Penalty Payment for Goods Release Doesn’t Absolve Officer from Passing Order; Costs Imposed for Non-Compliance
Issue
Whether the payment of penalty by a taxpayer solely to secure the release of detained goods constitutes a “voluntary” admission of liability under Section 129(5) of the CGST Act, thereby absolving the Proper Officer from passing a mandatory, reasoned order (MOV-09) under Section 129(3), which is a prerequisite for filing an appeal.
Facts
Detention: The petitioner’s consignment of electrical goods was intercepted and detained by GST enforcement officials on grounds of an expired e-way bill and vehicle mismatch.
Verification: A physical verification (MOV-04) confirmed that the goods matched the invoices, yet a detention order (MOV-06) and a Show Cause Notice (MOV-07) were issued proposing a penalty.
Payment under Protest: To mitigate business loss and secure the immediate release of the goods, the petitioner paid the entire penalty amount. However, they explicitly informed the officer in writing that the payment was “under dispute” and requested the issuance of a formal order (MOV-09) to enable them to file an appeal.
Officer’s Inaction: The Proper Officer released the goods but failed to pass the MOV-09 order for over 16 months. The Revenue argued that since the penalty was paid, the proceedings were deemed “concluded” under Section 129(5), requiring no further order.
Decision
The Tripura High Court ruled decisively in favour of the assessee.
Payment Under Duress: The Court held that payment made to release detained goods is often under “economic duress” and cannot be treated as a voluntary admission of guilt unless explicitly stated.
Mandatory Order: It is a statutory mandate under Section 129(3) for the officer to pass a speaking order (MOV-09) quantifying the tax and penalty. This requirement cannot be bypassed, as the absence of an order denies the taxpayer their statutory right to appeal under Section 107.
Consequences:
The entire penalty collected without a valid order was held to be illegal and without authority of law.
The Court ordered the refund of the entire penalty along with 9% interest.
A personal cost of ₹25,000 was imposed on the Superintendent for dereliction of duty and violating statutory mandates.
Directions were issued to the Commissioner to initiate potential disciplinary action against the errant officer.
Key Takeaways
MOV-09 is Non-Negotiable: The issuance of a formal penalty order (MOV-09) is mandatory in all detention cases. Officers cannot hide behind “voluntary payment” clauses to avoid adjudicating the matter.
Right to Appeal is Sacrosanct: The tax department cannot adopt procedures that effectively strip a taxpayer of their right to challenge a demand in an appellate forum.
Accountability of Officers: This judgment sets a strong precedent that tax officers can be held personally liable (monetary costs) for arbitrary actions that violate constitutional rights (Article 300A – Right to Property) and statutory procedures.
Payment $\neq$ Acceptance: Paying a penalty to get a truck released does not mean the taxpayer accepts the violation. They retain the right to contest the demand legally.