The Supreme Court has held that passing a reasoned order, despite payment of penalty on issuance of show cause notice under Central Goods and Services Tax Act, 2017 is mandatory, particularly when protest or dispute is raised.
A bench of Justices J B Pardiwala and R Mahadevan said that the right to appeal under Section 107 of the CGST Act, 2017 is predicated on the existence of a formal adjudication order, and its absence renders the right illusory.
The court said the proper officer is duty-bound to pass a formal order in Form GST MOV-09 and upload a summary thereof in Form GST DRT 07 as mandated under Rule 142(5) and the circular of April 13, 2018, so as to enable the taxpayer to avail the appeal remedy as per law.
“While Section 129(5) of the 2017 Act provides that proceedings shall be deemed to be concluded upon payment of tax and penalty, this deeming fiction cannot be interpreted to imply that the assessee has agreed to waive or abandon the right to challenge the levy, a right that is protected by the very enactment itself,” the bench said.
The court explained the term “conclusion” as used in Section 129(5) merely signified that no further proceedings for prosecution will be initiated.
“It does not absolve the responsibility of the proper officer to pass an order concluding the proceedings,” Justice Mahadevan wrote in the 30-page order for the bench on July 24, 2025.
In the case here, a consignment of red arecanut of appellant Karnataka-based M/s ASP Traders was seized by tax authorities at Jhansi and despite depositing the demanded tax and penalty of over Rs 7.2 lakh due to “business exigencies”, no formal adjudication order was passed even after repeated representations.
The Allahabad High Court dismissed the appellant’s writ petition.
Ruling in favour of the appellant, the apex court said the failure to issue a speaking order in response to a show cause notice created a legal vacuum and violated principles of natural justice and Article 265 of the Constitution, which mandates that no tax can be levied or collected except by authority of law.
The court said the absence of a mechanism in the GST payment portal to indicate payment under protest cannot operate to the detriment of the assessee’s rights, especially when objections are already on record.
The court also underscored that a waiver of rights must be more than mere acquiescence, and payment under compulsion, especially when objections are filed, cannot be treated as a waiver or abandonment of rights.
“It does not absolve the responsibility of the proper officer to pass an order concluding the proceedings,” Justice Mahadevan wrote in the 30-page order for the bench on July 24, 2025.
In the case here, a consignment of red arecanut of appellant Karnataka-based M/s ASP Traders was seized by tax authorities at Jhansi and despite depositing the demanded tax and penalty of over Rs 7.2 lakh due to “business exigencies”, no formal adjudication order was passed even after repeated representations.
The Allahabad High Court dismissed the appellant’s writ petition.
Ruling in favour of the appellant, the apex court said the failure to issue a speaking order in response to a show cause notice created a legal vacuum and violated principles of natural justice and Article 265 of the Constitution, which mandates that no tax can be levied or collected except by authority of law.
The court said the absence of a mechanism in the GST payment portal to indicate payment under protest cannot operate to the detriment of the assessee’s rights, especially when objections are already on record.
The court also underscored that a waiver of rights must be more than mere acquiescence, and payment under compulsion, especially when objections are filed, cannot be treated as a waiver or abandonment of rights.
It directed the tax authorities to pass a reasoned final order under Section 129(3) of the CGST Act, 2017, in Form GST MOV-09, after affording an opportunity of being heard as mandated under Section 129(4).
“This order, along with its summary in Form GST DRC-07, must be uploaded within a period of one month,” the bench ordered, allowing the appellant to pursue appropriate legal remedies against such order in accordance with law.
