Reasoned Order Necessary for Conclusion of GST Proceedings: Supreme Court

Reasoned Order Necessary for Conclusion of GST Proceedings: Supreme Court

Introduction

The Supreme Court has ruled that mere payment of penalty for the release of goods detained under Section 129 of the Central Goods and Services Tax Act (CGST Act) does not conclude the proceedings. The Court emphasized that a reasoned order is required to be passed under Section 129(3) of the CGST Act.

Factual Background

The appellant, M/s ASP Traders, had a consignment of Arecanut detained in Jhansi due to alleged discrepancies. The appellant paid the penalty under protest to avoid prolonged detention but sought a formal adjudication order to challenge the levy.

Procedural Background

The High Court dismissed the appellant's plea, holding that payment under Section 129(1) deemed the matter concluded under Section 129(5). The appellant approached the Supreme Court, challenging this interpretation.

Issues

The primary issue was whether mere payment of penalty for the release of goods detained during transit under the GST regime concludes the proceedings without a formal order.

Contentions of the Parties

Appellant's Contentions:

• The appellant argued that payment of penalty under protest did not waive their right to challenge the levy.
• The appellant contended that a formal, reasoned order was required to be passed under Section 129(3) of the CGST Act.

Respondent's Contentions:

• The respondent argued that payment under Section 129(1) deemed the matter concluded under Section 129(5).

Reasoning & Analysis

The Supreme Court held that mere payment of penalty could not be construed as the end of proceedings. The bench of Justices JB Pardiwala and R Mahadevan emphasized that unless the proper officer passes a reasoned order after duly considering the taxpayer's reply to the notice issued under Section 129(3) of the CGST Act, it would be impossible for the taxpayer to effectively exercise the statutory right of appeal under Section 107.

The Court observed that the principles of natural justice mandate that when a taxpayer submits a response to a show cause notice, the adjudicating authority is required to consider such response and render a reasoned, speaking order.

Implications

This decision underscores the importance of following due process and ensuring fairness in quasi-judicial proceedings under the GST regime. The Court’s decision emphasizes that a formal, reasoned order is required to be passed under Section 129(3) of the CGST Act, and mere payment of penalty does not conclude the proceedings.

Outcome

The Supreme Court allowed the appeal and directed the proper officer to pass a reasoned order under Section 129(3) of the CGST Act within one month. The Court set aside the High Court’s decision and ensured that the appellant’s statutory right to appeal is protected.