1. Detention of goods in transit — Notice under Section 129(3), CGST Act — Payment of tax and penalty for release — Absence of final adjudication order. (Para 3 , 7 )
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2025 Supreme(SC) 1109
SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
M/s ASP Traders – Appellant
Versus
State of Uttar Pradesh & Ors. – Respondents
Civil Appeal No. 9764 of 2025 [Arising out of S.L.P. (C) No. 17995 of 2022]
Decided On : 24-07-2025
Advocates appeared:
For the Petitioner(s): Mr. Pawanshree Agrawal, AOR Ms. Aakriti Goel, Adv.
For the Respondent(s): Mr. Bhakti Vardhan Singh, AOR
For the Petitioner(s): Mr. Pawanshree Agrawal, AOR Ms. Aakriti Goel, Adv.
For the Respondent(s): Mr. Bhakti Vardhan Singh, AOR
Important Points
A final, reasoned order under Section 129(3) must be issued despite payment to protect the taxpayer's right of appeal, ensuring adherence to principles of natural justice.
Subject
Taxation - GST Compliance
Act Referred
Headnote
(A) Central Goods and Services Tax Act, 2017 - Section 129(3) and 129(5) - Writ petition - The appellant, a dealer in Red Arecanut, questioned the detention of goods and lack of a reasoned final order after payment of tax. The High Court dismissed the petition, stating proceedings were concluded post-payment as per Section 129(5). The Court ruled that even with payment, a reasoned order must be issued to uphold procedural fairness and protect the right to appeal. (Paras 14, 20, 21)
(B) Principle of Natural Justice - Importance of issuing a reasoned final order in response to a show cause notice, even if payment is made, to uphold the right of appeal. (Paras 14, 18)
(C) Waiver and Abandonment - A payment made under protest does not constitute waiver of the right to challenge tax claims or demand a reasoned order. (Paras 16, 18.1)
(B) Principle of Natural Justice - Importance of issuing a reasoned final order in response to a show cause notice, even if payment is made, to uphold the right of appeal. (Paras 14, 18)
(C) Waiver and Abandonment - A payment made under protest does not constitute waiver of the right to challenge tax claims or demand a reasoned order. (Paras 16, 18.1)
Judgement Key Points
Key Points: - A reasoned final order must be issued under Section 129(3) even if tax and penalty are paid, to uphold procedural fairness and the right of appeal (!) (!) . - Payment under protest does not waive the right to challenge the tax demand or avoid the duty to pass a reasoned order (!) (!) . - The principles of natural justice require a speaking order to safeguard the taxpayer’s right of appeal under Section 107, making the right to appeal illusory without such an order (!) (!) . - Section 129(5) deeming provisions do not dispense with the mandatory requirement to pass a final order when objections are filed or payment is made under protest (!) (!) . - The circular issued by CBIC is binding and mandates issuance of Form GST MOV-09 and upload of Form GST DRC-07 to record the demand and enable judicial review (!) (!) . - The High Court erred in holding that no further order was necessary after payment, as it frustrated the appellant’s statutory right to appeal (!) (!) . - The impugned order is set aside, and the respondent is directed to pass a reasoned final order within one month (!) (!) .
What is the duty of the proper officer regarding issuing a reasoned final order under Section 129(3) of the CGST Act when payment is made under protest?
What are the rights of the taxpayer to a reasoned order and appeal under Section 107 of the CGST Act?
What is the effect of payment made under protest on the necessity of a final order under Section 129(5) of the CGST Act?
Legal Category Hierarchy
- tax law
- administrative law
-
constitutional law
-
taxation
- article 265 (Para 18)
-
taxation
- practice and procedure
Table of Contents
2. Whether payment of tax and penalty concludes proceedings under Section 129(5), CGST Act, dispensing with the requirement to pass a reasoned final order under Section 129(3). (Para 4 , 5 )
3. Payment under commercial compulsion does not constitute waiver of right to adjudication; reasoned orders are essential for transparency and exercising statutory appellate remedies. (Para 14 , 16 , 18 )
4. Mandatory requirement to pass a reasoned order under Section 129(3), CGST Act, persists despite payment of tax and penalty to ensure the right of appeal. (Para 14 , 15 , 19 )
5. Impugned order set aside — Direction to pass reasoned final order in Form GST MOV-09 and upload summary in Form GST DRC-07. (Para 21 , 22 )
6. Does payment of tax and penalty under Section 129(1) dispense with the need for a final order under Section 129(3)?
No. The conclusion of proceedings under Section 129(5) signifies that no further prosecution will be initiated, but it does not absolve the proper officer from passing a formal reasoned order to enable the taxpayer to exercise their statutory right of appeal. (Para 14 , 15 , 19 )
7. Can payment made via Form GST DRC-03 be treated as a voluntary waiver of the right to contest a notice?
Not necessarily. Payments made under commercial compulsion or business necessity to secure the release of detained goods, especially when written objections are already on record, cannot be construed as a voluntary waiver or admission of liability. (Para 16 )
8. What is the legal significance of a speaking order in the context of GST detention proceedings?
A speaking order is a substantive safeguard of natural justice that ensures transparency and accountability. It is a prerequisite for the taxpayer to exercise the statutory right of appeal under Section 107, as an appeal can only lie against an order. (Para 18 , 19 )
9. How does Article 265 of the Constitution impact the collection of tax and penalty in detention cases?
Article 265 mandates that no tax shall be levied or collected except by authority of law. Consequently, the action of the proper officer must be justifiable and fall within the law, meaning a reasoned order is required to validate the collection. (Para 18 )
JUDGMENT :
R. MAHADEVAN, J.
Leave granted.
2. This appeal has been preferred by the appellant against the final judgment and order dated 18.07.2022 passed by the High Court of Judicature at Allahabad1[Hereinafter referred to as “the High Court”] in Writ Tax No. 955 of 2022.
3. The relevant facts giving rise to the present appeal are as follows:
3.1. The appellant is a registered dealer in Red Arecanut operating from Channagiri, Davangere, Karnataka. On 14.01.2022, they consigned 17,850 kg of dry Arecanut valued at Rs.51,72,930/-, packed into 255 bags to one M/s. Diamond Trading Company, Delhi, through Vehicle No. UP-78-GN-7563 accompanied by E-Way bill No.141424463403.
3.2. During transit, the goods were transhipped and loaded onto another vehicle bearing Registration No. HR-38-U-0152 for onward journey to Delhi. However, only 248 bags were loaded onto the new vehicle, with 7 bags missing from the original consignment.
3.3. On 17.01.2022, the said vehicle was detained by the Mobile Squad at Lalitpur Bypass Road, Jhansi. The driver’s statement was recorded in Form GST MOV-01. Following physical inspection, a report was generated in Form GST MOV-04 on 20.01.2022 alleging certain deficiencies. A detention order in Form GST MOV-06 dated 20.01.2022 was also issued.
3.4. Subsequently, a notice dated 21.01.2022 under section 129(3) of the Central Goods and Services Tax Act, 20172[For short, “the CGST Act, 2017”], was issued in Form GST MOV-07 highlighting the discrepancy of 7 missing bags and the resulting shortfall in quantity from 18220 kg to 17670 kg. It was further alleged that the consignee, M/s. Diamond Trading Company, was prima facie non-existent and that the address of the consignor was incorrect as per departmental records.
3.5. The appellant submitted a detailed reply dated 24.01.2022 to Respondent No.3, denying all allegations. However, in view of pressing business exigencies, the appellant deposited Rs.7,20,440/- towards IGST, as indicated in the show cause notice, through Form GST DRC-03 dated 27.01.2022. Accordingly, the detained goods were released under Form GST MOV-05 dated 27.01.2022.
3.6. Despite the release, no final order under Section 129 (3) was passed by the Mobile Squad. Accordingly, on 26.02.2022, the appellant submitted a representation seeking an order in Form GST MOV-09, to enable it to pursue statutory remedies. In response, by communication dated 03.03.2022, the Mobile Squad Official stated that one Mohd. Javed, the appellant’s representative, appeared on 27.01.2022, orally requested withdrawal of the earlier reply dated 24.01.2022, and sought release of goods, and hence, no further proceedings were deemed necessary.
3.7. The appellant denied having made any oral request to withdraw the reply or abandon further proceedings. Asserting that the authorities are statutorily bound to pass a reasoned order under section 129(3), the appellant sent further communications dated 13.04.2022, 29.04.2022 and 13.05.2022, seeking a copy of the order, if any, passed under said provision.
3.8. Receiving no response, the appellant approached the High Court by filing Writ Tax No.955 of 2022 praying for the following reliefs:
(i) A direction to Respondent No. 3 to furnish a copy of the order passed under Section 129(3) in compliance with Section 129(4) of the U.P. GST Act, pursuant to notice dated 21.01.2022 in Form GST MOV-07;
(ii) A direction to Respondent No.3 to pass a speaking order under Section 129 (3) after affording an opportunity of hearing.
3.9. By the impugned order, the High Court dismissed the writ petition with the following observations:
“6. Admittedly a notice under Section 129(3) of the CGST Act was issued by the respondent no. 3 to the petitioner. Pursuant thereto the petitioner deposited the amount on his own in Form GST DRC-03 and intimated it to the respondent no.3. Therefore, the respondent no. 3 has issued an order in form GST DRC-05. Thus, proceedings in respect of the aforesaid notice under Section 129(3) of
