The Jammu & Kashmir and Ladakh High Court has set aside GST detention and penalty proceedings after finding that the proper officer issued the show-cause notice beyond the mandatory seven-day period prescribed under Section 129(3) of the Central Goods and Services Tax Act, 2017.

The Bench of Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani held that even a delay of one day in issuing the statutory notice violated the mandate of Section 129(3) and consequently vitiated the entire proceedings.

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The petitioner challenged an appellate order dated October 28, 2024, passed by the Appellate Authority, Appeals-I, State Taxes Department, Kashmir. The appellate authority had upheld a September 17, 2024 order passed by the Deputy Commissioner, State Taxes Enforcement (Central), Kashmir, under Section 129(3) of the CGST Act.

The petitioner primarily contended that the proper officer failed to serve the statutory notice within seven days from the date on which the goods and conveyance were detained and seized.

It was argued that the prescribed timeline under Section 129(3) was mandatory and that its violation rendered the subsequent penalty order and appellate order legally unsustainable.

The petitioner relied upon the High Court’s earlier judgment in Mohd. Hazzak Lohar and Another v. Commissioner State Taxes and Another, in which the Court had held that the timelines prescribed under Section 129(3) of the CGST Act were mandatory.

Examining the facts, the High Court noted that the proper officer detained the goods along with the conveyance on September 2, 2024. Consequently, the officer was required to issue a show-cause notice within seven days from the date of detention and seizure.

However, the notice intimating the detention and seizure and specifying the proposed penalty was issued only on September 11, 2024 and uploaded on the portal on September 12.

The Court observed that the notice was uploaded beyond the statutory period of seven days. There was, therefore, a delay of one day in complying with the requirement under Section 129(3).

“There was a delay of one day in issuing the notice, which vitiates the entire proceedings,” the Bench held.

The order mentions the notice as having been uploaded on September 12, 2026. However, this appears to be a typographical error since the detention, notice, penalty order and appellate proceedings pertained to 2024.

The High Court reiterated that the statutory timelines governing the detention and seizure of goods cannot be treated as merely directory.

Referring to its earlier decision in Mohd. Hazzak Lohar, the Bench observed that Section 129 regulates the exercise of coercive statutory powers and protects valuable rights. The legislature had deliberately used the expression “shall” while prescribing the timelines.

The Court stated that treating the timeline as directory would defeat the legislative objective of preventing the prolonged detention or seizure of goods, conveyances and documents belonging to traders, transporters or assessees.

It further noted that whenever a statute authorises coercive measures such as detention or seizure, courts insist upon strict compliance with the prescribed statutory procedure.

According to the Court, the absence of an expressly stated consequence for failure to meet the timeline does not necessarily make the provision directory. The legislative intent, object of the provision and nature of the rights affected must be considered.

The timelines under Section 129(3), the Court reiterated, were introduced to prevent arbitrary detention, prolonged seizure and harassment of traders.

The High Court allowed the writ petition and set aside the October 28, 2024 order passed by the appellate authority as well as the September 17, 2024 order passed by the proper officer.

The Bench held that both orders had been issued in violation of the mandatory provisions of Section 129(3) of the CGST Act.

The Court, however, clarified that quashing the notice and the consequential orders would not prevent the tax authorities from pursuing any other proceedings that may be permissible under the CGST Act.

The High Court also directed that the penalty amount deposited before it pursuant to an earlier order dated December 17, 2024 be released in favour of the petitioner after due verification.

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