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of <h1>Detention and penalty under s.129 CGST invalid without reasoned confirming order; full refund with 9% interest ordered</h1> HC held that detention and collection of penalty under s.129 CGST Act was without authority where the assessing officer failed to pass a reasoned ... Detention of goods u/s 129 of the CGST Act, 2017 - contravention of the provisions relating to the movement of goods stating that the E-Way Bills had expired and there is a mismatch with the vehicle - no bifurcation of penalty calculations in the notice u/s 129(1)(a) and 129(1)(b) - HELD THAT:- Notwithstanding the statutory mandate under Section 129(3) of the Tripura State Goods and Services Tax Act, 2017, no order was passed by respondent No. 4 justifying the imposition of penalty on the petitioner till date, for more than 16 months. After issuing the letter dt.23.7.2024 (Annexure-13) asking petitioner to appear for a personal hearing on 30.7.2024, nothing further was done by respondent no. 4 - the letter dt.26.7.2024 was addressed by the petitioner to the respondent no. 4 where the petitioner has specifically stated that he was paying the full penalty amount in dispute and specifically requesting the said officer to pass order confirming penalty in Form MOV-09 within the time frame so that he can challenge it in appeal before the appellate authority. In the absence of an order passed by respondent no. 4 confirming the penalty proposed on the petitioner (with reasons after considering petitioner’s representation dt. 18.7.2024 to the show cause notice dt.11.7.2024 issued to it), the very levy and collection of penalty under Section 129(1) on/from the petitioner by respondents is without authority of law and violates Art.14. Art.19(1) (g), Art. 265 and Art. 300-A of the Constitution of India. The respondents are directed to refund to petitioner within 2 months, the entire amount of penalty paid by the petitioner to them with interest @9% per annum from the date of such payment till the date of refund - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the statutory mandate in Section 129(3) requiring the officer detaining goods to issue a notice within seven days and thereafter pass an order within seven days of service of such notice was complied with where penalty was proposed in MOV-07 but no MOV-09 order confirming penalty was ever passed. 2. Whether payment of the tax/penalty by the detenu to secure release of goods, made under economic duress and coupled with a contemporaneous express statement of intention to challenge any confirming order, operates as a voluntary acceptance of liability that obviates the statutory requirement to pass a confirming order under Section 129(3). 3. Whether levy and collection of penalty under Section 129(1) without passing the statutorily mandated confirming order infringes principles of legality and the petitioner's constitutional rights under Articles 14, 19(1)(g), 265 and 300-A. 4. Whether refund, interest and costs are appropriate remedies where the collecting authority failed to pass the confirming order and the detained party paid the demanded amount to secure release of goods. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Compliance with Section 129(3) requirement to pass a confirming order (statutory framework). Legal framework: Section 129(3) imposes two temporal obligations on the proper officer detaining goods - (i) to issue a notice within seven days specifying the penalty payable; and (ii) to pass an order within seven days from the date of service of such notice confirming payment of penalty under clause (a) or (b) of sub-section (1). The second step requires the officer to consider the detenue's explanation and record reasons justifying the imposition of penalty. Precedent treatment: The judgment applies the statutory text and mandate; no prior authority is relied upon or overruled. The Court treats the two parts of Section 129(3) as sequential and mandatory. Interpretation and reasoning: The Court holds that issuance of MOV-07 satisfied only the first limb. The later limb - passing an order in MOV-09 justifying and confirming the penalty after considering explanations - was not complied with despite the passage of more than sixteen months. The statutory language compels the officer to pass a reasoned order; mere collection/release without issuance of MOV-09 cannot substitute for that requirement. Ratio vs. Obiter: Ratio - the two-step requirement in Section 129(3) is mandatory and non-derogable; failure to pass the confirming order renders subsequent steps procedurally void as regards the statutory mandate. Obiter - none beyond explanatory remarks on timelines. Conclusion: Non-passage of the confirming order under Section 129(3) constitutes non-compliance with statutory mandate and is impermissible. Issue 2 - Effect of payment made under economic duress and contemporaneous protest on voluntariness of payment and obligation to pass confirming order. Legal framework: Administrative actions imposing penalties must be accompanied by compliance with prescribed procedures. Acceptance of payment does not, without more, cure procedural non-compliance. A payment made to secure release of detained goods may be characterized as coerced if made to remove the duress of detention. Precedent treatment: The Court treats the facts against statutory requirements; no precedent cited to justify treating such payment as conclusive proof of voluntary acceptance. Interpretation and reasoning: The petitioner paid the full penalty in Form DRC-03 only to secure release and concurrently requested that the officer pass MOV-09 so that the petitioner could challenge the order. The Court views this as payment under economic duress and an express intention to challenge - therefore not a voluntary acceptance of liability. Consequently, the respondents cannot treat the payment as relieving them of the duty to pass a reasoned confirming order. Ratio vs. Obiter: Ratio - payment under compulsion to secure release, coupled with an express reservation of challenge, does not negate the statutory duty to pass a confirming order; it does not convert the detained party's payment into voluntary acceptance that dispenses with the officer's obligation. Obiter - remarks on the petitioner's motive and contemporaneous communications supporting economic duress characterization. Conclusion: The payment was not voluntary in law for purposes of dispensing with Section 129(3)'s requirement; respondents remained obliged to pass a confirming order. Issue 3 - Legality of levy and collection absent a confirming order; constitutional implications. Legal framework: Levy and collection of tax or penalty must have statutory authority; administrative compliance with procedural safeguards is integral to legality. Fundamental rights implicated include equality of treatment (Article 14), freedom to carry on trade (Article 19(1)(g)), requirement of levy by law (Article 265) and protection of property (Article 300-A) where revenue collection is concerned. Precedent treatment: The Court infers constitutional invalidity where statutory procedure for imposing financial liability is not followed; no precedent is cited for overruling or distinction. Interpretation and reasoning: Because no MOV-09 order was passed justifying the penalty, the collection of the penalty lacks the statutorily mandated basis and is therefore 'without authority of law.' The absence of a reasoned order deprived the petitioner of the opportunity to have the charge judicially and administratively reviewed in appeal. This deficiency is held to violate Articles 14 and 19(1)(g) by denying a fair and lawful process, Article 265 by permitting collection without lawful levy, and Article 300-A by impinging on property rights without lawful authority. Ratio vs. Obiter: Ratio - collection of penalty without the statutorily required confirming order is ultra vires and constitutionally impermissible; it violates Articles 14, 19(1)(g), 265 and 300-A. Obiter - discussion of how procedural non-compliance affects appellate rights. Conclusion: Levy and collection of penalty in the absence of a confirming order is unlawful and constitutionally invalid. Issue 4 - Appropriate remedies: refund, interest and costs; disciplinary direction. Legal framework: Where an administrative act is found unlawful, restitution (refund) with interest and costs is an established remedy to restore the aggrieved party and deter administrative non-compliance. Administrative accountability may involve departmental review or disciplinary steps against errant officers. Precedent treatment: The Court exercises its equitable and remedial powers to order refund with interest and costs; no conflicting authority is invoked. Interpretation and reasoning: Given that the payment was made under economic duress and collection occurred without statutory justification, the petitioner is entitled to restitution. Interest at a specified rate compensates for deprivation of funds from the date of payment. Costs are awarded to penalize failure to comply with mandatory statutory procedure and to compensate the petitioner for litigation. The Court further directs supervisory officers to examine the conduct of the responsible officer and, if warranted, initiate disciplinary action. Ratio vs. Obiter: Ratio - refund of the illegally collected amount with interest and an award of costs is appropriate where mandatory procedural requirements for levy have not been complied with and payment was made under duress. Obiter - suggested supervisory/disciplinary follow-up is a directive of administrative propriety rather than a substitute for statutory sanction. Conclusion: The respondent authority must refund the entire penalty with interest from date of payment and pay specified costs; supervisory authorities should consider disciplinary action against the officer who failed to comply with Section 129(3). Cross-references and consequential holdings 1. The Court's conclusions on Issues 1-3 are interlinked: failure to pass MOV-09 (Issue 1) + payment under duress (Issue 2) => collection without lawful basis (Issue 3) => entitlement to remedy (Issue 4). 2. The duty to pass a reasoned confirming order under Section 129(3) survives payment to secure release; acceptance of payment does not cure procedural non-compliance nor bar subsequent challenge. 3. Administrative authorities cannot rely on the practical effect of releasing goods after payment to avoid the statutory obligation of recording reasons and passing an appeal-reviewable order.
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