Facts of the Case:
The petitioners challenged various proceedings initiated under Section 129 of the Jammu & Kashmir Goods and Services Tax Act, 2017, including notices issued in Forms GST MOV-02, GST MOV-06, GST DRC-01 and the penalty order dated 22.09.2025. The dispute arose when a vehicle belonging to the petitioners was intercepted on 11.09.2025 and the person representing the transporter allegedly failed to produce documents relating to the consignment being transported. Consequently, proceedings under Section 129 were initiated and a show cause notice proposing penalty was issued on the same day. The petitioner filed a reply on 14.09.2025 and initially expressed willingness to furnish a bank guarantee. Subsequently, the petitioner disputed the valuation of the goods and sought revaluation, leading to constitution of a revaluation team.
During the proceedings, the Jammu & Kashmir Pollution Control Board intervened and declared a portion of the seized goods, namely polythene carry bags, as contraband under the Plastic Waste Management Rules, 2016. After excluding the contraband goods from consideration, the State Taxes Officer passed the final penalty order on 22.09.2025. The petitioners challenged the order primarily on the ground that it had been passed beyond the statutory period of seven days prescribed under Section 129(3) of the Act.
Issue:
Whether the time limit of seven days prescribed under Section 129(3) of the GST Act for passing a penalty order after service of a show cause notice is mandatory in nature, and whether a penalty order passed even one day beyond the prescribed period is liable to be quashed as being without authority of law.
Held That:
The High Court held that the timelines prescribed under Section 129(3) are mandatory and not merely directory. It observed that the legislature consciously employed the word “shall” while prescribing both the timeline for issuance of notice and the timeline for passing the penalty order. The Court emphasized that Section 129 authorizes coercive action in the nature of detention and seizure of goods and conveyances, thereby affecting valuable rights of taxpayers and transporters. Such provisions, being part of a fiscal statute, require strict compliance.
The Court further noted that the legislative intent behind prescribing strict timelines was to prevent arbitrary detention, prolonged seizure and harassment of traders. Rejecting the contention that the delay was caused by intervening circumstances, including the involvement of the Pollution Control Board, the Court held that the statutory mandate could not be diluted on equitable considerations. Even though the delay in the present case was only of one day, the authority was legally bound to pass the order within seven days from the date of service of the show cause notice. Since the impugned penalty order dated 22.09.2025 was passed beyond the statutory period, it was held to be unsustainable and was accordingly quashed.
However, the Court clarified that quashing of the penalty order would not preclude the authorities from taking any action otherwise permissible under other provisions of the GST law.
Case Name: Mohd Hazzak Lohar, Dheeraj Gupta Authorized signatory of JMC Transport Company Versus Commissioner State Tax, Excise & Taxation, Kashmir, J&K, State Taxes Officer, Enforcement South Kashmir. dated 23.07.2026
