The Patna High Court has ruled that the reply date of the taxpayer cannot be treated as service of GST MOV-07 notice. The court quashed the penalty order issued under GST ( Good and Services Tax ) which was issued beyond the 7 – day limit violating Section 129(3) of the GST Act after the service of MOV-07 notice.
M/s Kedia Enterprises – the petitioner’s vehicle carrying goods was detained by the authorities on 30.03.2024. A physical verification of the detained goods was conducted on the same day. Subsequently, a notice was issued and uploaded on the GST portal on 04.04.2024, which was duly signed by the petitioner’s representative, establishing that the notice was served within the 7-day timeframe.
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The petitioner challenged the order dated 18.04.2024, contending that it was issued beyond the mandated 7-day period following the service of notice. According to Section 129(3) of the CGST Act, an order must be passed within 7 days of the service of notice, following detention of goods or conveyance under the Act.
According to the law, the authorities were required to issue an order within 7 days from the service of notice, i.e., by 12.04.2024, accounting for the fact that 11.04.2024 was a public holiday. Instead, the final order was passed on 18.04.2024, six days beyond the prescribed time limit.
The Section 129(3) states as follows: “The proper officer detaining or seizing goods or conveyances shall issue a notice within seven days of such detention or seizure, specifying the penalty payable and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1).”
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The petitioner’s counsel, relying on the judgment in Pawan Carrying Corporation vs. Commissioner, CGST & Central Excise & Ors, argued that the penalty order passed beyond the limitation period under Section 129(3) was unsustainable. In the referenced case, despite the timely issuance of notice, the final order was delayed by 19 days, rendering it invalid under the Act.
The department counsel referred to M/s Sangam Wires vs. State of Bihar & Ors, to argue that the penalty imposed on the petitioner should be considered valid. It was contended that since the petitioner filed the reply on 12.04.2024 (a day after the due date due to the public holiday), that date should be treated as the date of service, and the delay in passing the order was justifiable.
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Furthermore, it was argued that the petitioner made the necessary payments on 24.04.2024 under Section 129(5), which involved the release of the goods and conveyance.
The court, however, rejected the Government’s reliance on Sangam Wires, pointing out that in that case, the order was passed simultaneously with the notice, which was a clear violation of natural justice.
Chief Justice K. Vinod Chandran and Justice Partha Sarth stated that in the present case, the delay in passing the order beyond the prescribed 7-day limit was a breach of Section 129(3). The petitioner’s reply was filed on the last permissible date, and the authority should have passed the order immediately after considering the reply. The delay rendered the entire process procedurally flawed, the bench added.
The petitioner further submitted that the payment made was to facilitate the release of the vehicle and not in compliance with Section 129(1)(a) of the Act. The court accepted this submission, stating that as the order had already been passed on 18.04.2024, the payment was made against that order and not under the applicable provisions of Section 129(1)(a).
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The High Court found the impugned penalty order unsustainable due to the delay in compliance with Section 129(3) of the CGST Act. It set aside the order and directed the refund of the amounts paid by the petitioner.
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