, copy of e-way bill, and e-invoice QR code (if applicable).
• The Person in Charge of the Vehicle, e., the driver must stop when signaled by the officer, provide documents, and allow inspection.
• Conditions of Rule 138 ( E – way Bill Rules) have been tabulated below:

–

Limits and conditions of different states with regard to Monetary limit has been discussed below:

Documents in different cases:

Reasons Why Vehicle could be detained

i) Absence or Expiry of E-Way Bill – detention is initiated even if validity expired by hours.

ii) Mismatch in Documents – vehicle number mismatch, invoice/e-way bill date inconsistency, GSTIN incorrect, Value or tax mismatch, address mismatch as compared to the invoice issued.

iii) Non-Generation of E-Invoice – mandatory taxpayers failing to generate IRN/QR code face detention.

iv) Suspicion of Bogus Transactions – if supplier is non-existent or flagged for fake invoicing.

v) Minor Clerical Errors – address, pin code, vehicle number, unit mismatch (Circular 64/38/2018 clarifies not detainable, but practice differs).

vi) Suspicion of Evasion / Undervaluation – officers may allege undervaluation/misclassification.

vii) Non Movement from the destination listed in the E Way bill

The detention of goods and vehicles under GST is guided primarily by Section 129 of the CGST Act, Rule 138B, and Circulars No. 41/2018 & 64/2018. The officer’s responsibility is not arbitrary but bound by procedure, forms, and statutory timelines. Whenever vehicle is detained, one should keep a watch on the process to be followed by the officers within a timeline. The non- following of same by the detention officer could provide a strong ground while making a reply or drafting of appeal. It is mandatory for the officer to issue each and every statement online on the generated temporary id in the name of Person in Charge of the Vehicle, i.e., the driver or the owner of the goods. In general, the temporary id is issued in the name of Person in Charge of the Vehicle, i.e., the driver detained because the officer detaining the goods is not the jurisdictional officer for a particular GSTIN and they are not empowered to issue any order or statement on the original GSTIN ids of the assessee. It is must for the assessee to insist on online issuance of all the forms otherwise one would be left in the vicious circle of department for depositing taxes, furnishing reply, Appeal and refund. The table has been listed below describing the timeline and stages of each form to be issued by the officer in case of detention of vehicle as per the mandatory requirement of Rule 138 of the CGST Rules 2017:

Courts have repeatedly stressed that strict adherence to procedure is mandatory. Common lapses include MOV forms not issued or issued belatedly, Detention carried out physically without uploading online, despite CBIC instructions Penalty order passed without providing opportunity of being heard, Detention continued even after furnishing valid documents or proof of genuineness.

2. Process to be Followed by the Assesseee

Once a vehicle carrying goods is intercepted and detained under Section 129 of the CGST Act, the burden shifts to the assesseee (taxpayer) to demonstrate compliance. The law prescribes timelines, specific forms (MOV-06, MOV-07, MOV-09 etc.), and rights that must be exercised promptly. For practitioners, the most crucial element is speed, documentation, and strategic representation. Following course of action should be implemented:

• Instruct the Person in Charge of the Vehicle, e., the driver not to argue with the officer. Collect details of seizure (time, place, officer’s name). Request a copy of the MOV-06 (order of detention).
• Collect All Documents: E-way bill, Tax Invoice, Delivery Challan, Transport documents(LR/GR). Any correspondence made by the
• Note whether detention is for minor clerical mistakes or substantive
• Document delay in issuing MOV-02 if more than 24 hours have
• Verify whether the officer uploaded detention order on the GST portal and note if the officer only issued a manual order.
• The notice will demand penalty and Assesseee must file a written reply within 7 days putting in review

√ Whether the proper officer had authority

√ Was MOV-06 uploaded online? Was detention beyond permissible time?

√ Identify whether lapse is clerical, substantive, or linked to alleged fraud and draft reply emphasizing Circular 64/38/2018 in case of clerical mistakes

√ Penalty must not exceed gravity of

√ Copies of invoices, challans, e-way bill validity, payment proofs should accompany the reply

√ Decide between: (a) paying penalty, (b) furnishing security, or (c) contesting detention

√ In case of detention of vehicle beyond permissible limit, prefer to file writ petition for the release of vehicle.

This is very rare instance that officer would be satisfied with the reply and would release the vehicle without payment of penalty. The release of detained goods and conveyances under Section 129 of the CGST Act has been one of the most litigated and practically challenging areas under GST. While the law prescribes clear mechanisms for release, the application has varied across states and has been subject to judicial scrutiny. The table below presents the applicable penalty or mode of release in different cases

Note: Circular No: 76/50/2018- GST dated 31.12.2018 answers the confusion regarding who shall be considered owner of the goods and states:

• Itis hereby clarified that if the invoice or any other specified document is accompanying the consignment of goods, then either the consignor or the consignee should be deemed to be the owner”
• If the invoice or any other specified document is not accompanying the consignment of goods, then in such cases, the proper officer should determine who should be declared as the owner of the goods

After omission of Section 129(2), technically the only statutory route is payment of penalty under Section 129(1). However, several High Courts have allowed release against furnishing a Bank Guarantee, taking a view that otherwise the assesseee’s right to trade would be disproportionately affected. This demonstrates the judicial balancing act between revenue protection and trade facilitation. Also, In case of Jainex Parivahan, Hon’ble Kolkata high court allowed the assesseee to get release the vehicle by furnishing security bond post omission of Section 129(2) and stated the reason that if the intentionion of the law was to totally discard the procedure of Release of Vehicle on the basis of Security bind then Section 129(1)c had also been omitted including the Rule 140 of the CGST Rules, 2017. Also, when the act itself provided for the payment of pre deposit @ 25 %( 10% wef 01.04.2025) of penalty imposed under section 129, then how can the provision of release of vehicle on full payment of penalty could only exist. If the intentionion of the law was to only release the vehicle and goods on full payment of penalty then why the provision of payment of 25% pre deposit was introduced wef 01.01.2022 i.e same time when section 129(2) was omitted. Therefore, one should try to convince the field officer to release the vehicle on the basis of security bond relying the judgements of high courts and file appeal after depositing 10% of the Penalty. This could serve both the purpose – Release of goods and Stay on Recovery of penalty. Once the recovery has been stayed, the assesseee can ask the department to return the bank guarantee provided. Few case laws have been discussed below:

• Allahabad High Court in M/s R.K. Overseas v. State of U.P. (2022) have allowed provisional release against bank guarantee. The reasoning is that the assesseee should not be forced to make cash outflows immediately where disputes are bona fide and matter is pending in appeal and stated “The deletion of Section 129(2) does not take away the constitutional power of the Court to order provisional release on furnishing of security where the circumstances warrant. The power to issue directions under Article 226 remains unfettered.”
• The Gujarat High Court in **Synergy Fertichem  Ltd. v. State of Gujarat (2019)** had earlier clarified that harsh provisions should not be interpreted in a manner that paralyzes business activity.
• In case of K.P. Sugandh Ltd. v. State of Chhattisgarh (2021), Hon’ble Chattisgarh High Court stressed proportionality that detention should not cripple business and allowed the release of vehicle on furnishing of
• Govind Tobacco  Ltd. v. State of U.P. (2020) – Release of goods allowed upon furnishing bank guarantee even after amendment deleting Section 129(2).

When the vehicle is detained, in general, the officer releases the vehicle only after the payment of full penalty as per section 129(1) despite existence of Circular No. 64/38/2018- GST dated 14.09.2018, repeated reminder by the different high court to not impose penalty where there is no malafide intention  or intent to evade the tax. First payment of full penalty and thereafter filing appeal in other state and ultimately seeking refund is a hectic and cumbersome process where the government need to work upon for the ease of the general public. Though one can always have the option of filing writ before the high court where one feels that penalty imposed cannot be borne but the problem is till the time the High Court will provide the order, the vehicle and goods will remain in the custody of the department. The cost of transporter, risk of perishable goods, theft and risk of losing the customer forces the assesseee to knee down before authorities and accept the payment of penalty.

Draft Reply Template to MOV-07

To,
The Proper Officer,
[Jurisdiction Address]

Subject: Reply to Notice under Section 129(3) – MOV-07 dated [insert date] Respected Sir,

1. The notice under reference alleges that the vehicle No. [ ] carrying goods covered under Invoice No. [ ] dated [ ] was detained for alleged contravention of provisions of Section 68/Rule 138.

2. At the outset, it is respectfully submitted that:

• Thee-way bill and invoice were valid and accompanied the
• The alleged discrepancy is merely clerical in nature without any intentionion to evade tax.
• Asper Circular 64/38/2018-GST, such minor errors should not invite proceedings under Section 129.

3. Procedural lapses in the detention process:

• The detention order (MOV-06) was not uploaded online as required under Circular 41/15/2018-GST.
• The notice was served after lapse of [X] hours, contrary to prescribed

4. In view of the above, it is respectfully prayed that:

• The notice under Section 129(3) be dropped
• The detained goods and vehicle be released immediately without levy of penalty

Enclosures:

• Copy of Invoice, E-way Bill, LR/GR.
• Copy of MOV-
• Relevant judicial precedents relied

Authorized Signatory [Name & Designation]

Date:

Place:

3.  Filing of Appeal against Detention Order

 The detention of goods and vehicles under Section 129 of the CGST Act, 2017 often results in immediate hardship to taxpayers. Even after securing the release of goods by making payment of tax and penalty or furnishing security, the assesseee frequently contests the validity of such detention. For this purpose, the statute provides a clear appellate mechanism. Section 107 of CGST Act, 2017 lays down the general provisions relating to appeals to the Appellate Authority.

“Any person aggrieved by an order or decision passed by an adjudicating authority under the Act (including orders under Section 129) may file an appeal within three months from the date of communication of the order.

– A further extension of one additional month may be granted if sufficient cause is shown for the delay in filing.

With effect from …………. Pre-deposit requirement in case of penalty order has been minimized from 25% to 10% of the penalty involved but as stated earlier that in almost every case the vehicle is released after payment of full penalty and therefore one do not need to further make pre deposit for filing of appeal. Only in cases where the penalty has not been paid at the time of release of vehicle, the assesseee needs to make 10% pre deposit of penalty involved.

One thing has to kept in mind that though it has been clearly instructed in  Circular No. 41/15/2018 dated 13.04.2018 Para U that all the order and penalty order shall be uploaded on the Id of the asessee but officer generally issues the Temporary GSTIN in the name of Person in Charge of the Vehicle, i.e., the driver for uploading all MOV forms at the time of detention. Order of release and payment of penalty is also done on the same Temporary ID. As the order has been uploaded online therefore it is mandatory for the assesseee to file the appeal on same id under the enforcement order.

Procedural Step:

1. The assesseee must secure a login credentials of Temp Id, certified copy of the detention order (MOV-06 / MOV-09 / adjudication order). Time limits for appeal are calculated from the date of communication on the portal.

2. Appeal is filed electronically in Form GST APL-01 through the GST portal. Grounds of appeal, statement of facts, and relief sought must be clearly drafted. Supporting documents like invoices, e-way bills, and correspondence with the authorities should be annexed.

3. Payment challans evidencing the statutory pre-deposit or payment of penalty must be attached to the appeal.

4. Appellate Authorities generally provide personal hearing, either physical or virtual. Practitioners should be prepared with case law and supporting documents. It must be taken care that same reason was mentioned in the reply furnished by the assesseee against the MOV 07.

5. The need of submitting the physical copy of appeal filed has been done away wef December 2022 but is always suggested to submit the copy and apply for early  This helps in early clearance of case.

Common Grounds of Challenge in Detention Matters:

1. Violation of Section 129 read with Section 68: Detention carried out without proper reason or contrary to statutory requirement of recording specific

2. Failure to Follow CBIC Circulars: Circular No. 41/15/2018-GST and Circular No. 64/38/2018 mandate that minor errors in documentation should not result in detention. If such cases are still detained, strong ground arises for appeal

3. Minor Clerical Errors: Wrong vehicle number, typographical error in invoice number or date, slight mismatch in consignee’s address. High Courts have consistently held that these are not grounds for detention.

4. Non-generation of E-invoice where applicable: Several High Courts have distinguished between bona fide lapse and deliberate evasion. If the invoice was otherwise uploaded in GSTR-1 and tax duly paid, detention is held to be

5. Detention for Alleged Fake Invoicing: In cases where vehicle was detained merely because supplier was later found non-existent, courts have held that detention cannot be justified unless nexus of transported goods with fraudulent activity is established.

6. Excessive Penalty and Non-speaking Orders: If order is passed mechanically without reasons or disproportionate penalty is imposed, strong ground arises for setting aside.

Reliefs Typically Sought:

• Setting aside of the detention order and consequential
• Direction for refund of penalty/tax already
• Declaration that goods movement was genuine and
• In some cases, remand for fresh adjudication in line with principles of natural justice.

Important Judicial Pronouncements and Case Studies

This section consolidates landmark judicial pronouncements and practical case studies arising under Section 129 of the CGST Act, Rule 138, and related provisions on e-way bills, detention, release, and appeals. The objective is to provide practitioners with a ready reference of legal reasoning adopted by High Courts and the Supreme Court, along with practical implications.

1. Non-generation of e-invoice where mandatory

• M/s Sahil Traders v. State of U.P. (Allahabad HC)– Held that detention merely for non-generation of e-invoice despite tax being paid is disproportionate; release should be allowed on payment of nominal penalty under Circular 64/2018.
• K.Steel v. State of Gujarat (Gujarat HC) – Recognized that technical breach of e-invoice requirement cannot override substantive compliance where transaction and tax payment are genuine.

2. Minor clerical errors in e-way bill / documents

• Assistant Commissioner v. M/s Hindustan Herbal Cosmetics (Allahabad HC)– Vehicle number mismatch in e-way bill treated as minor error; full penalty
• M/s Tvl. Aathi Products v. State Tax Officer (Madras HC) – Error in invoice date cannot justify detention when goods and tax payment not disputed.
• Indus Towers Ltd. v. Assistant Commissioner (Kerala HC) – Held that detention for address mismatch in invoice  e-way bill is hyper-technical and contrary to Circular 64/2018.

3. Errors in invoice number, date, address

• M/s Renuka Traders  State Tax Officer (Madras HC) – Error in invoice number considered clerical; penalty quashed.
• Suncraft Energy  Ltd. v. Assistant Commissioner (Calcutta HC) – Typographical error in consignee address insufficient to justify detention.

4. Detentions linked to fake invoicing allegations

• Surya Roadways v. State of Bihar (Patna HC) – Held that mere suspicion of fake invoicing cannot be a ground for detention under Section 129; separate proceedings under Section 74 required.
• M/s K.P. Sugandh Ltd. v. State of Madhya Pradesh (MP HC) – Clarified that transport of goods cannot be penalised merely because supplier is under investigation for fake ITC.

5. Supplier found non-existent or bogus dealer

• Siddharth Enterprise v. State of Gujarat (Guj HC) – Detention on ground that supplier was non-existent held invalid; remedy lies in blocking credit, not detaining goods.
• S. Industries v. State of Punjab (P&H HC) – Ruled that buyer cannot be penalised during transport for supplier’s bogus registration.

6. Other relevant case studies

• P. Sugandh Ltd. v. State of Chhattisgarh (Chhattisgarh HC) – Penalty quashed where detention was on suspicion without cogent evidence.
• Ashok Kumar  State of Bihar (Patna HC) – Held that circulars clarifying minor errors must be applied; department cannot act arbitrarily.
• Shree Enterprises  State of UP (Allahabad HC) – Vehicle detained for expired e-way bill; court allowed release considering genuine reason for delay.

4. Refund of Penalty Paid under Section 129

The levy of penalty under Section 129 of the CGST Act, 2017 arises when goods and conveyances are detained during transit for contravention of provisions relating to movement of goods, primarily under Section 68, Rule 138 (e-way bill requirements), and related notifications. Refund of such penalty, once paid, is governed not under Section 129 itself but through the general refund provisions under Section 54 of the CGST Act. The law recognizes that any amount paid as tax, interest, penalty or other dues, if found to be not payable upon adjudication, enforcement or appellate orders, must be refunded to the taxpayer.

Refund of penalty paid under Section 129 may be sought when the first appellate authority or higher forum has quashed the enforcement order of proper officer.

Following are the circumstances where the first appellate authority or higher forum sets aside the enforcement order:

• Excess Payment – if penalty collected exceeded the statutory rate or was
• Wrongful Detention– where minor clerical mistakes (vehicle no., invoice mismatch, typographical errors) led to detention, and courts held such penalty as
• Procedural Lapses by Department– non-compliance with mandatory steps under Section 129(3) (non-service of notice, non-speaking order).
• Subsequent Compliance – where missing documents (e.g., e-way bill, invoice) were later furnished and accepted by appellate authorities.

Notably, refund is not automatic; the taxpayer must proactively file a claim as per section 54 of GST Act.

Time limit for refund application:

As per section 54 of GST Act, 2017 the time limit to file the refund application is 2 years from the relevant date. In this case the relevant date is “the date of communication of such judgment, decree, order or direction”

Process of filling of refund Application:

The refund process is aligned with Section 54 and Rule 89:

1. Temporary id should be created with Pan of owner of Goods or Driving License Number of the person in charge: Whenever any temporary id created by the proper officer the owner of goods should try to convince the proper officer that he/she should create the Temporary Id with the Pan of the owner or Driving License of the person in charge.

• • If temporary id created with Driving License Number of person in charge: The person logged in on GST portal for filling of refund application then at the first he/she should update the PAN of the person who is claiming the refund through the application for amendment in registration details under the tab “Non-Core field”.
  • If temporary Id created with Pan of the owner of goods: In this case the person need not to do anything with the amendment of registration details and directly proceed with filling of refund application.

2. Updation of Bank Account Number on the temporary id: The Second step is updating bank account details on the temporary id.As penalty was paid via Temp Id and therefore refund will also be processed through same

But as the Pan details in bank account of the owner of goods will not match with the name of Person in Charge of the Vehicle, i.e., the driver on whose name the id was issued the refund amount will not credited to the bank account of the owner of goods.

Therefore it is mentioned in point no 1 that the owner of goods should convince the proper officer that the temporary id should be created with Pan of the owner of goods.

3. Category of Refund application:

The registered person should file the refund application under the category of “On account of

Assessment/Enforcement/Appeal/Revision/Any Other Order” on the GST portal.

4. Documents to be Attached along with refund application: The refund application should contain the documents which are mentioned as per circular no 125/44/2019 dated:18/11/2019 and circular no 197/09/2023 dated 17/07/2023 as under:

a) Undertaking in relation to sections 16(2)(c)

b) Self-declaration under rule 89(2)(l) if amount claimed does not exceed two lakh rupees, certification under rule 89(2)(m) otherwise

c) Reference number of the order and a copy of the Assessment / Provisional Assessment / Appeal / Any Other Order

d) Reference number/proof of payment of deposit made earlier for which refund is being claimed.( Extract of Electronic Cash ledger)

5. Processing by Proper Officer: The Proper Officer will issue Acknowledgment in RFD-02 if application is complete in all respect otherwise deficiency memo in RFD-03 which highlights the discrepancy in documents.

The registered person should file the fresh refund application along with correct documents which are mentioned in RFD 03.

6. Sanction: Refund order in RFD-06, with payment order in RFD-

7. Timeline for Proper officer for processing of refund application:

Statutory limit of 60 days from date of receipt of complete application

Practical Hurdles

1. Unjust Enrichment Doctrine – Officers often deny refund citing that penalty is a statutory levy and not refundable unless explicitly ordered.

2. Jurisdictional Confusion – Dispute whether refund is to be claimed from Mobile Squad/Enforcement officer or the regular jurisdictional officer.

3. Delay in Processing – Refund applications are often kept pending, necessitating writ petitions.

4. No Explicit Provision in Section129 – Since refund is not directly provided in Section 129, departmental officers sometimes resist, requiring reliance on appellate directions.

Always ensure appeal order specifically mentions refund of penalty otherwise, authorities may resist One should file refund promptly with all annexures – detention order, penalty receipt, appellate relief. In case of departmental delay, one must approach High Court under Article 226 for mandamus directing refund

Conclusion:

The jurisprudence around detention of goods and conveyances under Section 129 has evolved rapidly, guided by High Court rulings emphasizing proportionality, reasonableness, and protection against arbitrary penalties. While the statutory framework prescribes stringent consequences for lapses in documentation or procedure, appellate and writ remedies have balanced these by safeguarding bona fide trade. From a practitioner’s standpoint, it is essential to:

• Guide clients on preventive compliance (accurate e-way bill and invoice preparation
• Provide timely representation during detention
• Pursue appeals on strong legal grounds where detention is
• Ensure that refund of penalty wrongly collected is claimed systematically under Section 54.

In conclusion, the law recognizes that penalties cannot be a revenue-generating mechanism but must operate as deterrence against deliberate evasion. Where penalties are imposed without due cause, the refund mechanism ensures restitution, reinforcing the constitutional mandate under Article 265. A diligent practitioner, therefore, must not only secure release of goods and vehicles but also follow through until recovery of any unwarranted penalty is achieved.