M/S ASP TRADERS versus STATE OF UTTAR PRADESH & ORS. (24/07/2025) — Supreme Court headnote

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Summary

Goods in transit were detained and a notice under Section 129(3) of the CGST Act issued; the appellant filed objections but, to secure release, paid the proposed tax and penalty through Form GST DRC-03, after which no final order was passed. The High Court refused a mandamus, holding the proceedings concluded under Section 129(5). The Supreme Court held that every show cause notice must culminate in a reasoned order, that the deeming fiction in Section 129(5) does not absolve the proper officer of the duty to pass an order in Form GST MOV-09 and upload a summary in Form GST DRC-07, that a payment made under business compulsion with objections on record is not voluntary and is no waiver, and that the absence of an order renders the appeal under Section 107 illusory and offends Article 265.

Issues

Whether, upon payment of tax and penalty within the time stipulated in a notice under Section 129(3) of the CGST Act, the proper officer is still mandatorily required to pass a final order under Section 129(3), or whether the deeming fiction in Section 129(5) dispenses with that requirement.
Whether payment made through Form GST DRC-03 to secure release of detained goods, after written objections were filed, can be treated as voluntary or as a waiver of the right to challenge the levy.

Provisions considered

Section 129(1), Central Goods and Services Tax Act, 2017Goods and conveyance transported in contravention of the Act are liable to detention or seizure and are to be released on payment of the applicable tax and penalty or on furnishing security; payment of the amount referred to in this sub-section triggers the deeming fiction in sub-section (5). (¶¶ 9.2, 14)
Section 129(3), Central Goods and Services Tax Act, 2017The proper officer 'shall issue a notice ... and thereafter, pass an order' for payment of tax and penalty. The words 'and thereafter' make the passing of a reasoned order mandatory regardless of payment, particularly where protest or dispute is raised; once objections are filed, adjudication is imperative. (¶¶ 9.2, 14, 15, 19, 20, 21)
Section 129(4), Central Goods and Services Tax Act, 2017No tax, interest or penalty may be determined under sub-section (3) without an opportunity of hearing; the proper officer was directed to pass the final order after granting such hearing. (¶¶ 9.2, 21)
Section 129(5), Central Goods and Services Tax Act, 2017On payment of the amount under sub-section (1), all proceedings in respect of the notice are deemed concluded. 'Conclusion' merely signifies that no further proceedings for prosecution will be initiated; it does not imply waiver of the right to challenge the levy and does not absolve the proper officer of the duty to pass an order concluding the proceedings. Reliance on it to avoid a final order is a non-starter. (¶¶ 9.2, 14, 17)
Section 107, Central Goods and Services Tax Act, 2017The right of appeal is predicated on the existence of a formal adjudication; an appeal lies only against an order, so without a reasoned order under Section 129(3) the statutory remedy is rendered illusory. (¶¶ 15, 18, 19)
Section 168 and Circular No. 41/15/2018-GST dated 13.04.2018, Central Goods and Services Tax Act, 2017The CBIC circular, binding on the department under Section 168, requires that on payment under Section 129(1) the proper officer release the goods by an order in Form GST MOV-05, pass a formal order in Form GST MOV-09, upload it on the common portal and upload a summary in Form GST DRC-07 so that the demand is recorded in the electronic liability register. (¶¶ 10, 14, 19)
Rule 142(3) and (5), Central Goods and Services Tax Rules, 2017Sub-rule (3) provides for intimation of payment in Form GST DRC-03 and an order in Form GST DRC-05 concluding the proceedings; sub-rule (5) mandates uploading a summary of an order under Section 129 in Form GST DRC-07. The auto-generation of DRC-05 on a DRC-03 payment cannot defeat the taxpayer's rights, and the proper officer remains bound to pass the order and upload the DRC-07 summary. (¶¶ 9.3, 14, 16, 19)
Section 20, Integrated Goods and Services Tax Act, 2017Adopts the provisions of Section 129 of the CGST Act mutatis mutandis for IGST. (¶ 9.1)
Article 265, Constitution of IndiaNo tax shall be levied or collected except by authority of law; the bar is against collection as well as levy, so there can be no acquiescence in tax, and a levy unsupported by a speaking order would potentially violate the Article. (¶¶ 16.1, 18, 19)

Held

It is well settled that every show cause notice must culminate in a final, reasoned order. The deeming fiction in Section 129(5) cannot be interpreted to mean that the assessee has waived or abandoned the right to challenge the levy, a right protected by the enactment itself. 'Conclusion' in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated; it does not absolve the proper officer of the duty to pass a formal order in Form GST MOV-09 and upload a summary in Form GST DRC-07 under Rule 142(5) and the Circular of 13.04.2018, so that the taxpayer can avail the appeal remedy. (¶ 14)
Where objections have been filed and payment is made under protest, adjudication is not optional: a speaking order justifying the demand is imperative to safeguard the right of appeal under Section 107. The language of Section 129(3), 'shall issue a notice ... and thereafter, pass an order', reinforces the mandatory nature of a reasoned order regardless of payment, particularly where protest or dispute is raised. (¶ 15)
Where no written material supports the claim that objections were orally withdrawn, the written reply prevails over the contrary oral submission and the authorities must consider it and pass a speaking order on each contention. Because the GST portal permits payment only through Form GST DRC-03, which is automatically classified as voluntary with no mechanism to record protest, a payment made under commercial compulsion to secure release of detained goods, with objections already on record, cannot be treated as voluntary; the auto-generated DRC-05 and such procedural limitations cannot defeat the taxpayer's rights. (¶ 16)
Payment by an assessee does not absolve the proper officer of the responsibility to pass an order justifying the demand. Under Article 265 there is a bar against both levy and collection without authority of law, so there can be no acquiescence in tax. Waiver is an intentional abandonment of a right with full knowledge, and acquiescence requires prolonged inaction; the payment by itself is neither waiver nor abandonment, especially where the appellant objected to the demand and there is a statutory mandate to pass an order with a corresponding right of appeal. (¶¶ 16.1, 16.2)
Reliance on Section 129(5) to avoid issuing a final order under Section 129(3) is a non-starter that overlooks the statutory scheme; where objections are filed or payment is made under protest or compulsion, adjudication is indispensable. The decision in Dilip Kumar & Co. on strict interpretation of exemptions is misplaced, as the issue concerns due process and procedural safeguards, not exemption. (¶ 17)
Natural justice requires the adjudicating authority to consider a reply to a show cause notice and render a reasoned speaking order; this is a substantive safeguard. An appeal under Section 107 lies only against an order, so the absence of a reasoned order under Section 129(3) deprives the taxpayer of the statutory remedy, creates a legal vacuum and leaves any consequential tax or penalty unsupported by authority of law, potentially violating Article 265. Following Kranti Associates, failure to furnish reasons violates natural justice and renders the right of appeal illusory. (¶¶ 18, 18.1)
Even assuming the payment was voluntary, the proper officer could not be absolved of the statutory obligation to pass a reasoned order in Form GST MOV-09 and upload the summary in Form GST DRC-07; compliance is essential for transparency and accountability in tax administration and for safeguarding appellate rights, and is in consonance with Article 265. The High Court's refusal to direct such an order frustrated the appellant's statutory right of appeal. (¶¶ 19, 20)

Result

Appeal allowed; High Court order set aside. Respondent No. 3 directed to pass a reasoned final order under Section 129(3) of the CGST Act in Form GST MOV-09, after granting an opportunity of hearing under Section 129(4), and to upload the summary in Form GST DRC-07 within one month of receipt of the judgment; appellant free thereafter to pursue remedies against that order; no order as to costs; connected applications closed.