GST Seizure: Supreme Court Directs Officers to Pass Speaking Orders Despite Penalty Payment
GST Seizure: Supreme Court Directs Officers to Pass Speaking Orders Despite Penalty Payment
Introduction
The Supreme Court has held that Goods and Services Tax (GST) officers must pass a reasoned final order explaining and justifying a decision to detain goods under Section 129 of the Central GST Act, 2017. The Court emphasized that without such a reasoned final order, the taxpayer is effectively deprived of the appeal remedies.
Factual Background
The case concerned M/s ASP Traders, a Karnataka-based areca nut dealer, which had sent goods for delivery to Delhi. The consignment was intercepted in Jhansi, and a detention notice was issued by the GST authorities under Section 129(3). Although ASP Traders paid the demanded tax and penalty to secure the release of the goods, no formal adjudication order was passed thereafter.
Contentions of the Parties
GST Department's Contentions:
- The GST authorities relied on Section 129(5) of the CGST Act, which states that proceedings shall be deemed to be concluded upon payment of tax and penalty.
- The department claimed that ASP Traders' representative had reportedly orally withdrawn the reply to secure the release of the goods.
ASP Traders' Contentions:
- The company argued that it had filed a reply objecting to the detention and had not withdrawn it.
- ASP Traders contended that the GST authorities were required to pass a final order justifying the levy and demand of tax and penalty.
Issues
The primary issue was whether the GST officers are required to pass a reasoned final order under Section 129(3) of the CGST Act, even if the taxpayer has paid the demanded tax and penalty.
Reasoning & Analysis
The bench of Justice JB Pardiwala and Justice R. Mahadevan held that every show cause notice must culminate in a final, reasoned order. The Court emphasized that the term "conclusion" in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated, but it does not absolve the responsibility of the proper officer to pass an order concluding the proceedings.
The Court noted that the failure to issue a reasoned order renders the appellate remedy under Section 107 of the Act illusory and may violate the right to fair taxation under Article 265 of the Constitution.
Implications
This judgment highlights the importance of reasoned orders in administrative decision-making and ensures that taxpayers are not deprived of their right to appeal.
Final Outcome
The Supreme Court allowed the appeal by ASP Traders and directed the Assistant Commissioner (Mobile Squad), Jhansi, to pass a final order under Section 129(3) within one month, after affording an opportunity of hearing to the firm.
In this case the appellant was represented by Mr. Pawanshree Agrawal and Divyanshu Agrawal, Advocates. Meanwhile the respondent was represented by Mr. Bhakti Vardhan Singh, Advocate.
