The Jammu and Kashmir and Ladakh High Court has set aside GST penalty proceedings against a trader after finding that tax authorities failed to issue a mandatory notice within the seven-day period prescribed by law.
The Division Bench of Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani held that the deadline under Section 129(3) of the Central Goods and Services Tax Act, 2017 is mandatory and cannot be treated as a procedural formality.
The ruling came in a petition filed by a trader challenging action taken after his goods were detained by GST authorities.
Under Section 129 of the CGST Act, authorities can detain or seize goods being transported in breach of GST requirements, including cases involving deficiencies in documents such as invoices or e-way bills. The law provides for release of the goods subject to payment of applicable tax and penalty.
However, Section 129(3) requires the authorities to issue a notice within seven days of the detention or seizure. The notice is required to set out the tax and penalty allegedly payable and forms part of the process before a final order is passed.
In the present case, the trader’s goods were detained on September 2, 2024. The statutory notice, however, was issued on September 11—one day after the seven-day period had expired. It was subsequently uploaded online on September 12.
The High Court found that the delay was fatal to the proceedings.
The Bench held that the statutory requirement had not been complied with and that even a one-day delay could not be overlooked where the legislation expressly prescribed a seven-day period.
Finding the proceedings legally unsustainable, the Court quashed both the order passed by the GST officer on September 17, 2024 and the subsequent appellate order dated October 28, 2024.
The Court consequently allowed the trader’s petition and set aside the adverse orders, holding that they had been issued in breach of the mandatory requirement contained in Section 129(3) of the CGST Act.
The judgment underscores that GST authorities must adhere strictly to statutory timelines when exercising powers that can result in detention of goods and imposition of tax penalties.
