The Goods and Services Tax Appellate Tribunal (GSTAT), Thiruvananthapuram Bench, has held that the statutory period prescribed under Section 129(3) of the CGST/KGST Act, 2017 for passing a penalty order is mandatory. Consequently, a penalty order in Form GST MOV-09 passed 47 days after service of the notice in Form GST MOV-07 was held to be illegal and without jurisdiction.
The ruling was delivered in Siddhi Vinayak Automobiles v. The Commissioner of Kerala State GST, Thiruvananthapuram, Appeal No. APL/2/TVP/2026, Final Order No. 02/TVP/KERALA/2026, decided on 14 August 2026 by the Division Bench comprising Shri Subramanya V. Rayaprol, Member (Judicial) and Shri Ramamoorthi Sriram, Member (Technical). The reported citation is (2026) taxcode.in 87 GSTAT.
Background of the Case
Siddhi Vinayak Automobiles, a registered dealer engaged in trading automobiles and spare parts, transported automobile parts on 18 April 2022. The vehicle was intercepted by the Mobile Squad at Punalur. The goods were accompanied by two valid e-invoices, but the driver could not produce the required e-way bill.
The authorities detained the goods and issued Form GST MOV-07 on 18 April 2022. A penalty of Rs. 1,38,706, comprising CGST penalty of Rs. 69,353 and SGST penalty of Rs. 69,353, was ultimately confirmed through Form GST MOV-09 dated 4 June 2022. The goods and vehicle had meanwhile been released against a bond and bank guarantee. The First Appellate Authority subsequently upheld the penalty.
Before the GSTAT, the appellant contended, among other things, that the penalty order was passed beyond the statutory period prescribed under Section 129(3). While MOV-07 had been issued on 18 April 2022, MOV-09 was passed only on 4 June 2022, i.e. after 47 days.
Section 129(3) Prescribes a Mandatory Timeline
The Tribunal examined Section 129(3), which requires the proper officer to issue a notice within seven days of detention or seizure and thereafter pass the penalty order within seven days from the date of service of such notice.
The GSTAT held that the legislature’s use of the expression “shall” demonstrates that compliance with the stipulated timeline is mandatory. The fact that the provision does not expressly state the consequence of failure to meet the deadline does not make the time limit merely directory.
The Tribunal also observed that Section 129 concerns coercive statutory powers involving detention and seizure of goods and conveyances. Such provisions are required to be strictly complied with, particularly because GST legislation is a fiscal statute.
In reaching its conclusion, the Tribunal referred to decisions including Mohd Hazzak Lohar v. Commissioner of State Tax, J&K, Allcargo Logistics Limited v. State of Gujarat, Khatu Enterprises v. State of Gujarat, Deepam Roadways v. Deputy State Tax Officer, Chennai, Pawan Carrying Corporation v. State of Bihar, and K.P. Sugandh Ltd. v. Chief Commissioner of CT & GST, Odisha.
Limitation Point Could Be Considered by GSTAT
The Revenue argued that the appellant had not raised the seven-day limitation issue before the First Appellate Authority and was raising it for the first time before the Tribunal.
The GSTAT rejected this objection. It noted that the dates of MOV-07 and MOV-09 were undisputed and already formed part of the record. The First Appellate Authority itself had recorded these dates but failed to examine their legal consequence. Therefore, according to the Tribunal, relying upon these admitted facts before the GSTAT did not amount to introducing an impermissible new factual ground.
E-Invoices and Absence of Intent to Evade Tax
The Tribunal further recorded that the goods were transported under two tax invoices generated through the e-invoice portal. The appellant had subsequently filed its GST returns and paid the appropriate tax in respect of the invoices for April 2022.
It observed that an e-invoice is auto-populated into GSTR-1 and therefore the transactions had already entered the GST reporting system. On these facts, the GSTAT found no attempt or mens rea to evade tax merely because the e-way bill had not been prepared along with the e-invoice.
GSTAT Quashes Penalty Proceedings
The Tribunal concluded that the statutory limitation under Section 129(3) was “clear and definite”. Since the respondent authority failed to pass the penalty order within seven days from service of the notice, the order could not be sustained.
Accordingly, MOV-09 dated 4 June 2022, having been issued 47 days after MOV-07 dated 18 April 2022, was held illegal and without jurisdiction. The Order-in-Appeal was set aside, the appeal was allowed with consequential relief, and the respondent was directed to release the bank guarantee immediately on receipt of the Tribunal’s order.
Key Takeaway
The ruling reinforces that the procedural safeguards built into Section 129 are not merely administrative timelines. Once a notice specifying penalty is served under Section 129(3), the proper officer must pass the consequential penalty order within the statutory period of seven days. Failure to comply with this mandatory limitation can invalidate the penalty proceedings, notwithstanding the underlying allegation concerning movement of goods without an e-way bill.
The decision is particularly relevant for businesses, GST practitioners, Chartered Accountants and advocates dealing with detention of goods and conveyances, e-way bill disputes and penalties under Section 129 of the CGST and corresponding State GST enactments.
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