Section 129 Penalty Order Passed After 28 Days Void Ab Initio for Violating Mandatory Seven-Day Limitation

By | September 23, 2026
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Section 129 Penalty Order Passed After 28 Days Void Ab Initio for Violating Mandatory Seven-Day Limitation

Issue

Whether a penalty order passed under Section 129(3) of the CGST/KSGST Act after a delay of 28 days from the date of service of notice—exceeding the prescribed seven-day statutory limitation period—is void ab initio and legally unsustainable.

Facts

  • Interception of Goods: The appellant, a registered dealer in iron and steel, dispatched sponge iron to a purchaser, and the conveyance was intercepted by the State tax squad due to an expired e-way bill.
  • Detention & Notice: A detention order in Form GST MOV-06 and a show cause notice in Form GST MOV-07 proposing tax and penalty under Section 129(3) were issued on 28-06-2019.
  • Provisional Release: The appellant secured the release of the intercepted goods and conveyance by furnishing a bank guarantee for the proposed tax and penalty amounts.
  • Delayed Order & Non-Communication: The Proper Officer passed the final penalty order under Section 129(3) on 26-07-2019—28 days after issuing the notice—and initially failed to communicate the order while attempting to invoke the bank guarantee.
  • Appellate Proceedings: Upon obtaining a copy of the order pursuant to writ proceedings, the appellant filed a statutory appeal before the Joint Commissioner (Appeals), which was dismissed, leading to the present second appeal.

Decision

  • Mandatory Nature of Limitation: The statutory timeline under Section 129(3) requiring the issuance of an order within seven days from the service of notice is strictly mandatory and not directory [Paras 6, 10, 11].
  • Proceedings Vitiated: Passing the penalty order 28 days after notice service constitutes a fatal procedural breach that vitiates the entire adjudication proceeding [Paras 6, 10, 11].
  • Void Ab Initio: The adjudication order passed beyond the seven-day period is a nullity in law and void ab initio [Paras 6, 10, 11].
  • Relief Granted: The appeal was allowed, and both the penalty order and the Order-in-Appeal were set aside with all consequential reliefs granted in favour of the assessee [Paras 6, 10, 11].

Key Takeaways

  • Strict Seven-Day Limitation: Adjudication orders under Section 129(3) must be passed within seven days from the service of notice; any delay beyond this window strips the authority of jurisdiction.
  • Nullity in Law: An order passed in breach of statutory limitation timelines under Section 129 is void ab initio, rendering any tax or penalty demand legally unenforceable.
  • Invalidation of Ancillary Recovery Actions: Since the underlying penalty order is a nullity, consequential actions such as invoking bank guarantees or encashing securities are rendered invalid.
GOODS AND SERVICE TAX APPELLATE TRIBUNAL , ERNAKULAM BENCH
Tiger Steels
v.
Commissioner of State Tax
Subramanya Rayaprol, Vice President
and Ramamoorthi Sriram, Technical Member
APL/34/ERN/2026
SEPTEMBER  16, 2026
P.S. Soman Pulladan, Adv. for the Appellant. Anil Gopinath, AR for the Respondent.
ORDER
Ramamoorthi Sriram, Technical Member.- The present Appeal (APL/ERN/34/2026) has been preferred by M/s Tiger Steels Palakkad (‘Appellant’) against Order-in-Appeal No. GSTA-144/2020 dated 29/6/2022 passed by the Joint Commissioner (Appeals), SGST Department (Keralam), Palakkad
2. Brief Facts of the Case:
2.1 The Appellant, a registered person GSTIN-32AAJFT9657R1Z5, is a dealer in iron and steel. The Appellant had sold 30.940 Tons of sponge iron to M/s M. A. Steels Pvt. Ltd., Kanjikode, Palakkad.
2.2 Tax Officer attached to Squad No. II, SGST Department, Palakkad intercepted the vehicle and issued order No VC.II/13/19-20 dated 28-06-2019 under Section 129 of the State Goods & Service Tax Act and Central Goods & Service Tax Act (SGST & CGST Act) demanding Rs. 2, 26,108-00 towards SGST, CGST and penalty for the release of the goods. The only reason for issuing the order is that the validity of the eway bill which accompanied the consignment had expired on 25-06-2019.The Appellant remitted the amount demanded in the order by way of Bank Guarantee and got the vehicle and goods released
2.3 The State Tax Officer after the release of the goods, has conducted adjudication as provided under Section 129 (1) of the SGST Act. No order was communicated to the Appellant. The State Tax Officer initiated steps to invoke the Bank Guarantee by issuing letter to the Bank directing them to issue Demand Draft for the amount covered in the bank guarantee.
2.4 Thereupon the Appellant approached the Hon’ble High Court of Kerala by filing W.P. (C) 21211/19. The Hon’ble High Court as per judgment dated 02- 08-2019 was pleased to direct the State Tax Officer to issue copy of the adjudication order to the Appellant and also directed the State Tax Officer not to invoke the Bank Guarantee within 4 weeks. In compliance to the Judgment of the Hon’ble High Court the adjudication order was communicated to the Appellant on 06-08-2019.
2.5 Statutory appeal filed before the Joint Commissioner (Appeals). SGST Department, Palakkad against the OIO was dismissed by the first appellate authority as per order GSTA No.144/2020 dated 25-11-2022.
2.6 The appellant has filed the present appeal against the order of the Appellate Authority.
3. Discussion and findings
Even before we get into the merits of the issue, what strikes our eye is the chronology of events as narrated below:
a. In the instant case, the goods were intercepted on 28/6/2019 and an order of detention VC No II/13/19-20 in form GST MOV-06 was issued on 28/6/2019
b. Notice No II/13/19-20 under section 129(3) was issued in form GST MOV-07 was issued on 28/6/2019
c. Order No. VC/II/13/2018-19 under section 129(3) of the CGST/SGST Act 2017,was passed on 26/7/2019
4. We find that section 129(3) of the KGST / CGST Act reads as follows:
129(3) The proper officer detaining or seizing goods or conveyance shall issue a 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).]
5. We find that in terms of the above, it is mandatory on the part of the officer detaining or seizing the goods to pass an order for payment of penalty within seven days of the date of service of the notice. In the instant case, we find that while the notice was issued on 28/6/2019, the order under section 129(3) for payment of penalty was issued only on 26/7/2019, 28 days after the issue of notice.
6. We find that in view of the blatant violation of the statutory time limit, order No. VC/II/13/2018-19 dated 26/7/2019 (which has been upheld by the appellate authority), is void ab initio and is a nullity in the eyes of the law.
7. We find support for the above decision in the recent decision of the Thiruvananthapuram bench of the GSTAT in the case of Siddhivinayak Automobiles vs Commissioner of Kerala State GST (Final order no 2/TVP/Kerala/2026 dated 14/8/2026) wherein it was held as follows:
From the plain reading of Sub-section (3) of Section 129 of the Act of 2017, it is abundantly clear that the legislature by using the expression “shall” in respect of show cause notice as well as notice for payment of penalty has signified its intent that adherence to timeline is mandatory. Otherwise also, the CGST / KGST Act, 2017 is a fiscal statute and, therefore, required to be construed strictly.
8. We also find that a similar view has been taken by various High Courts across the country as detailed below:(chronologically – starting from the latest order)
a. Danish Hassan v. UT of J&K [WP (C) 2538 of 2024, dated 7-9-2026]
b. Mohd Hazzak Lohar v. Commissioner State Tax  117 GST 164/112 GSTL 207 (Jammu & Kashmir and Ladakh)/2026 (7) TMI 1769 – J&K and Ladakh HC, dtd 23/7/2026
c. Allcargo Logistics Ltd. v. State of Gujarat  113 GST 699/105 GSTL 277 (Gujarat)/ 2025 (12) TMI 1732 – Gujarat HC dtd 22/12/2025
d. Khatu Enterprises v. State of Gujarat  [2026] 104 GSTL 364 (Gujarat)/2025 (10) TMI 1341 – Gujarat HC dtd 10/10/2025
e. Pawan Carrying Corporation v. State of Bihar  103 GST 17/84 GSTL 14 (Patna)/(2024) 16 Centax 405 (Pat.) dtd 29/12/2024
f. K.P. Sugandh Ltd. v. Chief Commissioner of CT and GST, Odisha  97 GSTL 297 (Orissa)/(2025) 26 Centax 62 (Ori.) dtd 17/12/2024
g. Deepam Roadways v. Deputy State Tax Officer 96 GST 360/70 GSTL 337 (Madras)/(2023) 3 Centax 37 (Mad.) dtd 23/1/2023
h. TVl. Udhayan Steels (P.) Ltd. v. Deputy State Tax Officer (Int.)  96 GST 615/71 GSTL 133 (Madras)/2023 (1) TMI 378 – MADRAS HIGH COURT dtd 28/12/2022
We find that High Courts across the country right from 28/12/2022 to as recently as 7/9/2026 have consistently held that any violation of the mandated time limit specified in sub section 3 of Section 129(3) of the CGST Act by the proper officer vitiates the entire proceedings. The law on this point is well settled and the issue is no longer res integra.
9. In view of the finding that the order in original is a nullity and void ab initio on the grounds of the non-adherence to statutory time limits, we find that nothing else survives in this case.
10. We find that the Appellate Authority has failed to look into this basic fact which was apparent on the face of record. The impugned OIA is therefore liable to be set aside.
11. In view of the findings as above, the appeal is allowed and the Order in Appeal is set aside with consequent relief.f