The Hon’ble Supreme Court in ASP Traders v. State of U.P. & Ors. [Civil Appeal No. 9764 Of 2025 dated July 24, 2025] held that despite payment of tax and penalty under Section 129(1), the proper officer is obligated to pass a reasoned order under Section 129(3) to enable statutory appeals, and the deeming fiction under Section 129(5) does not absolve this duty where objections have been filed and payment made under protest.
Facts:
ASP Traders (“the Petitioner”), a registered dealer in Red Arecanut from Karnataka, consigned 17,850 kg of dry Arecanut to M/s. Diamond Trading Company, Delhi. During transit, 7 bags were missing, and the vehicle was detained by the Mobile Squad. Notices and detention orders were issued under Section 129 of the CGST Act, including a show cause notice under Section 129(3).
The Petitioner filed a detailed reply denying allegations but paid Rs. 7,20,440/- towards IGST to secure release of goods. No final order under Section 129(3) was passed thereafter. Petitioner sought such an order through representations and ultimately approached the High Court by writ petition under Article 226.
The Allahabad High Court dismissed the petition holding that proceedings stood concluded under Section 129(5) upon payment, hence no order was required. The Petitioner contended that payment was under protest and a reasoned order was necessary for appeal rights.
Issue:
Whether the proper officer is still required to pass a reasoned final order under Section 129(3) of the CGST Act, after payment of tax and penalty within the stipulated time under the notice, or whether proceedings stand concluded under Section 129(5) dispensing with such requirement?
Held:
The Hon’ble Supreme Court in Civil Appeal No. 9764 Of 2025 held as under:
- Observed that, Circular No. 41/15/2018-GST, mandates that upon payment under Section 129(1), the proper officer must issue the release order in Form GST MOV-05 and also pass a formal order of demand in Form GST MOV-09, uploading a summary in Form GST DRC-07 to enable statutory appeals.
- Noted that, the Petitioner paid tax and penalty under protest to release goods but no final order was passed despite filing objections.
- Held that, while Section 129(5) deems proceedings concluded upon payment, this does not waive or extinguish the taxpayer’s right to a reasoned order or the statutory right of appeal under Section 107 of the CGST Act, 2017.
- Held further that, the words “shall issue a notice…and thereafter pass an order” in Section 129(3) impose a mandatory duty on the officer to pass a reasoned order regardless of payment, especially where objections exist.
- Further rejected the argument that payment under protest equates to waiver of the right to adjudication or appeal and directed that, the proper officer is duty-bound to pass a speaking order under Section 129(3) in Form GST MOV-09 and upload it, to preserve procedural safeguards.
- Further held that, that non-passing of such order violates principles of natural justice and Article 265 of the Constitution which requires tax or penalty to be levied only by authority of law.
Our Comments:
This decision aligns with principles of natural justice and constitutional mandates under Article 265 requiring lawful levy and adjudication. The mere payment of tax or penalty does not extinguish the right to appeal and that final orders are indispensable to preserve such rights.
While the decision highlights procedural safeguards, it appears to temper the strict deeming fiction of Section 129(5) as interpreted in earlier judgments such as Commissioner of Customs v. Dilip Kumar & Co. [(2018) 9 SCC 1], which says when a statute is clear and unambiguous, it must be applied in its literal sense. In the present case, Section 129(5) is explicit, and the appellant cannot now be permitted to reopen concluded proceedings. However, the SC did not rely on this judgment, by saying that, the issue involved herein pertains not to tax exemption, but to compliance with due process and procedural safeguards. Therefore, this judgment need not be relied upon for the facts and issue prevalent in the case at hand.
Relevant Provisions:
Section 129 – CGST Act, 2017
129. Detention, seizure and release of goods and conveyances in transit:
“(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.”
Section 142 – CGST Act, 2017
“142. Notice and order for demand of amounts payable under the Act
(3) Where the person chargeable with tax makes payment of tax and interest under sub-section (8) of section 73 or, as the case may be, tax, interest and penalty under sub-section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within fourteen days of detention or seizure of the goods and conveyance, he shall intimate the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice. …
(5) A summary of the order issued under section 52 or section 62 or section 63 or section 64 or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.”
Circular No. 41/15/2018-GST dated April 13, 2018
“1.2 Section 129 of the CGST Act provides for detention, seizure and release of goods and conveyances in transit while section 130 of the CGST Act provides for the confiscation of goods or conveyances and imposition of penalty.
2. In this regard, various references have been received regarding the procedure to be followed in case of interception of conveyances for inspection of goods in movement and detention, seizure and release and confiscation of such goods and conveyances. In order to ensure uniformity in the implementation of the provisions of the CGST Act across all the field formations, the Board, in exercise of the powers conferred under section 168 (1) of the CGST Act, hereby issues the following instructions:
(g) Where no discrepancies are found after the inspection of the goods and conveyance, the proper officer shall issue forthwith a release order in FORM GST MOV-05 and allow the conveyance to move further. Where the proper officer is of the opinion that the goods and conveyance need to be detained under section 129 of the CGST Act, he shall issue an order of detention in FORM GST MOV-06 and a notice in FORM GST MOV-07 in accordance with the provisions of sub-section (3) of section 129 of the CGST Act, specifying the tax and penalty payable. The said notice shall be served on the person in charge of the conveyance.
(h) Where the owner of the goods or any person authorized by him comes forward to make the payment of tax and penalty as applicable under clause (a) of sub-section (1) of section 129 of the CGST Act, or where the owner of the goods does not come forward to make the payment of tax and penalty as applicable under clause (b) of sub-section (1) of the said section, the proper officer shall, after the amount of tax and penalty has been paid in accordance with the provisions of the CGST Act and the CGST Rules, release the goods and conveyance by an order in FORM GST MOV-05. Further, the order in FORM GST MOV-09 shall be uploaded on the common portal and the demand accruing from the proceedings shall be added in the electronic liability register and the payment made shall be credited to such electronic liability register by debiting the electronic cash ledger or the electronic credit ledger of the concerned person in accordance with the provisions of section 49 of the CGST Act.
(j) Where any objections are filed against the proposed amount of tax and penalty payable, the proper officer shall consider such objections and thereafter, pass a speaking order in FORM GST MOV-09, quantifying the tax and penalty payable. On payment of such tax and penalty, the goods and conveyance shall be released forthwith by an order in FORM GST MOV-05.
(k) The order in FORM GST MOV 09 shall be uploaded on the common portal and the demand accruing from the order shall be added in the electronic liability register and, upon payment of the demand, such register shall be credited by either debiting the electronic cash ledger or the electronic credit ledger of the concerned person in accordance with the provisions of section 49 of the CGST Act.”
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