Tribunal Must Pass Reasoned Order After Transit-Detention Payment; Supreme Court Remands For Formal Adjudication

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by M/s ASP Traders against the Allahabad High Court’s dismissal of a writ challenging the absence of a formal adjudicatory order after payment of tax and penalty for detained goods. The question before the Court concerned whether payment made to secure release of detained goods under Section 129(1) of the CGST Act, 2017 dispensed with the statutory duty of the proper officer to pass a reasoned order under Section 129(3) and to enable the taxpayer’s right of appeal.

The Court allowed the appeal, set aside the High Court order and directed the mobile squad officer to pass a reasoned final order under Section 129(3) in Form GST MOV-09 and to upload the summary in Form GST DRC-07 within one month, after affording an opportunity of hearing. The Court emphasised that procedural safeguards and the right of appeal could not be rendered illusory by automatic system-generated conclusions. The Court, in its reasoning, observed: “It is a well settled principle that every show cause notice must culminate in a final, reasoned order. 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. The term ‘conclusion’ as used in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated. It does not absolve the responsibility of the proper officer to pass an order concluding the proceedings. Therefore, the proper officer is duty-bound to pass a formal order in Form GST MOV-09 and upload a summary thereof in Form GST DRT 07 as mandated under Rule 142(5) and the Circular dated 13.04.2018, so as to enable the taxpayer to avail the appeal remedy as per law.” The Court further noted that the language of Section 129(3) was categorical that the officer “shall issue a notice… and thereafter, pass an order,” reinforcing the mandatory nature of adjudication where objections had been filed.

Background The dispute arose when M/s ASP Traders, a registered dealer in red arecanut from Karnataka, consigned 17,850 kg of dry arecanut to a Delhi consignee in January 2022. During transhipment one vehicle carried only 248 of 255 bags; the subsequent interception by the Mobile Squad at Lalitpur Bypass Road, Jhansi led to recording of the driver’s statement, physical inspection and a detention order with a show cause notice in Form GST MOV-07 dated 21.01.2022 alleging shortfall and other discrepancies. The appellant filed a written reply contesting the allegations but, citing business exigencies, deposited Rs.7,20,440 by Form GST DRC-03 on 27.01.2022 and the goods were released by a discharge order in Form GST MOV-05. No formal adjudicatory order in Form GST MOV-09 was issued and no summary was uploaded in Form GST DRC-07.

The appellant sought a writ directing issuance of the Form GST MOV-09 order and a speaking adjudication. The High Court held that because payment was made and the discharge order was issued, proceedings stood concluded under Section 129(5) and Rule 142(3), and denied relief. Before the Supreme Court, the appellant contended that payment could not be treated as voluntary or as relinquishment of the right to challenge, that Rule 142 and CBIC Circular No.41/15/2018 required issuance of Form MOV-09 and upload in DRC-07, and that a reasoned order was necessary to preserve appellate rights under Section 107 and to satisfy Article 265. The respondents relied on Section 129(5) and Rule 142(3) to contend that payment concluded proceedings and no further order was required.

The Supreme Court analysed the statutory scheme, Rule 142 and the CBIC circular, and held that where objections were on record or payment was made under protest or compulsion, adjudication was indispensable. It found no documentary proof of a written withdrawal of objections and noted the limitations of the GST payment portal that did not permit recording payment “under protest.” The Court concluded that the absence of a speaking order deprived the taxpayer of the statutory right of appeal and directed the proper officer to pass the final order in Form GST MOV-09 and upload the summary in Form GST DRC-07 within one month, after hearing. The High Court order was set aside and the appeal was allowed. No order as to costs was made.

Case Details: Case No.: CIVIL APPEAL NO. 9764 OF 2025 (Arising out of S.L.P. (C) No. 17995 of 2022) Case Title: M/s ASP Traders v. State of Uttar Pradesh & Ors. Appearances: For the Petitioner(s): Mr. Pawanshree Agrawal, Advocate For the Respondent(s): Mr. Bhakti Vardhan Singh, Advocate