Facts of the Case:

In this case, M/s. GMG Electric, a registered taxable person engaged in trading of low-tension and high-tension line materials, safety products and hardware in Kerala, was transporting electrical goods to the Deputy Chief Engineers of Nilambur Electrical Circle and Kondotty Electrical Division. On 16.08.2021, the vehicle carrying the goods was intercepted at Aswini Junction, Thrissur. On verification, the e-way bills were found to have expired on 15.08.2021. The vehicle and goods were detained under Section 129 of the KGST/CGST Act and subsequently released against furnishing of a bank guarantee.

A notice in FORM GST MOV-07 under Section 129(3) was issued on 16.08.2021 proposing payment of tax and penalty. However, the adjudicating authority passed the order under Section 129(3) confirming the demand only on 04.11.2022, i.e. 445 days after issuance of the notice. The appellant’s challenge before the Joint Commissioner (Appeals) was rejected, leading to the present appeal before the GSTAT.

Issue:

Whether an order under Section 129(3) of the CGST/KGST Act passed 445 days after issuance of the notice is sustainable when the statute mandates that the order for payment of penalty must be passed within seven days from the date of service of the notice?

Held That:

The GSTAT allowed the appeal and set aside the Order-in-Appeal, holding that the order passed under Section 129(3) after expiry of the statutorily prescribed period was void ab initio and a nullity in law.

The Tribunal examined Section 129(3), which specifically requires the proper officer detaining or seizing the goods or conveyance to issue a notice within seven days of such detention or seizure and thereafter “pass an order within a period of seven days from the date of service of such notice” for payment of the applicable penalty.

In the present case, the notice under Section 129(3) was issued on 16.08.2021, whereas the adjudication order confirming the tax and penalty was passed only on 04.11.2022. Thus, the order was passed 445 days after issuance of the notice, instead of within the statutory seven-day period.

The Tribunal held that the use of the expression “shall” in Section 129(3) manifests a legislative intention that the prescribed timeline is mandatory. Since Section 129 is a machinery provision concerning detention and seizure of goods in transit, strict compliance with the statutory procedure and timeline was required.

The Tribunal relied upon its earlier decision in Siddhivinayak Automobiles v. Commissioner of Kerala State GST, Final Order No. 2/TVP/Kerala/2026 dated 14.08.2026, wherein the Thiruvananthapuram Bench had held that adherence to the timeline prescribed under Section 129(3) is mandatory. The Tribunal also noted that several High Courts, including the Jammu & Kashmir and Ladakh, Gujarat, Patna, Orissa and Madras High Courts, had taken the same view in the decisions cited before it.

Since the order itself had been passed beyond the mandatory statutory period, the Tribunal held that the adjudication order was void ab initio. Consequently, the appellate order upholding such an order could not survive.

The Tribunal also observed that the First Appellate Authority had failed to examine this fundamental defect, which was apparent from the chronology of the proceedings. Since the original order itself was a nullity for non-compliance with the mandatory statutory timeline, the Tribunal found it unnecessary to examine the merits of the alleged e-way bill violation.

Accordingly, the appeal filed by GMG Electric was allowed, the impugned Order-in-Appeal was set aside and consequential relief was granted.

Case Name: GMG Electric, Kochi Versus Commissioner Of State Tax, State GST Department, Keralam State, Thiruvananthapurm. dated 16.09.2026

Citation No. 2026 Taxo.online 2970