GST Penalty Order Passed Beyond Seven-Day Statutory Limit Under Section 129(3) Quashed

The High Court of Jammu & Kashmir and Ladakh has held that the seven-day period prescribed under Section 129(3) of the J&K Goods and Services Tax Act, 2017 for passing a penalty order is mandatory. A penalty order passed even one day beyond the statutory period was consequently quashed.

Case Details

• Case: Mohd Hazzak Lohar & Anr. v. Commissioner State Tax & Anr.

• Court: High Court of Jammu & Kashmir and Ladakh

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• Case No.: WP(C) No. 2434 of 2025, CM No. 6459 of 2025

• Judgment pronounced: 23 July 2026

• Provision involved: Section 129(3), J&K GST Act, 2017

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The case concerned detention of goods in transit and the subsequent levy of penalty under Section 129. The judgment was delivered by the Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani. (CaseMine)

Facts of the Case

The petitioners' vehicle was intercepted at Heerpora, Shopian on 11 September 2025 while carrying goods without the required documents. A notice proposing penalty under Section 129(3) was served on 14 September 2025.

The petitioner disputed the valuation of the goods and requested revaluation. A revaluation team was constituted and submitted its report.

Subsequently, officials of the J&K Pollution Control Board inspected certain polythene goods and declared them contraband under the Plastic Waste Management Rules, 2016. The authorities therefore excluded those goods from the eventual penalty calculation.

However, the penalty order relating to the remaining goods was passed on 22 September 2025. Since the Section 129(3) notice had been served on 14 September 2025, the statutory seven-day period expired on 21 September 2025. (CaseMine)

What Does Section 129(3) Provide?

Section 129 deals with detention, seizure and release of goods and conveyances in transit where transportation is in contravention of GST law.

Under the current wording of Section 129(3) of the CGST Act, which is materially relevant to the corresponding State GST provisions:

• The proper officer must issue the notice within seven days of detention or seizure.

• The officer must thereafter pass the penalty order within seven days from the date of service of the notice.

• The person concerned must be given an opportunity of being heard before the penalty is determined. (Tax Information)

These provisions were substituted pursuant to the Finance Act, 2021 and became effective from 1 January 2022. (Tax Information)

High Court's Decision

The High Court held that the timelines under Section 129(3) are mandatory and not merely directory.

The Court particularly noted that:

1. The legislation uses the word "shall" in prescribing the timelines.

2. Section 129 authorises coercive measures such as detention and seizure.

3. The prescribed timelines protect taxpayers and traders from prolonged detention and seizure.

4. The absence of an express consequence for non-compliance does not by itself make the statutory timeline directory.

5. Even the intervening circumstances concerning valuation and the contraband polythene could not extend the statutory period.

The Court observed that although the delay was only one day, the authority was required to pass the order within seven days. The order dated 22 September 2025 was therefore held to be beyond the statutory period and was quashed. (CaseMine)

Important Takeaway for Taxpayers and Transporters

This judgment reinforces the importance of strict compliance with statutory timelines in GST detention and seizure proceedings.

Taxpayers and transporters should:

• Maintain proper tax invoices and prescribed transport documents.

• Immediately review any notice issued under Section 129.

• Record the exact date of service of the notice.

• Track the seven-day statutory period for the penalty order.

• Preserve replies, valuation requests, correspondence and inspection reports.

• Challenge an order passed beyond the statutory period where legally appropriate.

The decision is particularly relevant because Section 129 proceedings involve significant consequences for businesses whose goods or vehicles are detained during transit.

Conclusion

The judgment in Mohd Hazzak Lohar v. Commissioner State Tax confirms that the seven-day period under Section 129(3) is a mandatory statutory safeguard. Authorities cannot extend the prescribed period merely because intervening circumstances arise during the proceedings. At the same time, the Court clarified that quashing the Section 129 order does not prevent the authorities from taking action under other applicable provisions of the GST law. (CaseMine)

For expert guidance on this topic, contact your tax professional today.

EXCERPT: J&K High Court quashed a GST penalty order passed one day beyond the mandatory seven-day limit under Section 129(3).

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