GST detention procedure requires notice and hearing before tax or penalty is fixed for release of goods in transit.

Under the GST detention and release framework for goods in transit, tax or penalty cannot be determined or enforced as a condition for release without prior notice and an opportunity of hearing. The court noted that the statutory scheme allows interception, detention, seizure and conditional release, but requires notice specifying the liability and a hearing before any tax, interest or penalty is fixed. A pre-release demand of tax and maximum penalty passed without hearing the dealer breached this mandatory procedure and could not be sustained. The demand order was quashed, and a fresh hearing was required before any final determination of liability.

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Issues: Whether the demand of tax and penalty raised at the stage of detention and release of goods in transit could be sustained without prior notice and opportunity of hearing.

Analysis: The detention powers under the goods and services tax law permit interception, detention, seizure and conditional release of goods in transit, but the statutory scheme requires issuance of notice specifying the tax and penalty payable and a hearing before any tax, interest or penalty is determined. The impugned demand order was not an assessment order, but a pre-release demand of tax and maximum penalty, passed without affording the dealer an opportunity to contest the liability. Such action breached the mandatory procedure governing detention and release of goods in transit.

Conclusion: The demand order could not be sustained and was liable to be quashed; the petitioner was entitled to a fresh hearing before any final determination of tax and penalty.

Ratio Decidendi: No tax or penalty for detained goods in transit can be determined or enforced as a condition for release without prior notice and an opportunity of hearing under the statutory detention procedure.

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