Jammu and Kashmir High Court quashes GST penalty over one-day delay in issuing mandatory notice

The High Court of Jammu and Kashmir and Ladakh recently quashed GST penalty order issued against a trader on finding that the tax authorities missed a statutory seven-day deadline to issue a mandatory notice by one day [Danish Hassan v. UT of Jammu and Kashmir].

A Division Bench comprising Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani reiterated that the timeline prescribed under Section 129 (3) of the Central Goods and Services Tax Act, 2017 (CGST Act) is mandatory.

“There was a delay of one day in issuing the notice, which vitiates the entire proceedings,” the High Court observed in its September 7 order.

The Court made the observation while dealing with a plea filed by a trader challenging the seizure of his goods by GST authorities under Section 129 of the CGST Act.

This provision empowers the GST authorities to seize goods that are transported without proper documents (e-way bill, invoice) or in violation of GST rule. The seizure is meant to enforce tax compliance, and the seized goods are released on the payment of a penalty.

However, Section 129 (3) lays down that within seven days of the seizure or detention of goods under Section 129, a notice must be issued by the GST authorities to the person whose goods are seized.

This notice is supposed to specify the tax and penalty payable for release of the goods, the grounds of detention and give the person whose goods are seized an opportunity to be heard before a final penalty order is passed.

Pertinently, this notice must be issued within seven days of the seizure of goods.

In the case at hand, the trader claimed that his goods were detained on September 2, 2024, but the Section 129 (3) notice issued beyond the seven day deadline.

The Court found merit in this argument. It found that the notice was issued only on September 11, 2024, and uploaded online only on September 12, 2024. The Court held that this was sufficient grounds to set aside the proceedings against the trader.

"The notice dated 11.09.2024 admittedly was uploaded on 12.09.2026 i.e beyond a period of seven days. In that view of the matter, the mandate of Sub Section 3 of Section 129 of the Act was violated by the Proper Officer. There was a delay of one day in issuing the notice, which vitiates the entire proceedings."

It, therefore, set aside the adverse orders passed against the trader (petitioner) by a GST officer as well as an appellate authority in 2024.

"The writ petition is allowed. The impugned order of the appellate Authority dated 28.10.2024 and order of Proper Officer dated 17.09.2024 are set aside, having been issued in violation of the mandatory provisions of Sub Section 3 of Section 129 of the Act," the Court said.

Advocate Zaffer Qadri appeared for the petitioner.

Senior Additional Advocate General Mohsin Qadri, assisted by Advocate Maha Majeed, represented the respondent authorities.

[Read Order]