Deeming fiction of Section 129(5) of CGST Act, 2017 cannot be interpreted to imply that the proper officer is absolved from passing an order concluding the proceedings.
In a recent judgment, Hon’ble Supreme Court has held that deeming fiction of Section 129(5) of CGST Act, 2017 that proceedings shall be deemed to be concluded upon payment of tax and penalty, cannot be interpreted to imply that the proper officer is absolved to pass an order concluding the proceedings.
ABCAUS Case Law Citation:
4666 (2025) (07) abcaus.in SC
Important Case Laws relied upon by Parties:
Commissioner of Customs (Import) Mumbai v. Dilip Kumar & Co. and other
M/s. Kranti Associates (P) Ltd & Anr. v. Masood Ahmed Khan & Ors
In the instant case, the assessee had appealed against the judgment passed by the High Court dismissing appeal holding that upon payment of tax and penalty proceedings under Section 129(3) of the CGST Act stood concluded in terms of mandate of sub-section (5) of Section 129.
The appellant was a registered dealer at Karnataka who had consigned goods bags to Delhi through a Vehicle duly accompanied by E-Way bill. During transit, the goods were transhipped and loaded onto another/second vehicle for onward journey to Delhi. However, while being loaded onto second vehicle, 7 bags were missing from the original consignment and only remaining bags were loaded onto the second vehicle.
The second vehicle was detained by the GST Mobile Squad authorities at in the State of UP. The driver’s statement was recorded in Form GST MOV-01. Following physical inspection, a report was generated in Form GST MOV-04 alleging certain deficiencies. A detention order in Form GST MOV-06 was also issued.
Subsequently, a notice under section 129(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) was issued in Form GST MOV-07 highlighting the discrepancy of 7 missing bags and the resulting shortfall. It was further alleged that the consignee, was prima facie non-existent and that the address of the consignor was incorrect as per departmental records.
The appellant denied all allegations. However, in view of pressing business exigencies, the appellant deposited tax towards IGST, as indicated in the show cause notice, through Form GST DRC-03. Accordingly, the detained goods were released by passing discharge order in Form GST MOV-05.
Despite the release, no final order under Section 129(3) was passed by the Mobile Squad. Therefore, the appellant submitted a representation seeking an order in Form GST MOV-09, to enable it to pursue statutory remedies. In response, the Mobile Squad Official stated that the appellant’s representative had appeared orally requested withdrawal of the earlier reply and sought release of goods, and hence, no further proceedings were deemed necessary.
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 seeking a copy of the order, if any, passed under said provision.
Receiving no response, the appellant approached the High Court. However, the High Court dismissed the writ petition observing that petitioner deposited the amount on his own in Form GST DRC-03 and intimated it to the authorities. Therefore, the order was issued in form GST DRC-05. Thus, proceedings in respect of the aforesaid notice under Section 129(3) of the CGST Act stood concluded in terms of mandate of sub-section (5) of Section 129. Therefore, no mandamus contrary to law can be issued in exercise of powers conferred under Article 226 of the Constitution of India.
The question before the Hon’ble Supreme Court was as to whether, upon payment of tax and penalty by the appellant within the time stipulated in the notice under section 129(3), the proper officer is still mandatorily required to pass a final order under section 129(3), or whether the deeming fiction under section 129(5) dispenses with such requirement?
Before the Hon’ble Supreme Court, the appellant inter alia drew attention to Circular No.41/15/2018-GST dated 13.04.2018 specifying procedure for interception of conveyances for inspection of goods in movement, and detention, release and confiscation of such goods and conveyances issued by the CBIC GST Policy Wing.
The Hon’ble Supreme Court noted that the said circular, which is binding on the department under Section 168 of the CGST Act, 2017 provides detailed instructions to ensure uniformity in implementation of procedures for interception, detention, seizure, and confiscation of goods in transit. It mandates that upon payment of tax and penalty under Section 129 (1), the proper officer must issue the release order in Form GST MOV-05. Additionally, the officer is required to pass a formal order of demand in Form GST MOV-09 and upload it on the common portal. A summary of this order must be uploaded in Form GST DRC-07, so that the demand is recorded in the taxpayer’s electronic liability register.
The appellant contended that he paid the tax and penalty due to business exigencies to secured the release of the goods and vehicle detained. This payment, however, cannot be construed as an admission of liability for the alleged contraventions of the Act. In contrast, the GST authorities asserted that the payment was made voluntarily by the appellant prior to the passing of an order under Section 129(3), and that the appellant’s authorised representative had withdrawn the objections earlier filed. Accordingly, they stated that in terms of section 129(5), all proceedings stood concluded, and no further order was required to be passed.
The Hon’ble Supreme Court observed that it is a well settled principle that every show cause notice must culminate in a final, reasoned order. While Section 129(5) of the CGST Act, 2017 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 term “conclusion” as used in Section 129(5) merely signifies 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. Therefore, 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 CBIC Circular so as to enable the taxpayer to avail the appeal remedy as per law.
The GST authorities contended that objections were orally withdrawn. However, the Court held that as between a written reply and an oral submission contrary to such written submission/reply, the written reply would prevail, and the authorities are duty-bound to consider that reply and pass speaking orders addressing each and every contention.
The Hon’ble Supreme Court further observed that the GST payment portal permits payments only through Form GST DRC-03, which is automatically classified as a voluntary payment, and does not provide any mechanism for an assessee to indicate that the payment is being made under protest. In the absence of such an option, payments made under commercial compulsion or business necessity – such as for securing release of detained goods – may be erroneously construed as voluntary, resulting in undue prejudice. Under such circumstances, the written objections become significant to understand the intention of the assessee/owner or transporter.
The Hon’ble Supreme Court further held that the payment by an assessee will not absolve the responsibility of the proper officer to pass an order justifying the demand of tax and penalty.
The Hon’ble Supreme Court held that in the instant case objections were filed, payment was stated to have been made under protest due to business exigencies, and the appellant sought to challenge the levy, the proper officer was under a clear statutory obligation to pass a final order under section 129(3) in Form GST MOV-09 and DRC-07. The refusal by the High Court to direct the passing of such an order, had the effect of frustrating the appellant’s statutory right to appeal and is contrary to well established legal principles governing tax adjudication and procedural fairness.
Accordingly, the impugned order passed by the High Court was set aside. Respondent GST Authority was directed to pass a reasoned final order under section 129(3) of the CGST Act, 2017, in Form GST MOV-09, after granting an opportunity of being heard as mandated under Section 129(4), and upload the summary thereof in Form GST DRC-07.
Accordingly, the appeal was allowed.
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