Jammu and Kashmir High Court Overturns GST Penalty Due to Procedural Delay
The Jammu and Kashmir and Ladakh High Court has recently annulled a GST penalty imposed on a trader, highlighting a procedural lapse by tax authorities. The court found that the authorities failed to issue a mandatory notice within the statutory seven-day period, as mandated by the Central Goods and Services Tax Act, 2017 (CGST Act). This decision came in the case titled Danish Hassan v. UT of Jammu and Kashmir.
A Division Bench, consisting of Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani, emphasized the necessity of adhering to the timeline stipulated under Section 129(3) of the CGST Act. This provision requires that, following the seizure of goods, a notice specifying the tax and penalty due must be issued within seven days. The court observed, “There was a delay of one day in issuing the notice, which vitiates the entire proceedings,” in their order dated September 7.
Background of the Case
In the case under review, the trader challenged the GST authorities’ decision to seize his goods, citing non-compliance with procedural requirements. Section 129 of the CGST Act authorizes the seizure of goods transported without proper documentation, such as an e-way bill or invoice, aiming to enforce tax compliance. However, it also mandates that a notice be issued within seven days of the seizure, outlining the tax and penalty and providing an opportunity for a hearing before finalizing any penalty orders.
The trader argued that his goods were detained on September 2, 2024, but the requisite notice was not issued until September 11, 2024, and was only uploaded online on September 12, 2024. This delay exceeded the statutory timeframe, leading the court to consider the penalty proceedings as flawed.
Court’s Decision and Implications
The High Court found the trader’s argument compelling, noting that the delay in issuing the notice constituted a breach of the mandatory provision in Section 129(3) of the CGST Act. Consequently, the court set aside the penalty orders against the trader. It declared, “The notice dated 11.09.2024 was uploaded on 12.09.2024, i.e., beyond a period of seven days. In that view of the matter, the mandate of Sub Section 3 of Section 129 of the Act was violated by the Proper Officer. There was a delay of one day in issuing the notice, which vitiates the entire proceedings.”
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As a result, the court annulled the orders issued by both the GST officer and the appellate authority in 2024. “The writ petition is allowed. The impugned order of the appellate Authority dated 28.10.2024 and order of Proper Officer dated 17.09.2024 are set aside, having been issued in violation of the mandatory provisions of Sub Section 3 of Section 129 of the Act,” stated the court.
Advocate Zaffer Qadri represented the petitioner, while the respondent authorities were represented by Senior Additional Advocate General Mohsin Qadri, assisted by Advocate Maha Majeed.
