The Hon’ble Punjab and Haryana High Court in the case of M/s Deutsche Cars Pvt. Ltd. v. State of Haryana and Others [CWP-21628 of 2025, order dated January 31, 2026] held that mere payment of penalty under protest does not conclude proceedings under Section 129(5) of the GST Act, and the Proper Officer is mandatorily required to pass a reasoned order after considering the reply of the assessee.
Facts:
M/s Deutsche Cars Pvt. Ltd. (‘the Petitioner’) is a registered dealer engaged in trading of cars and an authorized dealer of BMW. The Petitioner transported a car for display purposes with proper documents including delivery challan and e-way bill.
The State of Haryana and Others (‘the Respondent’) intercepted the vehicle at Badarpur border and detained it alleging absence of proper invoice for inter-state stock transfer, issuing detention order in Form GST MOV-06. A show cause notice (GST MOV-07) dated May 06, 2025 was issued to be replied by May 13, 2025.
The Petitioner contended that payment was made under protest, not acceptance of liability and the reply was filed on May 13, 2025. The impugned order was passed prematurely on May 06, 2025 itself, before expiry of reply period and without considering objections and that the order violated principles of natural justice and lacked reasoning.
The Respondent contended that since penalty was paid on May 06, 2025, proceedings stood concluded under Section 129(5) of the HGST Act. Therefore, there was no requirement to wait for reply or objections.
Aggrieved by the premature and non-speaking order, the Petitioner approached the Court by way of writ petition.
Issue:
Whether payment of tax and penalty under protest leads to automatic conclusion of proceedings under Section 129(5), dispensing with the requirement of passing a reasoned order after considering the assessee’s reply?
Held:
The Hon’ble Punjab and Haryana High Court in CWP-21628 of 2025 held as under:
- Observed that, the Petitioner deposited the penalty amount “under protest”, which is explicitly recorded in DRC-03.
- Observed that, the finding in the impugned order that “no objection has been filed” and that penalty was accepted is contrary to record.
- Noted that, payment under protest is made to secure release of goods and does not amount to acceptance of liability.
- Observed that, reliance on Section 129(5) to conclude proceedings is misplaced where payment is under protest.
- Observed that, adjudication is indispensable where objections are filed or payment is made under protest.
- Held that, the impugned order dated May 06, 2025 is unsustainable in law. Directed that, the order is set aside and the matter is remanded to the Proper Officer to consider the Petitioner’s reply/objections, and pass a fresh order after granting opportunity of hearing.
Our Comments:
The Court has strictly followed the ratio laid down by the Supreme Court in ASP Traders v. State of Uttar Pradesh & Ors. [2025 SCC OnLine SC 1507], wherein it was held that, the deeming fiction under Section 129(5) only concludes coercive proceedings, not adjudication. The Proper Officer is duty-bound to pass a speaking order under Section 129(3) and that payment does not amount to waiver or acquiescence, especially where made under protest. Moreover, the right to appeal under Section 107 necessitates existence of a reasoned adjudication order.
Relevant Provisions:
Section 129 of the CGST Act, 2017
“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 the applicable tax and penalty equal to one 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 tax and penalty;
(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon 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 tax and 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: Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.
(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).
(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.
(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.
(6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within fourteen days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130: Provided 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 fourteen days may be reduced by the proper officer.”
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