Case Law Details
Khanna Engineering Vs Commissioner of CT & GST (Orissa High Court)
Orissa High Court has dismissed a writ petition filed by Khanna Engineering, ruling that the voluntary payment of a penalty under Section 129 of the Goods and Services Tax (GST) Act concludes all associated proceedings. The court held that once the penalty amount is paid, the legal process concerning the detention of goods is deemed finalized by operation of law, irrespective of subsequent challenges to the detention’s legality or the absence of a formal order within the statutory timeframe.
The case originated on July 5, 2024, when a truck carrying a consignment for Khanna Engineering was detained. A penalty of ₹5,37,656 was calculated under Section 129(1)(a) of the Odisha Goods and Service Tax Act, 2017. According to the petitioner, facing urgency to release the consignment, they paid the calculated penalty on the same day the truck was detained.
However, Khanna Engineering later filed a petition on September 4, 2024, seeking a formal order in Form GST MOV-09. The petitioner argued that the initial detention was illegal and, crucially, that no formal order under Section 129(3) of the Act had been passed within the stipulated period of seven days from the service of notice. Their petition seeking such an order was subsequently rejected by the tax authorities on September 26, 2024, a decision the petitioner challenged before the High Court.
Appearing for Khanna Engineering, the advocate contended that the rejection was legally flawed because no order was issued within the seven-day window mandated by the law.
Conversely, the Standing Counsel for the State revenue argued that by paying the penalty on July 5, 2024, the petitioner effectively compounded the issue, leading to the immediate release of the truck and the conclusion of the proceedings at that point. The revenue asserted that having admitted liability through payment, the petitioner could not later challenge the detention or the process.
The High Court examined Section 129(5) of the OGST Act, which explicitly states that upon payment of the amount specified in Section 129(1), “all proceeding in respect of the notice specified in sub-section (3) shall be deemed to be concluded.”
The bench noted that the petitioner admitted receiving the notice and voluntarily paying the calculated penalty on the day of detention. The court’s interpretation of Section 129(5) led it to conclude that the proceedings initiated by the detention notice were automatically concluded the moment the penalty was paid. Therefore, the necessity of an order under Section 129(3) within seven days became irrelevant in this context due to the statutory conclusion of the matter under Section 129(5).
Finding no legal grounds to support the petitioner’s challenge after the voluntary payment and subsequent conclusion of proceedings, the High Court dismissed the writ petition.
No judicial precedents were referenced in the court’s order as provided.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Mr. Das, learned advocate appears on behalf of petitioner and submits, his client had filed petition dated 4th September, 2024 seeking passing of order in Form GST MOV-09. The truck carrying consignment was detained on 5th July, 2024. There was urgency for his client to conclude the consignment. Hence on 5th July, 2024 itself his client paid Rs.5,37,656/- and got released the truck. However, the detention was illegal. There was no order made within a period of seven days from the date of service of the notice, as provided by sub-section (3) in section 129, Odisha Goods and Service Tax Act, 2017. Hence, the petition.
2. He submits, by impugned order dated 26th September, 2024 the petition stood rejected as devoid of merit. It does not bear a reason that can be acceptable in law. He reiterates, no order was passed within period of seven days from date of service of the notice and hence, the rejection of the petition by impugned order is bad. He seeks interference.
3. Mr. Mishra, learned advocate, Standing Counsel appears on behalf of State revenue. He submits, on 5th July, 2024 itself, petitioner paid the penalty to compound the offence. The proceeding was dropped there and then. The truck stood released. Petitioner after having admitted his liability cannot be allowed to turn around and seek adjudication on merits. It is an abuse of the process.
4. Mr. Kedia, learned advocate, Junior Standing Counsel appears on behalf of Central revenue.
5. We find disclosed in the petition Form GST MOV-07 dated 5th July, 2024. In it there is reflection of calculation of applicable penalty under clause (a) of sub-section (1) in section 129. The amount is Rs.5,37,656/-, which petitioner says he paid and State revenue confirms, he did. In the circumstances, we have a situation where petitioner admits the notice having been served and payment of penalty on calculation made, all done on the date of detaining the truck, i.e. 5th July, 2024.
6. Sub-section (5) under section 129 says, on payment of amount referred in sub-section (1), all proceeding in respect of the notice specified in sub-section (3) shall be deemed to be concluded. Proceeding under sub-section (3) was initiated by the notice, received by petitioner. This happened on detaining his truck. There was calculation of penalty to be paid. It was in the proceeding commenced by the notice. Petitioner paid the penalty. Sub-section (5) came into operation. It is not necessary for us to adjudicate on whether in spite of payment of the required penalty an order was required to be made under sub-section (3) because on the payment, by operation of sub-section (5), the proceeding was deemed to be concluded.
7. We find no merit in the writ petition. It is dismissed.
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