Paying IGST and Penalty under Protest does not Negate AO’s Liability to Pass Reasoned Order: Supreme Court upholds Assessee’s Right of Appeal [Read Judgement]
The Appellant, an arecanut dealer was apprehended after a part of their transported goods was transhipped onto another vehicle, resulting in a discrepant amount of goods.
![Paying IGST and Penalty under Protest does not Negate AO’s Liability to Pass Reasoned Order: Supreme Court upholds Assessee’s Right of Appeal [Read Judgement]](https://images.taxscan.in/h-upload/2025/07/28/2069983-paying-igst-penalty-protest-negate-aos-liability-pass-reasoned-order-supreme-court-right-of-appeal-taxscan.webp "Paying IGST and Penalty under Protest does not Negate AO’s Liability to Pass Reasoned Order: Supreme Court upholds Assessee’s Right of Appeal [Read Judgement]")
The Supreme Court recently passed a noteworthy judgment, holding that the payment of Integrated Goods and Services Tax (IGST) and penalty under protest by an assessee does not absolve the proper officer of the statutory obligation to pass a reasoned order under Section 129(3) of the Central Goods and Services Tax Act, 2017. The Apex Court stated that the order from the assessing...
The Supreme Court recently passed a noteworthy judgment, holding that the payment of Integrated Goods and Services Tax (IGST) and penalty under protest by an assessee does not absolve the proper officer of the statutory obligation to pass a reasoned order under Section 129(3) of the Central Goods and Services Tax Act, 2017.
The Apex Court stated that the order from the assessing officer (AO) reaffirms the assessee’s right to appeal under Section 107 of the Act even after such payment is made to secure the release of detained goods.
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A civil appeal was filed by ASP Traders, a Karnataka-based registered dealer engaged in the trade of arecanuts against the State of Uttar Pradesh and others contesting a decision by the Allahabad High Court wherein it was held that the Court could not order that the AO pass a reasoned in the case.
ASP Traders consigned 17,850 kg of dry arecanuts to Delhi. During the course of transit, the goods were transhipped onto another vehicle, resulting in a discrepancy of seven bags. On January 17, 2022, the Mobile Squad of the Commercial Tax Department - Jhansi detained the vehicle on the Lalitpur Bypass Road citing discrepancies in quantity and inconsistencies in the consignee’s address.
Following inspection, a notice was issued to the appellant on January 21, 2022 under Section 129(3) of the CGST Act. The appellant proceeded to submit a written reply contesting the allegations but, owing to business exigencies proceeded to deposit ₹7,20,440 towards IGST and penalty under protest via Form GST DRC-03.
The detained goods were then released through Form GST MOV-05, but no final order was passed in Form GST MOV-09. Although the assessee requested a copy of the final order in the matter, they were met with a response that all proceedings stood concluded under Section 129(5), which prompted the assessee to approach the Allahabad High Court. The High Court dismissed the writ petition, holding that the matter issue stood concluded and that no further adjudication was necessary, leading to the present appeal before the Supreme Court.
Pawanshree Agrawal, appearing for the appellant submitted that it is a settled position in law that every show cause notice must culminate in a reasoned final order; such an order being essential to enable the person affected to avail all statutory remedies.
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It was further contended that payment under protest does not amount to admission of liability, and that the statutory right to appeal under Section 107 cannot be extinguished in the absence of a reasoned order. It was submitted that the issuance of an order in Form GST MOV-09 was mandatory under Section 129(3), Rule 142(5) and CBIC Circular No. 41/15/2018-GST dated 13.04.2018.
Conversely, the respondents, represented by Bhakti Vardhan Singh, submitted that the authorized representative of the assessee had orally withdrawn their objections that were earlier filed towards the detention and voluntarily made the payment of ₹7,20,440 via Form GST DRC- 03, thereby concluding the proceedings under Section 129(5).
A Bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed that the payment made by the appellant was under protest and driven by business exigencies. The Court held that “While Section 129(5) of the CGST Act, 2017 provides that proceedings shall be deemed to be concluded upon payment of tax and penalty, this deeming fiction cannot be interpreted to imply that the assessee has agreed to waive or abandon the right to challenge the levy — a right that is protected by the very enactment itself.”
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It was thus held that the ‘deeming fiction’ under Section 129(5) does not override the obligation of the AO under Section 129(3) to pass a reasoned adjudicatory order. The Bench emphasized that without such an order, the assessee’s statutory right of appeal becomes illusory and violates the principle enshrined in Article 265 of the Constitution that no tax shall be collected without authority of law.
Accordingly, the Supreme Court set aside the order of the Allahabad High Court and directed the proper officer to pass a speaking order in Form GST MOV-09 and upload its summary in Form GST DRC-07 within one month. The Court further clarified that the right to appeal under Section 107 of the CGST Act must be preserved through proper adjudication, even if payment has been made.
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