Khatu Enterprises Vs State of Gujarat & Ors. (Gujarat High Court)
Summary: Gujarat High Court held that the statutory timelines prescribed under Section 129(3) of the GST Act for proceedings relating to detention or seizure of goods and conveyances are required to be strictly followed. The Court quashed the detention order dated 06.05.2025 issued in Form GST MOV-06 and directed immediate release of the detained goods and conveyances bearing Nos. RJ-14GN-6007 and RJ-14GN-6017. The petitioner, a sole proprietorship engaged in trading brass scrap, had sold 3,042 kg of brass crop to M/s Gatral Metals, Jamnagar. The consignment, accompanied by tax invoices, e-way bill and delivery/consignment note, was intercepted at Bavla Highway on 03.05.2025. Physical verification in Form GST MOV-04 disclosed no excess quantity or other material difference, but system-based analysis allegedly indicated that invoices and e-way bills generated by parties whose goods were in transit were bogus, fake or suspicious. Pasted markdown
The petitioner contended that despite the detention, the authorities failed to issue the mandatory penalty notice in Form GST MOV-07 within seven days as contemplated by Section 129(3). According to the petitioner, the period expired on 13.05.2025 and the authority consequently became functus officio for continuing proceedings under Section 129. The Department admitted that no action had been taken after GST MOV-06 for a considerable period, attributing the delay to training, transfer of officers, workload and health issues. It eventually issued Form GST MOV-10 under Section 130 only on 06.08.2025, almost three months later. Pasted markdown Pasted markdown
The High Court reproduced Section 129(3), which mandates that the proper officer detaining or seizing goods or conveyance “shall” issue notice within seven days of detention or seizure specifying the penalty payable and thereafter pass an order within seven days from service of such notice. The Court found it undisputed that after GST MOV-06 dated 06.05.2025, no penalty notice under Section 129(3) and no consequential penalty order under Section 129(1)(a) or (b) had been issued. Pasted markdown
The Court followed the consistent judicial view reflected in Pawan Carrying Corporation v. State of Bihar, S.A. Sugandh (P.) Ltd. v. Chief Commissioner of CT & GST, Odisha, Madhesh @ Madesan v. State Tax Officer, Tvl. Udhayan Steels Private Limited v. Deputy State Tax Officer, Deepam Roadways v. Deputy State Tax Officer and D.K. Enterprises v. Assistant/Deputy Commissioner (ST). These authorities treat non-compliance with Section 129(3)’s prescribed timeline as fatal to detention proceedings. Pasted markdown
Agreeing with those decisions, Gujarat High Court held that failure to issue the notice required by Section 129(3) rendered the detention order dated 06.05.2025 liable to be quashed. It therefore allowed the petition and ordered immediate release of the goods and both conveyances. However, the Court preserved the separate proceedings initiated under Section 130 through GST MOV-10 dated 06.08.2025. The petitioner was directed to reply to that notice, if not already done, within 15 days along with an undertaking to pay the fine in lieu of confiscation if ultimately imposed after hearing. Failure to furnish the reply or undertaking would leave the authority free to pass an order under Section 130 in accordance with law. Pasted markdown
Cases Discussed
- S.A. Sugandh (P.) Ltd. v. Chief Commissioner of CT & GST, Odisha, (2025) 108 GST 371 (Orissa High Court) — Relied upon. Orissa High Court ordered release of goods and vehicle and set aside detention where the notice for levy of penalty under Section 129 was not issued within seven days.
- Madhesh @ Madesan v. State Tax Officer (FAC), Commercial Tax Department, (2025) 96 GSTL 363 (Madras High Court) — Relied upon. Proceedings beyond the timelines stipulated under Section 129(3) were held fatal and the detained vehicle/goods were directed to be released forthwith.
- Pawan Carrying Corporation v. State of Bihar, (2024) 103 GST 17 (Patna High Court) — Relied upon. Held that the limitation under Section 129(3) is clear and definite; failure of the authorities to act within the prescribed period rendered detention proceedings unsustainable.
- Tvl. V.V. Iron and Steels v. State Tax Officer, (2024) 80 GSTL 296 (Madras High Court) — Relied upon by petitioner. Section 129(3) expressly requires notice specifying the penalty to be issued within seven days from detention or seizure.
- Deepam Roadways v. Deputy State Tax Officer, (2023) 147 taxmann.com 35 / 96 GST 360 / 70 GSTL 337 (Madras High Court) — Considered/Followed. Similar view taken that proceedings exceeding the statutory seven-day timeline under Section 129(3) cannot survive.
- Tvl. Udhayan Steels (P.) Ltd. v. Deputy State Tax Officer (Int.), [2023] 147 taxmann.com 509 / 96 GST 615 / 71 GSTL 133 (Madras High Court) — Considered/Followed. Order under Section 129(3) passed on the eighth day was held beyond the statutory timeline and the proceedings were set aside.
- A. Irudayaraju v. State Tax Officer, [2023] 147 taxmann.com 269 / 72 GSTL 245 (Madras High Court) — Considered through Madhesh/Udhayan Steels. Applied for the consequence of non-compliance with the statutory timeline governing detention proceedings.
- D.K. Enterprises v. Assistant/Deputy Commissioner (ST) Adjudication, Intelligence, [2022] 143 taxmann.com 201 (Madras High Court) — Relied upon. Held that interception and detention powers affect substantial civil rights and must therefore be exercised in strict compliance with statutory timelines; delay vitiates the proceedings.
- K.M. Sharma v. Income Tax Officer, (2002) 254 ITR 772 (Supreme Court) — Relied upon by petitioner. Cited for the proposition that limitation provisions must receive strict construction and are intended to provide certainty and finality to legal proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1.Heard learned advocate Mr. Pulkit Verma through video conference for learned advocate Mr. Rajan Patel for the petitioner and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondents.
2. Rule returnable forthwith. Learned Assistant Government Pleader Ms, Shrunjal Shah waives service of notice of Rule for the respondents.
3.Having regard to the controversy involved which is in narrow compass, this matter is taken up for hearing with the consent of learned advocates for both the parties.
4. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs:
“A. Be pleased to issue a writ of certiorari and/or mandamus or any other appropriate writ in the nature under Article 226 of the Constitution of India quashing/set aside the impugned order dated 06.05.2025 passed by Respondent No. 2 under Section 129(1) in GST MOV-06 (Annexure – A); In continuation thereto, be further pleased to pass an appropriate order to directing the Respondents to release the goods and conveyance bearing number RJ14GN6007 and RJ14GN6017 in time bound manner;
B. Be pleased to declare that the detention of the vehicle was illegal and without the authority of law, and consequently, quash and set aside any subsequent proceedings or orders passed pursuant to such illegal detention;
C. Pending admission, hearing and final disposal of the present petition, the Hon’ble court may please to pass an appropriate interim relief/ad interim relief/stay the effects, implementation, operations and executions of the impugned order dated 06.05.2025 passed by Respondent No. 2 under Section 129(1) in GST MOV-06 (Annexure – A) D. Be please to allow any other appropriate relief and compensation to the petitioner for the loss and hardship suffered due to the unlawful and prolonged detention of the vehicle E. Any other relief that may be dim fit and proper in the facts and circumstances of the case may please be granted.”
5.The brief facts of the petition are as under:
5.1The petitioner is a sole proprietorship firm engaged in trading of brass scrap. The petitioner is registered under the provisions of Goods and Service Tax Act, 2017 (for short ‘ the GST Act’) with effect from 26.9.2023.
5.2It is the case of the petitioner that in the normal case of the business, the petitioner sold 3,042 Kgs of Brass Crop to M/s Gatral Metals situated in Jamnagar, Gujarat on FOB basis on 30.4.2025 and the goods were transported by the petitioner from New Delhi along with Tax Invoices, E-way Bill and Delivery / Consignment note.
5.3On 3.5.2025, while the goods were in transit to Jamnagar in Vehicle No. RJ-14G-6007, the respondent No.2 intercepted the said vehicle at Bavla Highway at around 11.21 p.m. on the ground that the genuineness of the goods and/ or tendered documents requires further verification. Accordingly, order in Form GST MOV-02 for physical verification/ inspection of conveyance, goods and documents was passed after issuance of Form GST MOV-01.
5.4Thereafter on 6.5.2025, physical verification report in Form GST MOV-04 was issued by the respondent stating that no excess quantity or other goods related material difference was found during physical verification, however, on the basis of the system based analysis, it was found that the invoice and e-way bill generated by the parties whose goods were in transit (including petitioner) is found to be wither, bogus/ fake and suspicious. The petitioner was, therefore, called upon to provide reasonable explanation for the said discrepancy within 15 working days i.e. on or before 21.5.2025, failing which, further proceedings would be initiated.
5.5It is the case of the petitioner that on 7.5.2025, without providing opportunity to the petitioner to explain the discrepancy highlighted in Form GST MOV-04, an order of detention of consignment under Section 129(1) of the Gujarat GST Act was passed in Form GST MOV-06 proposing further investigation on the ground that the tax invoice and E-way bill generated by the parties whose goods were detained were found to be either bogus/ fake/ suspicious.
5.6. It is also the case of the petitioner that on 7.6.2025, in pursuance to directions issued by the respondent No.2, the authorized representative of the petitioner appeared and availed the opportunity of personal hearing and submitted necessary documents such as tax invoice, E-way bill and other documents.
5.7. The respondent No.2 issued a notice dated 21.6.2025 directing the petitioner to avail the opportunity of personal hearing and to produce the relevant documents such as bank statement in relation to the detention of goods in question.
5.8. The petitioner filed detailed reply dated 30.6.2025 against the detention order dated 6.5.2025 contending that the consignment was accompanied by all requisite documents as per Rule 138A of the Central/ State GST Rules, 2017 (for short ‘the GST Rules’) and that the detention under Section 129 or 130 of the GST Act was without authority of law.
5.9. It is the case of the petitioner that the petitioner made request for release of the detained goods and vehicle on 14.7.2025, however, the same was not released and, therefore, the petitioner requested the Special Commissioner, State Goods and Services Tax, Gujarat to intervene in the matter by filing a representation highlighting that the vehicle in question had remained under detention for a period exceeding 72 days as on the date of the application dated 14.7.2025. It was also contended that such prolonged and unjustified detention was causing severe operational and financial hardship to the business of the petitioner and, therefore, request was made for issuance of appropriate directions for the release of the vehicle.
6.Being aggrieved by the impugned order dated 6.5.2025, the petitioner has preferred this petition.
7.Learned advocate Mr. Pulkit Verma for learned advocate Mr. Rajan Patel for the petitioner submitted that as per the provision of Section 129 of the GST Act, the respondent was required to pass order under the provisions of Section 129(3) in Form GST MOV-09 read with Rule 138 and issue a notice in Form GST MOV-07 within 7 days of detention of such detention or seizure, specifying the penalty payable and, thereafter, pass an order within a period of 7 days from the date of service of such notice. It is submitted that there is violation of provisions of sub- section (3) of Section 129 of the GST Act by the respondent No.2, as the time period to issue the notice in Form GST MOV-07 expired on 13.5.2025 and till date no show-cause notice has been issued by the respondent No.2. Therefore, the respondent No.2 has become functus officio and he has no power to continue the proceedings under the said provisions. It was, therefore, submitted that the detention order would have no effect from 14.5.2025.
7.1. It was further submitted that even if is presumed that 15 days provided to the petitioner to file reply to the detention order is required to be excluded while computing the period of 7 days as prescribed under Section 129(3) of the GST Act, the respondent No.3 was bound to pass an order on or before 29.5.2025, which has not been done in the facts of the case. It was, therefore, submitted that the detention order dated 6.5.2025 passed by the respondent No.2 in Form GST MOV -06 is liable to be set-aside and the conveyance and the good are liable to be released.
7.2 In support of his submissions, reliance was placed on the decision of Pawan Carrying Corporation v. State of Bihar, reported in (2024) 103 GST 17 (Patna) and the decision of the Orissa High Court in case of S.A. Sugandh (P) Ltd. v. Chief Commissioner of CT & GST, reported in (2025) 108 GST 371 (Orissa) and the decision of the Madras High Court in case of Madhesh @Madesan V. State Tax Officer (FAC), Commercial Tax Department, reported in (2025) 96 GSTL 363 (Mad).
7.3 The learned advocate for the petitioner, referred to the provisions of Section 129(3) of the GST Act, and submitted that the period of limitation prescribed must receive strict construction, as the law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events.
7.4It was, therefore, submitted that as per the provisions of Section 129(3) of the GST, Act, the respondent has missed the time line for issuance of the notice and passing of the detention order and as such, the impugned detention order in Form GST MOV-06 dated 6.5.2025 is liable to be quashed and set-aside. 7.5 In support of his submissions, reliance was placed on the decision of Apex Court in case of K.M. Sharma v. Income Tax Officer, reported in (2002) 254 ITR 772. Reliance was also placed on the decision of the Madras High Court in case of
Tvl. V.V. Iron and Steels v. State Tax Officer, reported in (2024) 80 GSTL 296 (Madras) wherein it is held that Section 129(3) of the GST Act, 2017 has used the expression “within seven days from the date of detention or seizure” and as the language in Section 129(3) of the GST Act is clear, notice specifying payment of penaty has to be issued within seven days of detention or seizure of goods. 7.6It was, therefore, submitted that in view of the settled legal position, impugned order is liable to be quashed and set-aside.
8.On the other hand, learned Assistant Government Pleader Ms. Shrunjal Shah for the respondent submitted that the respondent has already issued the show-cause notice in Form GST MOV1-10 under Section 130 of the GST Act on 6.8.2025, due to transfer a new officer was appointed on 18.8.2025. It was submitted that if the petitioner filed reply in pursuance to the notice in Form GST MOV-10 dated 6.8.2025, respondent would pass an order in Form GST MOV-11 within two weeks from the date of the such reply.
9. Learned Assistant Government Pleader Ms. Shrunjal referred to and relied upon the following averments made in the affidavit-in- reply, filed on behalf of respondent No.2, which read as under: “6. It is submitted that in the facts of the present case since it was prime facie found that the Petitioner was involved in bogus/fake/ suspicious transactions, an Order in Form-MOV 2 dated 03.05.2025 was issued for the purpose of further verification.
7.Thereafter, on 06.05.2025 physical verification report was issued in Form GST MOV 4, wherein admittedly no discrepancy was found between the E-way bill and the physical goods.
8. However, considering the fact that upon verification from the GST Portal, the suppliers of the Petitioners and other dealers whose goods were being transported appeared either bogus/fake/suspicious, a common order of detention in Form GST MOV 6 was passed which is attached at Annexure-A to the impugned petition.
9. It is further submitted that against such Order of detention, an opportunity was granted to the Petitioners and other parties to provide reasonable explanation within 15 working days i.e., 21.05.2025 as to why s. 130 should not be invoked.
10. It is submitted that since the regular officer had gone for training, different officers were in-charge of the post of the answering respondent. It was only on 11.06.2025 that the regular officer took charge.
11. It is submitted that further due to the heavy work load and health issues, the answering respondent was unable to initiate further action in the case of the Petitioners.
12. It is submitted that inadvertently such delay has taken place and no action was taken pursuant to issuance of the detention order in form GST MOV 06. It is further submitted that on 06.08.2025 the answering respondent has issued form GST MOV 10 under Section 130 of the Act.
13. It is submitted that as per provision of Section 130 there is no stipulated time line within which a show cause notice in Form MOV 10 is to be issued. However, admittedly there is delay in the present matter for which we apologize.
14. It is further submitted that after issuance of Form GST MOV 10 dated 06.08.2025, due to transfer a new Officer was appointed on 18.08.2025.”
10.Referring to the aforesaid averments, it was submitted that the petition is not maintainable and is liable to be quashed and set-aside in view of the issuance of the show-cause notice in Form GST MOV-10.
11.Having heard learned advocates for the respective parties and having considered the facts of the case, it would be germane to refer to provisions of Section 129(3), which reads as under: “129(3): The proper officer detaining or seizing goods or conveyances shall issue notice within seven days of such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period of seven days from the date of service of such notice, for payment of penalty under clause
(a) or clause (b) of sub-section (1)”
12.On perusal of the above provision, it is incumbent upon the respondent authority after detaining or seizing of the goods or conveyance, to issue a notice within 7 days from such detention or seizure, specifying the penalty payable and pass an order within a period of 7 days from the date of service of such notice, for payment of penalty under clause (a) or clause (b) of sub-section (1)of Section 129 of the GST Act.
13.It is not in dispute in the facts of the case that after passing the detention order in Form GST MOV-06 dated 6.5.2025, the respondent authorities have not issued any notice for penalty as prescribed in sub-section (3) of Section 129 of the GST Act nor has passed any order for payment of penalty as per Clause (a) or
(b) of Section 129(1) of the GST Act. Even the notice in Form GST MOV-10 was issued after almost 3 months i.e. 6.8.2025. The only explanation given in the affidavit-in-reply for issuance of Form GST MOV-10 under Section 130 of the GST Act is that due to transfer, a new Officer was appointed on 18.8.2025.
14.The various High Courts have consistently held that the provisions of Section 129(3) of the GST Act are required to be adhered to by respondent authority and it would be fruitful to refer to the various decisions relied upon by the petitioner, which can be summarized as under:
i)The Hon’ble High Court in case of Pawan Carrying Corporation v. State of Bihar (supra),after considering the provisions of Section 129(3) of the GST Act, has held as under:
“9.The Limitation is clear and definite. The facts of the case indicate that the officers did not act in accordance with the provisions, we hence find no reason to sustain the demand raised. We set aside the orders passed for detention of the vehicles. The vehicle with the goods would be released immediately. Ordered, accordingly.”
ii)The Hon’ble Orissa High Court in case of S.A. Sugandh (P.) Ltd. v. Chief Commissioner of CT & GST, Odisha (supra) has also after considering the provisions of Section 129(3) of the GST Act ordered to release the goods and vehicle, setting aside the order of detention as no notice was issued for levy of penalty under Section 129 of the GST Act within 7 days. iii)The Hon’ble Madras High Court in case ofMadhesh @Madhesan v. State Tax Officer (FAC) Commercial Tax Department, Hosur (Supra) following its earlier decisions, has held as under:
“2. In this regard, petitioner has relied upon the judgment of this Court inTVI Udhavan Steels (P) Ltd. v. Deputy State Tax Officer (Ins) [2023] 147 taxmann.com 509/96 GST 615/71 GSTL 133 (Madras) wherein this Court, following the order in W.P.No. 25931 of 2022, dated 10.10.2022/4 Irudayaraju v. State Tax Officer [2023] 147 taxmann.com 269/72 GSTL 245 (Madras) held as under-
3.In this regard, it may be relevant to note the following dates.
(a) The date of detention is 07.12.2022.
(6) The notice was issued on 07.12.2022
(c) The order of detention is passed on 15.12.2022.
4. It is submitted by both the counsel for the petitioner and respondent that the order u/s. 129(3) of the Act is passed on the eight day from the date of service of notice, whereas the time line stipulated under Section 129(3) of the Act is that the order ought to be passed within a period of seven days from the date of service of such notice. In as much as admittedly, the impugned proceedings are beyond the time lines stipulated under Section 129(3) of the Act, the same is fatal to the order in terms of the order of this Court in W.P.No. 25931 of 2022/A. Irudayaraju v. State Tax Officer [2023] 147 taxmann.com 269/72 GSTL 245 (Madras). The impugned proceedings are set aside and the vehicles/goods in question shall be released forthwith.”
3. Similar view has also been expressed by this Court in W.P.Nos. 476 of 2023 and W.P.No. 33851 of 2022, dated 23.01.2023/Deepam Roadways v. Deputy State Tax Officer [2023] 147 taxmann.com 35/96 GST 360/70 GSTL 337 (Madras)
4. Following the above orders, this Court is of the view that the impugned proceedings are liable to be set aside inasmuch as it is in contravention of the time lines stipulated in Section 129 of the Act. Consequently, vehicle bearing Registration No. TN-29-AB-7887 shall be released forthwith.” iv)Hon’ble Madras High Court in case of D.K. Enterprises v. Assistant/ Deputy Commissioner (ST) Adjudication, Intelligence, reported in [2022] 143 taxmann.com 201 (Madras), after considering the Scheme of the Act as well as the Circular No. 41/15/2018 dated 13.4.2018, has held as under: “10. Thus, in matters of interception, seizure and detention, it is clear that the GS Department does not recognise the concept of working day’ and ‘holiday’ and rightly so, since substantial civil rights of the parties we at stake by the aforesaid powers. Thus, the decision in regard to whether such detention is required at all and the fate of such detention must be decided expeditiously by the officials concerned. In this context learned pleader will agree, on instructions, that the roving squad of the GST Department knows no distinction between working and non-working days and the wing works 24/7, the year through.
11. In such circumstances, neither the petitioner nor the respondents can have the luxury of reference to a holiday to delay or protract the proceedings. This is precisely what the respondents seek to do in the present case. This is made explicitly clear from the Circular and the amendment brought about on 21-6-2018 and the submission of learned Government Pleader runs directly contrary to the amendment under the Circular and the purpose it evidently seeks to advance.
These submissions are thus found to be misconceived and hyper-technical, and are rejected.
12. The acts of interception and retention, though an invasion into the rights of citizens, have been accorded satutory sanction in pursuance of the aims and objects of the Goods and Services Act. Thus, it is imperative that such intrusive acts be carried in strict compliance of the statutory provisions in this regard. Thus, and as the detention is a pre-condition/requisite for the issuance of the SCN, the order of detention is necessarily to be issued prior to the 7th day from date of detention/seizure of the conveyance/consignment in question. being, in this case, on or before the 20-8-2022, to validate both the interception and the SCN.
13. Since the order of detention is dated 22-8-2022, it is clearly beyond the date provided and in my view, is a serious flaw, one that vitiates the proceedings for interception in full and in entirety. In this context, learned Additional Government Pleader relies upon section 10 of the General Clauses Act, 1897, as per which, if any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within the prescribed period and if the office or Court were closed on that day or the last day of prescribed period, that act or proceeding shall be considered as done or taken in due time if it done or taken on the next day afterwards when the Court or office were open.”
15.In view of the above dictum of law, we are in respectful agreement with the above proposition of law laid down by various High Courts and when the respondent authority has failed to issue notice as required under sub-section (3) of Section 129 of the GST Act, the detention order dated 6.5.2025 is liable to be quashed and set- aside.
16.In view of the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned order of detention of goods and vehicle dated 6.5.2025 issued in Form GST MOV-06 is hereby quashed and set-aside, in view of the provisions of Section 129(3) of the GST Act, and the respondent authorities are directed to release the goods in question and the conveyance bearing number RJ-14GN-6007 and RJ-14GN-6017 forthwith. 16.1 We, however, make it clear that the petitioner is required to reply to the notice issued in Form GST MOV-10 dated 6.8.2025 by the respondent No.3, if not filed within a period of 15 days from the date of receipt of a copy of this Order along with an undertaking to pay the fine in lieu of confiscation of the goods and conveyance if any order under Section 130 of the GST Act is passed against the petitioner by the respondent authority, after giving an opportunity of hearing to the petitioner. 16.2 If the petitioner fails to file reply or undertaking as per the direction issued by this Court, the respondent authority is free to pass an order under Section 130 of the GST Act, in accordance with the law.
The petition is accordingly disposed of. Rule is made absolute.
