The Supreme Court has held that in GST, only a formal order brings closure — pre-SCN payments hold no legal finality.
The bench of Justice J.B. Pardiwala and Justice R. Mahadevan has observed that even assuming that the payment was made by the appellant, voluntarily or otherwise, the proper officer could not be absolved of the statutory obligation to pass a reasoned order in Form GST MOV-09 and upload the corresponding summary in Form GST DRC-07.
The appellant is a registered dealer in Red Arecanut operating from Channagiri, Davangere, Karnataka. On 14.01.2022, they consigned 17,850 kg of dry Arecanut valued at Rs.51,72,930/-, packed into 255 bags to one M/s. Diamond Trading Company, Delhi, through Vehicle No. UP-78-GN-7563 accompanied by E-Way bill. During transit, the goods were transhipped and loaded onto another vehicle for onward journey to Delhi. However, only 248 bags were loaded onto the new vehicle, with 7 bags missing from the original consignment. The vehicle was detained by the Mobile Squad at Lalitpur Bypass Road, Jhansi. The driver’s statement was recorded in Form GST MOV-01. Following physical inspection, a report was generated in Form GST MOV-04 on 20.01.2022 alleging certain deficiencies. A detention order in Form GST MOV-06 dated 20.01.2022 was also issued.
Subsequently, a notice under section 129(3) of the Central Goods and Services Tax Act, 2017, was issued in Form GST MOV-07 highlighting the discrepancy of 7 missing bags and the resulting shortfall in quantity from 18220 kg to 17670 kg. It was further alleged that the consignee, M/s. Diamond Trading Company, was prima facie non-existent and that the address of the consignor was incorrect as per departmental records.
The appellant submitted a detailed reply denying all allegations. However, in view of pressing business exigencies, towards IGST, as indicated in the show cause notice, through Form GST DRC-03 dated 27.01.2022. Accordingly, the detained goods were released under Form GST MOV-05 dated 27.01.2022.
Despite the release, no final order under Section 129(3) was passed by the Mobile Squad. Accordingly, on 26.02.2022, the appellant submitted a representation seeking an order in Form GST MOV-09, to enable it to pursue statutory remedies. In response, by communication dated 03.03.2022, the Mobile Squad Official stated that one Mohd. Javed, the appellant’s representative, appeared on 27.01.2022, orally requested withdrawal of the earlier reply, and sought release of goods, and hence, no further proceedings were deemed necessary.
The appellant denied having made any oral request to withdraw the reply or abandon further proceedings. Asserting that the authorities are statutorily bound to pass a reasoned order under section 129(3), the appellant sent further communications, seeking a copy of the order, if any, passed under provision.
Pawanshree Agrawal, the counsel appearing on behalf of the appellant, at the outset, submitted that it is a settled position in law that every show cause notice must culminate in a reasoned final order. Such an order is essential to enable the person affected to avail all statutory remedies.
Bhakti Vardhan Singh, counsel appearing on behalf of the department submitted that the vehicle transporting betel nuts from Nagpur to Delhi, was intercepted by the Assistant Commissioner, Mobile Squad Unit, Jhansi, on 17.01.2022. Upon examination of the documents, several discrepancies were found. Consequently, the goods and the vehicle were detained, and proceedings under the GST Act were initiated.
The court held that the objections were filed, payment was stated to have been made under protest due to business exigencies, and the appellant seeks to challenge the levy, the proper officer was under a clear statutory obligation to pass a final order under section 129(3) in Form GST MOV-09 and DRC-07. The refusal by the High Court to direct the passing of such an order, has the effect of frustrating the appellant’s statutory right to appeal and is contrary to well established legal principles governing tax adjudication and procedural fairness.
The court held that the order passed by the High Court is set aside. The court is directing the department to pass a reasoned final order under section 129(3) of the CGST Act, 2017, in Form GST MOV-09, after granting an opportunity of being heard as mandated under Section 129(4), and upload the summary thereof in Form GST DRC-07 within a period of one month from the date of receipt of a copy of this judgment. Thereafter, it shall be open to the appellant to pursue appropriate legal remedies against such order, in accordance with law.
Case Details
Case Title: M/S ASP TRADERS Versus State of UP
Case No.: CIVIL APPEAL NO. 9764 OF 2025
Date: JULY 24, 2025
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