GST goods detention tax-and-penalty payment under protest: final speaking order still required; MOV-09 directed, appeal allowed.

Whether payment of tax and penalty pursuant to a notice under s.129(3) CGST Act, 2017, coupled with release of goods under Form GST MOV-05, dispenses with the requirement of a final order by virtue of the deeming conclusion under s.129(5), was answered in the negative. SC held that every show cause notice must culminate in a reasoned, speaking order; s.129(5) only deems cessation of further proceedings and does not amount to waiver or abandonment of the taxpayer's right to contest the levy or appeal under s.107, particularly where objections are filed and payment is under protest. Non-passing of an order undermines natural justice and may offend Art.265. HC order was set aside and the proper officer was directed to issue a final order in Form GST MOV-09 with summary in Form GST DRC-07 after hearing; appeal allowed.

---

---

ISSUES:

Whether the proper officer is mandatorily required to pass a final, reasoned order under Section 129(3) of the CGST Act, 2017 after issuing a notice specifying tax and penalty payable, even if the tax and penalty are paid by the person charged within the stipulated time.Whether the deeming provision under Section 129(5) of the CGST Act, 2017, which states that proceedings shall be deemed concluded upon payment of the amounts, dispenses with the requirement of passing a formal adjudicatory order under Section 129(3).Whether payment of tax and penalty via Form GST DRC-03 can be treated as voluntary payment, thereby waiving the right to contest the demand and obviating the need for passing a reasoned order.Whether failure to pass a reasoned order under Section 129(3) after issuance of notice and receipt of objections violates principles of natural justice and the constitutional mandate under Article 265 of the Constitution of India.Whether the appellant's right to appeal under Section 107 of the CGST Act, 2017 is preserved in the absence of a formal order under Section 129(3).

RULINGS / HOLDINGS:

On the requirement of passing a final order under Section 129(3): The Court held that the proper officer is "duty-bound to pass a formal order in Form GST MOV-09" after issuing a notice specifying tax and penalty payable, regardless of payment, especially where objections have been filed, to enable the taxpayer to exercise the statutory right of appeal.On the effect of Section 129(5): The Court ruled that the deeming fiction in Section 129(5) that proceedings are concluded upon payment "does not absolve the responsibility of the proper officer to pass an order concluding the proceedings," and cannot be interpreted as waiver or abandonment of the right to challenge the levy.On the nature of payment via Form GST DRC-03: The Court found that payment made under business exigencies or protest cannot be treated as voluntary payment; the absence of a mechanism to record protest in Form GST DRC-03 should not prejudice the taxpayer, especially when objections are on record.On violation of natural justice and Article 265: The Court held that failure to pass a reasoned order in response to a show cause notice violates principles of natural justice and Article 265, which mandates that no tax or penalty shall be levied or collected except by authority of law.On the right to appeal under Section 107: The Court emphasized that the right to appeal is predicated on the existence of a formal adjudicatory order; absence of such order renders the right of appeal illusory and deprives the taxpayer of statutory remedies.

RATIONALE:

The Court applied the statutory framework of Section 129 of the CGST Act, 2017, which mandates that after issuing a notice specifying tax and penalty payable under subsection (3), the proper officer shall "thereafter, pass an order," and subsection (4) which requires an opportunity of hearing before determination.Rule 142 of the CGST Rules, 2017, particularly sub-rules (3) and (5), reinforce the procedural requirement that upon payment of tax and penalty, the proper officer shall issue an order in Form GST DRC-05 concluding the proceedings and upload a summary in Form GST DRC-07.The Court relied on Circular No.41/15/2018-GST dated 13.04.2018 issued by the CBIC, which provides binding departmental instructions that a speaking order in Form GST MOV-09 must be passed after objections are filed, even if payment is made, to ensure uniformity and safeguard taxpayer rights.The Court distinguished the deeming provision under Section 129(5) as signifying conclusion of prosecution proceedings but not waiver of adjudication or appeal rights; it held that "there can be no acquiescence in tax" and that payment under protest or compulsion does not constitute waiver or abandonment of rights.Judicial precedents on waiver, acquiescence, and abandonment were examined, emphasizing that waiver or abandonment must be clear, voluntary, and with full knowledge; mere payment or oral withdrawal of objections without written evidence does not satisfy this standard.The Court emphasized the constitutional mandate under Article 265 that tax or penalty can only be levied or collected by authority of law, which requires passing of a reasoned order to justify the demand.Principles of natural justice and fairness require that quasi-judicial authorities record cogent, clear, and succinct reasons for decisions affecting rights, as supported by Supreme Court jurisprudence emphasizing transparency, accountability, and judicial review.The Court rejected the respondents' reliance on strict literal interpretation of Section 129(5) to avoid adjudication, holding that procedural safeguards and taxpayer rights cannot be circumvented by mechanical application of deeming provisions.

---