The Goods and Services Tax Appellate Tribunal (GSTAT), Rajkot Bench, has set aside a confiscation order involving penalties and fines of ₹19.06 lakh after finding that the tax officer passed it on the same day as the show-cause notice, despite granting seven days to submit a reply.
The Bench of Pramod Kumar Rai and Technical Member Kishori Lal held that an opportunity to respond must be real and reasonable. It also ruled that payment made to secure the release of detained goods and a vehicle cannot be treated as an admission of allegations or a waiver of the right to contest the demand.
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The dispute concerned 30.28 metric tonnes of MS Round in Coil, valued at ₹14,01,964, being supplied to M/s Motabhai Steel at Amreli.
The goods were originally covered by an invoice and an e-way bill issued by a supplier in Chhattisgarh for delivery to assessee at Rajkot. However, the vehicle was intercepted near the buyer’s premises at Amreli on April 20, 2025, at approximately 8:35 a.m. The Tribunal noted that Amreli was not on the route from Chhattisgarh to Rajkot.
At interception, the driver produced the original supplier’s invoice and e-way bill. No invoice or e-way bill was available for the onward supply from assessee to the Amreli buyer. The appellant generated those documents at 9:42 a.m., approximately 67 minutes after interception.
Following physical verification, the officer detained the goods and vehicle under Section 129(1) on April 22, 2025.
On April 25, 2025, the officer issued a notice in Form GST MOV-10 proposing confiscation under Section 130. The notice expressly allowed seven days from receipt to show cause, while also directing personal appearance at 12:30 p.m. on the date of issuance.
The officer nevertheless passed the confiscation order in Form GST MOV-11 that same day. The order recorded that no objections had been filed.
The demand comprised a penalty of ₹2,52,354, a fine of ₹14,01,964 in lieu of confiscation of goods, and a fine of ₹2,52,354 in lieu of confiscation of the conveyance, aggregating to ₹19,06,672. No tax was demanded.
The assessee paid the entire amount to secure release of the goods and vehicle, stating that the payment was made under protest.
The Tribunal found that the seven-day reply period would have run until May 2, 2025. Passing the final order on April 25 foreclosed the opportunity expressly granted in the notice.
It held that the absence of objections could not be used against the appellant when the time allowed for filing them had not expired.
Reading Section 130(4) with Section 126(3), the Bench emphasised that confiscation and penalty orders require an effective opportunity of being heard. A direction to appear on the very date of issuance, coupled with a final order before the reply deadline, did not satisfy that requirement.
The first appellate authority had relied on the appellant’s purported participation and subsequent payment to conclude that a hearing had been provided. The department also argued before the Tribunal that payment amounted to acceptance of the allegations.
The Tribunal rejected that reasoning. It found that the confiscation order itself referred to no submission or representation by the appellant and expressly recorded that no objections had been filed.
The Bench held that a person may pay the demand to obtain immediate release of detained goods while retaining the right to challenge the demand and seek a refund. Such payment does not establish acquiescence or waive the right to submit a reply and receive a hearing.
The Tribunal set aside the confiscation order, the consequential DRC-07 summary order and the first appellate order, remanding the dispute to the original adjudicating authority.
It directed the authority to provide sufficient opportunity to submit a written reply with supporting documents and to attend a personal hearing.
The appeal was allowed by way of remand solely on the ground of breach of natural justice. The Tribunal did not decide whether the officer could bypass the Section 129 procedure and proceed directly under Section 130, or whether the circumstances established an intention to evade tax. All substantive issues were kept open, and no refund was expressly ordered.
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