Supreme Court of India
M/S ASP TRADERSversusSTATE OF UTTAR PRADESH & ORS.
- Citation
- 2025 INSC 890
- Decided
- 24 July 2025
- Disposal
- Appeal(s) allowed
- Bench
- B PARDIWALA
Holding
The proper officer must pass a reasoned final order under section 129(3) even when tax and penalty are paid, as section 129(5) does not dispense with this statutory requirement.
Summary
The appellant, a dealer in red arecanut, had its consignment detained by the GST Mobile Squad and was served a show‑cause notice under section 129(3) of the CGST Act. The appellant filed objections but, due to business exigencies, paid the tax and penalty amount of Rs 7,20,440 under protest and the goods were released by a discharge order, without a formal order under section 129(3). The appellant sought a speaking order to preserve its right of appeal, but the respondents relied on section 129(5) and the High Court dismissed the petition. The Supreme Court held that the deeming provision of section 129(5) does not relieve the officer of the mandatory duty to pass a reasoned order under section 129(3), especially when objections are filed or payment is made under protest. Consequently, the High Court’s order was set aside and the respondent was directed to issue a final order in Form GST MOV‑09 and upload the summary as required. The appeal was allowed.
Issues considered
- Whether the payment of tax and penalty under section 129(3) obviates the statutory duty of the proper officer to pass a reasoned final order under the same provision.
- Whether section 129(5) deeming fiction dispenses the officer from passing an order when payment is made.
- Whether a payment made under protest can be treated as a voluntary admission of liability, thereby waiving the right to appeal.
- Whether the failure to pass a speaking order violates principles of natural justice and the right to appeal under section 107 of the CGST Act.
- Whether Rule 142(5) of the CGST Rules and Circular No.41/15/2018 require the issuance of a final order irrespective of payment.
Legislation cited
- Central Goods and Services Tax Act, 2017s. 107, s. 129, s. 168
- CGST Rules, 2017s. 142
- Constitution of Indias. Article 265
- IGST Act, 2017s. 20
- SGST/UTGST Act, 2017
Headnote
Issue for Consideration Whether, upon payment of tax and penalty by the appellant within the time stipulated in the notice u/s.129(3), the proper officer is still mandatorily required to pass a final order u/s.129(3), or whether the deeming fiction u/s.129(5) dispenses with such requirement. Tax Act, 2017 – ss.129, 168 – CGST Rules, 2017 – r.142 – IGST Act, 2017 – s.20 – SGST/UTGST Act, 2017 – Circular No.41/15/2018-GST dated 13.04.2018 – A Consignment transported by the appellant was detained by the Mobile Squad for alleged
Subjects
Central Goods and Services Tax Act, 2017Section 129(3) of CGST Act, 2017Discharge orderNo formal order passed under section 129(3)One Nation, One TaxPayment construed as admission of liabilityStatutory right to appealWaiver or abandonmentRight to challengePayment under protestArticle 265 of Constitution of IndiaNo acquiescence in taxPrinciples of natural justiceProcedural formalitySubstantive safeguardPrinciples of fairness, due process and access to justiceFailure to issue speaking orderTransparency and accountability in tax department
Judgment
[2025] 7 S.C.R. 1462 : 2025 INSC 890
M/s ASP Traders
v.
State of Uttar Pradesh & Ors.
(Civil Appeal No. 9764 of 2025)
24 July 2025
[J.B. Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
Whether, upon payment of tax and penalty by the appellant within
the time stipulated in the notice u/s.129(3), the proper officer is still
mandatorily required to pass a final order u/s.129(3), or whether
the deeming fiction u/s.129(5) dispenses with such requirement.
Headnotes†
Central Goods and Services Tax Act, 2017 – ss.129, 168 – CGST
Rules, 2017 – r.142 – IGST Act, 2017 – s.20 – SGST/UTGST
Act, 2017 – Circular No.41/15/2018-GST dated 13.04.2018 –
A Consignment transported by the appellant was detained
by the Mobile Squad for alleged contraventions under the
IGST/CGST/SGST Act, 2017 – Following inspection, a notice
u/s.129(3) was issued to the appellant, directing the appellant
to file objections – The appellant submitted a reply, but due to
business exigencies, paid the tax and penalty amounting to
Rs.7,20,440/- and uploaded the receipt in Form GST DRC-03 –
Thereafter, the respondent authorities released the goods by
passing discharge order in Form GST MOV-05 – However, no
formal order u/s.129(3) was passed – The appellant requested
such an order to pursue statutory remedies, but the respondent
authorities responded that in view of s.129(5), no further order
needs to be passed – Aggrieved, the appellant filed writ petition,
which was dismissed by the High Court – Correctness:
Held: 1. Taking into account that objections were filed, payment
was stated to have been made under protest due to business
exigencies, and the appellant seeks to challenge the levy, the
proper officer was under a clear statutory obligation to pass a
final order u/s.129(3) in Form GST MOV-09 and DRC-07 – The
* Author
[2025] 7 S.C.R. 1463
M/s ASP Traders v. State of Uttar Pradesh & Ors.
refusal by the High Court to direct the passing of such an order,
has the effect of frustrating the appellant’s statutory right to appeal
and is contrary to well established legal principles governing tax
adjudication and procedural fairness – Accordingly, the impugned
order passed by the High Court is set aside. [Paras 20 and 21]
2. No final order was passed, pursuant to the notice dated 21.01.2022
issued u/s.129(3) of the CGST Act – Evidently, the discharge order
merely records that the detained goods and vehicle were released
upon payment of the proposed tax and penalty – It makes no
mention of any withdrawal of objections or of the conclusion of
proceedings initiated u/s.129(3) of the CGST Act, 2017 – In the
present case, payment was made under protest, and objections
had already been filed by the appellant – Once objections are
filed, adjudication is not optional, it becomes imperative to pass a
speaking order to justify the demand of tax and penalty, to safeguard
the right of appeal u/s.107 of the CGST Act, 2017 – The language
of s.129(3) is categorical in stating that the officer “shall issue a
notice… and thereafter, pass an order” – The use of the words “and
thereafter” reinforces the mandatory nature of passing a reasoned
order, regardless of payment, particularly where protest or dispute
is raised – Significantly, the GST payment portal permits payments
only through Form GST DRC-03, which is automatically classified
as a voluntary payment, and does not provide any mechanism for
an assessee to indicate that the payment is being made under
protest – In the absence of such an option, payments made under
commercial compulsion or business necessity—such as for securing
release of detained goods–may be erroneously construed as
voluntary, resulting in undue prejudice – Such procedural limitations
cannot be allowed to defeat the rights of the taxpayer, particularly
where the detention of goods is ultimately found to be unlawful –
Therefore, this Court is of the considered opinion that the payment
made by the appellant in the present case cannot be treated as
voluntary – Further, the payment by an assessee will not absolve
the responsibility of the proper officer to pass an order justifying
the demand of tax and penalty – The payment, by itself, cannot be
treated as a waiver or abandonment, especially when the appellant
has clearly objected to the demand and when there is a statutory
mandate to pass an order and a corresponding right to appeal –
An appeal can lie only against an ‘order’, and in the absence of
a reasoned order passed u/s.129(3) of the Act, the taxpayer is
effectively deprived of the statutory remedy of appeal – Such a
1464 [2025] 7 S.C.R.
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deprivation undermines the foundational principles of fairness,
due process, and access to justice, rendering the right of appeal
illusory or nugatory – The proper officer could not be absolved of
the statutory obligation to pass a reasoned order – Such adherence
is in consonance with the constitutional mandate u/Art.265 of
the Constitution of India – Thus, respondent no.3 is directed to
pass a reasoned final order u/s.129(3) of the CGST Act, 2017.
[Paras 11, 13.1, 15, 16, 16.1, 16.2, 20]
Central Goods and Services Tax Act, 2017 – ss.129, 168 – CGST
Rules, 2017 – r.142 – IGST Act, 2017 – s.20 – SGST/UTGST Act,
2017 – Whether section 129(5) absolves the responsibility of
the proper officer to pass an order concluding the proceedings:
Held: It is a well settled principle that every show cause notice
must culminate in a final, reasoned order – While Section 129(5)
of the CGST Act, 2017 provides that proceedings shall be deemed
to be concluded upon payment of tax and penalty, this deeming
fiction cannot be interpreted to imply that the assessee has
agreed to waive or abandon the right to challenge the levy–a
right that is protected by the very enactment itself – The term
“conclusion” as used in Section 129(5) merely signifies that no
further proceedings for prosecution will be initiated – It does not
absolve the responsibility of the proper officer to pass an order
concluding the proceedings – Therefore, the proper officer is duty-
bound to pass a formal order in Form GST MOV-09 and upload a
summary thereof in Form GST DRT 07 as mandated under Rule
142(5) and the Circular dated 13.04.2018, so as to enable the
taxpayer to avail the appeal remedy as per law. [Para 14]
Constitution of India – Art. 265 – Central Goods and, Services
Tax Act, 2017 – Right against the illegality committed by the
proper officer – Whether payment can be treated as a waiver
or abandonment:
Held: The assessee, even by election, cannot be treated to have
waived his right against the illegality committed by the proper officer
or acquiesced to the demand, as by the constitutional mandate
u/Art.265 of the Constitution, no tax can be levied or collected
except with the authority of law – There is not only a bar against
levy but also against collection – Therefore, the action of the proper
officer must always be justifiable and fall within the four corners
of law, as it is well settled that there can be no acquiescence in
[2025] 7 S.C.R. 1465
M/s ASP Traders v. State of Uttar Pradesh & Ors.
tax – It must be much more than an abandonment of a right to
plead waiver or acquiescence – The payment, by itself, cannot be
treated as a waiver or abandonment, especially when the appellant
has clearly objected to the demand and when there is a statutory
mandate to pass an order and a corresponding right to appeal.
[Paras 16.1 and 16.2]
Central Goods and, Services Tax Act, 2017 – s.129(3) and
s.107 – Right to appeal – When there is an absence of a
reasoned order:
Held: An appeal can lie only against an ‘order’, and in the absence
of a reasoned order passed u/s.129(3) of the Act, the taxpayer is
effectively deprived of the statutory remedy of appeal – Such a
deprivation undermines the foundational principles of fairness, due
process, and access to justice, rendering the right of appeal illusory
or nugatory – Failure to issue a speaking order in response to a
show cause notice creates a legal vacuum – Any consequential
action including imposition of tax or penalty, would then be
unsupported by authority of law, thereby potentially violating Art.
265 of the Constitution of India. [Para 18]
Central Goods and, Services Tax Act, 2017 – Waiver and
Acquiescence – Distinction thereof – Discussed. [Para 16.2]
Case Law Cited
Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd. [1953] 1 SCR 351 :
MANU/SC/011/1952 : AIR 1953 SC 98; Bhau Ram v. Baij Nath
Singh and Ors. [1962] 1 SCR 358 : MANU/0031/SC/1961 : AIR
1961 SC 1327; M/s. Kranti Associates (P) Ltd & Anr. v. Masood
Ahmed Khan & Ors. [2010] 10 SCR 1070 : (2010) 9 SCC 496 :
(2010) 3 SCC (Civ) 852 : 2010 SCC OnLine SC 987; Commissioner
of Customs (Import) Mumbai v. Dilip Kumar & Co. and Others
[2018] 7 SCR 1191 : (2018) 9 SCC 1 – relied on.
List of Acts
Central Goods and Services Tax Act, 2017; CGST Rules, 2017,
IGST Act, 2017; SGST / UTGST Act, 2017; Constitution of India.
List of Keywords
Central Goods and Services Tax Act, 2017; Section 129(3) of
CGST Act, 2017; Discharge order; No formal order passed under
1466 [2025] 7 S.C.R.
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section 129(3)of CGST Act, 2017; One Nation, One Tax; Payment
construed as admission of liability; Statutory right to appeal; Waiver
or abandonment; Right to challenge; Payment under protest; Article
265 of Constitution of India; No acquiescence in tax; Principles
of natural justice; Procedural formality; Substantive safeguard;
Principles of fairness, due process and access to justice; Failure
to issue speaking order; Transparency and accountability in tax
department.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9764 of
2025
From the Judgment and Order dated 18.07.2022 of the High Court
of Judicature at Allahabad in WT No. 955 of 2022
Appearances for Parties
Advs. for the Appellant:
Pawanshree Agrawal, Ms. Aakriti Goel.
Adv. for the Respondents:
Bhakti Vardhan Singh.
Judgment / Order of the Supreme Court
Judgment
R. Mahadevan, J.
Leave granted.
2. This appeal has been preferred by the appellant against the final
judgment and order dated 18.07.2022 passed by the High Court of
Judicature at Allahabad1 in Writ Tax No. 955 of 2022.
3. The relevant facts giving rise to the present appeal are as follows:
3.1. The appellant is a registered dealer in Red Arecanut operating
from Channagiri, Davangere, Karnataka. On 14.01.2022, they
consigned 17,850 kg of dry Arecanut valued at Rs.51,72,930/-,
1 Hereinafter referred to as “the High Court”
[2025] 7 S.C.R. 1467
M/s ASP Traders v. State of Uttar Pradesh & Ors.
packed into 255 bags to one M/s. Diamond Trading Company,
Delhi, through Vehicle No. UP-78-GN-7563 accompanied by
E-Way bill No.141424463403.
3.2. During transit, the goods were transhipped and loaded onto
another vehicle bearing Registration No. HR-38-U-0152 for
onward journey to Delhi. However, only 248 bags were loaded
onto the new vehicle, with 7 bags missing from the original
consignment.
3.3. On 17.01.2022, the said vehicle was detained by the Mobile
Squad at Lalitpur Bypass Road, Jhansi. The driver’s statement
was recorded in Form GST MOV-01. Following physical
inspection, a report was generated in Form GST MOV-04 on
20.01.2022 alleging certain deficiencies. A detention order in
Form GST MOV-06 dated 20.01.2022 was also issued.
3.4. Subsequently, a notice dated 21.01.2022 under section
129(3) of the Central Goods and Services Tax Act, 20172, was
issued in Form GST MOV-07 highlighting the discrepancy of 7
missing bags and the resulting shortfall in quantity from 18220
kg to 17670 kg. It was further alleged that the consignee,
M/s. Diamond Trading Company, was prima facie non-existent
and that the address of the consignor was incorrect as per
departmental records.
3.5. The appellant submitted a detailed reply dated 24.01.2022 to
Respondent No.3, denying all allegations. However, in view
of pressing business exigencies, the appellant deposited
Rs.7,20,440/- towards IGST, as indicated in the show cause
notice, through Form GST DRC-03 dated 27.01.2022.
Accordingly, the detained goods were released under Form
GST MOV-05 dated 27.01.2022.
3.6. Despite the release, no final order under Section 129(3) was
passed by the Mobile Squad. Accordingly, on 26.02.2022,
the appellant submitted a representation seeking an order in
Form GST MOV-09, to enable it to pursue statutory remedies.
In response, by communication dated 03.03.2022, the Mobile
Squad Official stated that one Mohd. Javed, the appellant’s
2 For short, “the CGST Act, 2017”
1468 [2025] 7 S.C.R.
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representative, appeared on 27.01.2022, orally requested
withdrawal of the earlier reply dated 24.01.2022, and sought
release of goods, and hence, no further proceedings were
deemed necessary.
3.7. The appellant denied having made any oral request to withdraw
the reply or abandon further proceedings. Asserting that the
authorities are statutorily bound to pass a reasoned order under
section 129(3), the appellant sent further communications dated
13.04.2022, 29.04.2022 and 13.05.2022, seeking a copy of the
order, if any, passed under said provision.
3.8. Receiving no response, the appellant approached the High Court
by filing Writ Tax No.955 of 2022 praying for the following reliefs:
(i) A direction to Respondent No. 3 to furnish a copy of
the order passed under Section 129(3) in compliance
with Section 129(4) of the U.P. GST Act, pursuant
to notice dated 21.01.2022 in Form GST MOV-07;
(ii) A direction to Respondent No.3 to pass a
speaking order under Section 129(3) after affording
an opportunity of hearing.
3.9. By the impugned order, the High Court dismissed the writ
petition with the following observations:
“6. Admittedly a notice under Section 129(3) of the
CGST Act was issued by the respondent no. 3 to the
petitioner. Pursuant thereto the petitioner deposited
the amount on his own in Form GST DRC-03 and
intimated it to the respondent no.3. Therefore, the
respondent no. 3 has issued an order in form GST
DRC-05. Thus, proceedings in respect of the aforesaid
notice under Section 129(3) of the CGST Act stood
concluded in terms of mandate of sub-section (5) of
Section 129. Hence, relief sought by the petitioner
cannot be granted since the matter is concluded as
per legislative mandate.
7. Once the proceedings in respect of notice under
Section 129(3) of the Act stood concluded in terms
of Section 129(5) of the Act read with Rule 142(3)
of the Rules, no mandamus can be issued to the
[2025] 7 S.C.R. 1469
M/s ASP Traders v. State of Uttar Pradesh & Ors.
respondent no. 3 to pass an order under Section
129(3) of the CGST/UPGST/IGST Act.
8. The contention of the petitioner that a copy of the
order under Section 129(3) of the CGST/UPGST/
IGST Act be provided to him, is wholly misconceived
inasmuch as the proceedings stood concluded in
terms of sub-section (5) of Section 129 read with Rule
142 (3) of the Rules and therefore, no mandamus
contrary to law can be issued in exercise of powers
conferred under Article 226 of the Constitution of
India.”
3.10. Aggrieved by the aforesaid order, the appellant has preferred
the present appeal before this Court.
4. Mr. Pawanshree Agrawal, learned counsel appearing on behalf of
the appellant, at the outset, submitted that it is a settled position in
law that every show cause notice must culminate in a reasoned final
order. Such an order is essential to enable the person affected to
avail all statutory remedies.
4.1. It was further submitted that the payment of penalty cannot be
treated as voluntarily under Form GST DRC-03, as no show
cause notice or statement in Form GST DRC-01 was ever
issued by the respondent authorities requiring the appellant
to make such a deposit. The respondent authorities failed to
follow the mandatory procedure prescribed under Rule 142 of
the CGST Rules, 2017. The High Court, in the impugned order,
erroneously recorded that the penalty was deposited voluntarily,
whereas the appellant had consistently sought final adjudication
and had, in fact, filed a reply to the notice issued under section
129(3) of the Act.
4.2. Without prejudice to the above, the learned counsel submitted
that even if it is assumed that the penalty was paid voluntarily
to secure release of the goods, Respondent No.3 was still under
a statutory obligation to pass an order in Form GST MOV-09,
in accordance with Section 129(3) of the CGST Act, 2017, and
as clarified in Circular No.41/15/2018-GST dated 13.04.2018
issued by the CBIC, GST Policy Wing.
1470 [2025] 7 S.C.R.
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4.3. It was further submitted that Section 129 of the CGST / SGST
Act governs the detention, seizure, and release of goods in
transit. Under section 129(3), the proper officer is required to
issue notice specifying tax and penalty payable and thereafter
pass an order. This obligation to pass an order is independent
of whether any payment has been made by the taxpayer.
Section 129(5) merely states that the proceedings shall be
deemed concluded upon payment of penalty, and does not
dispense with the requirement of adjudication, once a notice
under section 129(3) has been issued.
4.4. The learned counsel submitted that neither Section 129(5) nor
Rule 142(5) permits dispensing with the adjudication process.
While Rule 142(5) provides that detention/ seizure proceedings
conclude on payment of penalty, it does not override the
requirement to pass a formal order determining such penalty.
For proper legal closure, a final order in Form GST DRC-07
and GST MOV-09 must be issued. The CBIC’s circular dated
13.04.2018 being a binding departmental clarification, ought to
have been considered by the High Court.
4.5. According to the learned counsel, an order must be passed
under Section 129(3) even if the penalty amount is paid during
the pendency of proceedings, so as to preserve the taxpayer’s
right of appeal under section 107 of the CGST Act, 2017, and
the failure to pass such an order violates Article 265 of the
Constitution, which mandates that no tax or penalty shall be
levied or collected except by authority of law.
4.6. It was further submitted that the imposition of penalty has
wider implications, including possible consequences in future
adjudication or enforcement proceedings under the CGST Act,
2017. In the absence of a formal order, the appellant stands
prejudiced, and the statutory right of appeal under Section 107
becomes illusory. However, the High Court erred in holding that
no further order was necessary merely because the amount
was paid during the pendency of the notice.
4.7. In light of the above submissions, the learned counsel prayed
that the impugned order of the High Court be set aside, and
appropriate directions be issued to the respondent authorities
[2025] 7 S.C.R. 1471
M/s ASP Traders v. State of Uttar Pradesh & Ors.
to pass final orders in Form GST MOV-09 and GST DRC-07,
thereby preserving the appellant’s right to appeal against the
same under the CGST Act, 2017.
5. Per contra, Mr. Bhakti Vardhan Singh, learned counsel appearing
on behalf of the respondents submitted that the vehicle bearing
Registration No. UP78 GN 7563 transporting betel nuts from
Nagpur to Delhi, was intercepted by the Assistant Commissioner,
Mobile Squad Unit, Jhansi, on 17.01.2022. Upon examination of the
documents, several discrepancies were found. Consequently, the
goods and the vehicle were detained, and proceedings under the
GST Act were initiated.
5.1. It was submitted that the statement of the driver was recorded
in Form GST MOV-01, followed by physical inspection of the
goods and issuance of Form GST MOV-04 dated 20.01.2022.
A detention order in Form GST MOV-06 was issued on the
same date. Thereafter, a show cause notice under Section
129(3) of the CGST Act, 2017 was issued on 21.01.2022
directing the owner of the goods and vehicle to submit a reply by
27.01.2022. In compliance, one Mohd. Taha Qureshi, proprietor
of M/s. Diamond Trading Company appeared on 25.01.2022
and submitted a joint objection on behalf of the appellant
herein, M/s.ASP Traders Co., the purchaser firm M/s. Diamond
Trading Company, and the transporter, M/s Verma Roadways.
On 27.01.2022, the authorised representative of the appellant
Mohd. Javed, appeared and orally sought withdrawal of the
earlier objections, and voluntarily deposited Rs.7,20,440/- via
Form GST DRC-03 as demanded in the notice. Upon this
payment, the goods and vehicle were released under Form
GST MOV-05 dated 27.01.2022. Hence, in terms of Section
129(5), the proceedings stood concluded.
5.2. The learned counsel further submitted that although Section
129(3) requires a notice followed by an order, Section 129(5)
clearly stipulates that upon payment of the amount under Section
129(1), “all proceedings in respect of the notice specified in
sub-section (3) shall be deemed to be concluded” and thus,
no further order is necessary.
5.3. It was further argued that Rule 142(3) of the CGST Rules
reinforces this position stating that if payment is made after
1472 [2025] 7 S.C.R.
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issuance of the notice under Section 129(3) but before passing
of the order, the proceedings shall stand concluded. Hence, no
further adjudication is mandated.
5.4. The learned counsel contended that had the appellant intended
to contest the notice, it could have avoided withdrawing
objections and instead opted to secure release of goods by
furnishing security under the Act. Thus, the High Court rightly
declined to grant a mandamus directing the authorities to pass
an order.
5.5. Finally, relying on the decision of this Court in Commissioner of
Customs (Import) Mumbai v. Dilip Kumar & Co. and others3,
it was argued that when a statute is clear and unambiguous, it
must be applied in its literal sense. In the present case, Section
129(5) is explicit, and the appellant cannot now be permitted to
reopen concluded proceedings. Accordingly, the High Court’s
decision is correct, and the present appeal deserves to be
dismissed.
6. We have heard the learned counsel appearing for both sides and
carefully perused the materials available on record.
7. Admittedly, the consignment transported by the appellant was
detained by the Mobile Squad for alleged contraventions under
the IGST/CGST/SGST Act, 2017. Following inspection, a notice
dated 21.01.2022 under Section 129(3) was issued to the appellant,
directing the appellant to file objections. The appellant submitted
a reply, but due to business exigencies, paid the tax and penalty
amounting to Rs.7,20,440/- and uploaded the receipt in Form GST
DRC-03 on 27.01.2022. Thereafter, the respondent authorities
released the goods by passing discharge order in Form GST MOV-
05 dated 27.01.2022. However, no formal order under Section
129(3) was passed. The appellant requested such an order, but the
respondent authorities responded that in view of Section 129(5),
no further order needs to be passed. Aggrieved, the appellant filed
Writ Tax No.955 of 2022, which was dismissed by the High Court,
accepting the stand of the respondents. Hence, the present appeal
came to be filed.
3 (2018) 9 SCC 1
[2025] 7 S.C.R. 1473
M/s ASP Traders v. State of Uttar Pradesh & Ors.
8. The issue that arises for consideration in this appeal is whether,
upon payment of tax and penalty by the appellant within the time
stipulated in the notice under section 129(3), the proper officer is
still mandatorily required to pass a final order under section 129(3),
or whether the deeming fiction under section 129(5) dispenses with
such requirement.
9. Before proceeding further, it is necessary to examine the relevant
legal provisions applicable to the present case. The IGST Act, 2017,
CGST Act, 2017 and SGST / UTGST Act, 2017 are interrelated
parts of the Goods and Services Tax (GST) regime in India. All three
enactments originate from the same constitutional amendment – 101st
Amendment Act, 2016 – aimed at establishing a harmonized indirect
tax structure under the philosophy of ‘One Nation, One Tax’. While
the tax base and compliance framework are integrated, the Acts are
separate to reflect the federal distribution of taxing powers.
9.1. Notably, Section 20 of the IGST Act adopts the provisions of
Section 129 of the CGST Act mutatis mutandis.
9.2. Section 129 of the CGST Act, 2017 outlines the mechanism
for detention, seizure, and release of goods and conveyance
in transit. Sub-section (1) authorizes detention and prescribes
the conditions for release. Sub-section (3) requires the proper
officer to issue a notice specifying the tax and penalty payable
and thereafter pass an order. Sub-section (4) mandates that
no tax or penalty shall be determined without providing an
opportunity of hearing. Sub-section (5) provides that upon
payment of the amounts under sub-section (1), all proceedings
in respect of the notice shall be deemed to be concluded. For
ease of reference, the said provisions are reproduced below:
“129. Detention, seizure and release of goods and
conveyances in transit:
(1) Notwithstanding anything contained in this Act,
where any person transports any goods or stores any
goods while they are in transit in contravention of the
provisions of this Act or the rules made thereunder,
all such goods and conveyance used as a means of
transport for carrying the said goods and documents
relating to such goods and conveyance shall be liable
to detention or seizure and after detention or seizure,
shall be released,—
1474 [2025] 7 S.C.R.
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(a) on payment of the applicable tax and penalty equal
to one hundred per cent of the tax payable on such
goods and, in case of exempted goods, on payment
of an amount equal to two per cent of the value of
goods or twenty-five thousand rupees, whichever is
less, where the owner of the goods comes forward
for payment of such tax and penalty;
(b) on payment of the applicable tax and penalty
equal to the fifty per cent of the value of the goods
reduced by the tax amount paid thereon and, in case
of exempted goods, on payment of an amount equal
to five per cent of the value of goods or twenty five
thousand rupees, whichever is less, where the owner
of the goods does not come forward for payment of
such tax and penalty;
(c) upon furnishing a security equivalent to the amount
payable under clause (a) or clause (b) in such form
and manner as may be prescribed:
Provided that no such goods or conveyance shall
be detained or seized without serving an order of
detention or seizure on the person transporting the
goods.
………….
(3) The proper officer detaining or seizing goods
or conveyances shall issue a notice specifying
the tax and penalty payable and thereafter, pass
an order for payment of tax and penalty under
clause (a) or clause (b) or clause (c).
(4) No tax, interest or penalty shall be determined
under sub-section (3) without giving the person
concerned an opportunity of being heard.
(5) On payment of amount referred in sub-section
(1), all proceedings in respect of the notice
specified in sub-section (3) shall be deemed to
be concluded.
(6) ….”
[2025] 7 S.C.R. 1475
M/s ASP Traders v. State of Uttar Pradesh & Ors.
9.3. Rule 142 of the CGST Rules, 2017 indeed reinforces and
operationalizes the provisions of Section 129 of the CGST
Act, 2017, particularly, with regard to the procedural aspects of
issuance of notices, orders, and payment of tax and penalty in
cases involving detention, seizure, and release of goods and
conveyances in transit. Sub-rule (3) states that on payment of
tax and penalty under section 129(1), intimation shall be given
in Form DRC-03 and the proper officer shall issue an order
in Form DRC-05 concluding the proceedings. Sub-rule (5)
mandates uploading a summary of the final order in Form
GST DRC-07. For the sake of reference, the said provisions
are extracted below:
“142. Notice and order for demand of amounts
payable under the Act.
…
(3) Where the person chargeable with tax makes
payment of tax and interest under sub-section (8) of
section 73 or, as the case may be, tax, interest and
penalty under sub-section (8) of section 74 within thirty
days of the service of a notice under sub-rule (1), or
where the person concerned makes payment of the
amount referred to in sub-section (1) of section 129
within fourteen days of detention or seizure of the
goods and conveyance, he shall intimate the proper
officer of such payment in FORM GST DRC-03 and
the proper officer shall issue an order in FORM GST
DRC-05 concluding the proceedings in respect of
the said notice.
…
(5) A summary of the order issued under section 52
or section 62 or section 63 or section 64 or section 73
or section 74 or section 75 or section 76 or section
122 or section 123 or section 124 or section 125
or section 127 or section 129 or section 130 shall
be uploaded electronically in FORM GST DRC-07,
specifying therein the amount of tax, interest and
penalty payable by the person chargeable with tax.”
1476 [2025] 7 S.C.R.
Supreme Court Reports
10. During the course of hearing, the learned counsel for the appellant
drew our attention to Circular No.41/15/2018-GST dated 13.04.2018
issued by the Central Board of Indirect Taxes and Customs, GST
Policy Wing, and the same reads as under:
“Circular No. 41/15/2018-GST
CBEC-20/16/03/2017-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
****
New Delhi, Dated the 13th April, 2018
To
The Principal Chief Commissioners/Chief Commissioners/
Principal Commissioners/ Commissioners of Central Tax
(All)/The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Procedure for interception of conveyances
for inspection of goods in movement, and detention,
release and confiscation of such goods and
conveyances –Reg.
Sub-section (1) of section 68 of the Central Goods and
Services Tax Act, 2017 (hereinafter referred to as the “CGST
Act”) stipulates that the person in charge of a conveyance
carrying any consignment of goods of value exceeding a
specified amount shall carry with him the documents and
devices prescribed in this behalf. Sub-section (2) of the
said section states that the details of documents required
to be carried by the person in charge of the conveyance
shall be validated in such manner as may be prescribed.
Sub-section (3) of the said section provides that where
any conveyance referred to in sub-section (1) of the said
section is intercepted by the proper officer at any place,
he may require the person in charge of the conveyance
to produce the documents for verification, and the said
[2025] 7 S.C.R. 1477
M/s ASP Traders v. State of Uttar Pradesh & Ors.
person shall be liable to produce the documents and also
allow the inspection of goods.
1.1 Rules 138 to 138D of the Central Goods and Services
Tax Rules, 2017 (hereinafter referred to as the “CGST
Rules”) lay down, in detail, the provisions relating to e-way
bills…..
1.2 Section 129 of the CGST Act provides for detention,
seizure and release of goods and conveyances in transit
while section 130 of the CGST Act provides for the
confiscation of goods or conveyances and imposition of
penalty.
2. In this regard, various references have been received
regarding the procedure to be followed in case of
interception of conveyances for inspection of goods
in movement and detention, seizure and release and
confiscation of such goods and conveyances. In order to
ensure uniformity in the implementation of the provisions
of the CGST Act across all the field formations, the Board,
in exercise of the powers conferred under section 168 (1)
of the CGST Act, hereby issues the following instructions:
(a) The jurisdictional Commissioner or an officer authorised
by him for this purpose shall, by an order, designate an
officer/officers as the proper officer/officers to conduct
interception and inspection of conveyances and goods in
the jurisdictional area specified in such order.
(b) The proper officer, empowered to intercept and
inspect a conveyance, may intercept any conveyance for
verification of documents and/or inspection of goods. On
being intercepted, the person in charge of the conveyance
shall produce the documents related to the goods and the
conveyance. The proper officer shall verify such documents
and where, prima facie, no discrepancies are found, the
conveyance shall be allowed to move further. An e-way bill
number may be available with the person in charge of the
conveyance or in the form of a printout, sms or it may be
written on an invoice. All these forms of having an e-way
bill are valid. Wherever a facility exists to verify the e-way
1478 [2025] 7 S.C.R.
Supreme Court Reports
bill electronically, the same shall be so verified, either by
logging on to http://mis.ewaybillgst.gov.in or the Mobile
App or through SMS by sending EWBVER <EWB_NO>
to the mobile number 77382 99899 (For e.g. EWBVER
120100231897).
(c) ….
(d) Where the person in charge of the conveyance fails
to produce any prescribed document or where the proper
officer intends to undertake an inspection, he shall record
a statement of the person in charge of the conveyance in
FORM GST MOV 01. In addition, the proper officer shall
issue an order for physical verification/inspection of the
conveyance, goods and documents in FORM GST MOV-
02, requiring the person in charge of the conveyance to
station the conveyance at the place mentioned in such
order and allow the inspection of the goods. The proper
officer shall, within twenty four hours of the aforementioned
issuance of FORM GST MOV-02, prepare a report in Part
A of FORM GST EWB-03 and upload the same on the
common portal.
(e) Within a period of three working days from the date
of issue of the order in FORM GST MOV-02, the proper
officer shall conclude the inspection proceedings, either
by himself or through any other proper officer authorised
in this behalf. Where circumstances warrant such time
to be extended, he shall obtain a written permission
in FORM GST MOV-03 from the Commissioner or
an officer authorized by him, for extension of time
beyond three working days and a copy of the order of
extension shall be served on the person in charge of the
conveyance.
(f) On completion of the physical verification/inspection of
the conveyance and the goods in movement, the proper
officer shall prepare a report of such physical verification
in FORM GST MOV-04 and serve a copy of the said report
to the person in charge of the goods and conveyance. The
proper officer shall also record, on the common portal,
[2025] 7 S.C.R. 1479
M/s ASP Traders v. State of Uttar Pradesh & Ors.
the final report of the inspection in Part B of FORM GST
EWB-03 within three days of such physical verification/
inspection.
(g) Where no discrepancies are found after the
inspection of the goods and conveyance, the proper
officer shall issue forthwith a release order in FORM
GST MOV-05 and allow the conveyance to move further.
Where the proper officer is of the opinion that the
goods and conveyance need to be detained under
section 129 of the CGST Act, he shall issue an order of
detention in FORM GST MOV-06 and a notice in FORM
GST MOV-07 in accordance with the provisions of sub-
section (3) of section 129 of the CGST Act, specifying
the tax and penalty payable. The said notice shall be
served on the person in charge of the conveyance.
(h) Where the owner of the goods or any person
authorized by him comes forward to make the payment
of tax and penalty as applicable under clause (a) of
sub-section (1) of section 129 of the CGST Act, or where
the owner of the goods does not come forward to make
the payment of tax and penalty as applicable under
clause (b) of sub-section (1) of the said section, the
proper officer shall, after the amount of tax and penalty
has been paid in accordance with the provisions of
the CGST Act and the CGST Rules, release the goods
and conveyance by an order in FORM GST MOV-05.
Further, the order in FORM GST MOV-09 shall be
uploaded on the common portal and the demand
accruing from the proceedings shall be added in the
electronic liability register and the payment made
shall be credited to such electronic liability register by
debiting the electronic cash ledger or the electronic
credit ledger of the concerned person in accordance
with the provisions of section 49 of the CGST Act.
(i) ….
(j) Where any objections are filed against the proposed
amount of tax and penalty payable, the proper officer
1480 [2025] 7 S.C.R.
Supreme Court Reports
shall consider such objections and thereafter, pass
a speaking order in FORM GST MOV-09, quantifying
the tax and penalty payable. On payment of such
tax and penalty, the goods and conveyance shall be
released forthwith by an order in FORM GST MOV-05.
The order in FORM GST MOV 09 shall be uploaded on
the common portal and the demand accruing from the
order shall be added in the electronic liability register
and, upon payment of the demand, such register shall
be credited by either debiting the electronic cash
ledger or the electronic credit ledger of the concerned
person in accordance with the provisions of section
49 of the CGST Act.
(k) In case the proposed tax and penalty are not paid
within seven days from the date of the issue of the order
of detention in FORM GST MOV-06, action under section
130 of the CGST Act shall be initiated by serving a notice
in FORM GST MOV 10, proposing confiscation of the
goods and conveyance and imposition of penalty.
(l)…
(m) No order for confiscation of goods or conveyance, or
for imposition of penalty, shall be issued without giving
the person an opportunity of being heard.
(n) An order of confiscation of goods shall be passed in
FORM GST MOV-11, after taking into consideration the
objections filed by the person in charge of the goods
(owner or his representative), and the same shall be
served on the person concerned. Once the order of
confiscation is passed, the title of such goods shall
stand transferred to the Central Government. In the said
order, a suitable time not exceeding three months shall
be offered to make the payment of tax, penalty and fine
imposed in lieu of confiscation and get the goods released.
The order in FORM GST MOV-11 shall be uploaded on
the common portal and the demand accruing from the
order shall be added in the electronic liability register
and, upon payment of the demand, such register shall
be credited by either debiting the electronic cash ledger
or the electronic credit ledger of the concerned person
[2025] 7 S.C.R. 1481
M/s ASP Traders v. State of Uttar Pradesh & Ors.
in accordance with the provisions of section 49 of the
CGST Act. Once an order of confiscation of goods is
passed in FORM GST MOV-11, the order in FORM GST
MOV-09 passed earlier with respect to the said goods
shall be withdrawn.
(o)..
(p)…
(q)…
(r)…
(s)…
(t)…
(u)…
(v) A summary of every order in FORM GST MOV-09 and
FORM GST MOV-11 shall be uploaded electronically in
FORM GST-DRC-07 on the common portal.
….
(Upender Gupta)
Commissioner (GST)”
This circular, which is binding on the department under Section
168 of the CGST Act, 2017 provides detailed instructions to ensure
uniformity in implementation of procedures for interception, detention,
seizure, and confiscation of goods in transit. It mandates that upon
payment of tax and penalty under Section 129 (1), the proper officer
must issue the release order in Form GST MOV-05. Additionally, the
officer is required to pass a formal order of demand in Form GST
MOV-09 and upload it on the common portal. A summary of this
order must be uploaded in Form GST DRC-07, so that the demand
is recorded in the taxpayer’s electronic liability register.
11. In the present case, upon payment of the tax and penalty demanded
in the notice dated 21.01.2022 issued under Form GST MOV-07,
Respondent No.3 released the goods and vehicle by passing a
discharge order dated 27.01.2022 in Form GST MOV-05. However, no
final order was passed, pursuant to the said notice dated 21.01.2022
issued under Section 129(3) of the CGST Act.
1482 [2025] 7 S.C.R.
Supreme Court Reports
12. The appellant has categorically pleaded that due to business exigencies,
they paid the tax and penalty and secured the release of the goods
and vehicle detained. This payment, however, cannot be construed
as an admission of liability for the alleged contraventions of the Act.
It was further stated that the payment was made under protest, and
the appellant had intended to contest the matter. Therefore, the proper
officer was bound to pass a speaking order under section 129(3),
to enable the appellant to exercise of their statutory right of appeal.
12.1. In contrast, the respondent authorities asserted that the payment
was made voluntarily by the appellant prior to the passing
of an order under Section 129(3), and that the appellant’s
authorised representative had withdrawn the objections earlier
filed. Accordingly, they stated that in terms of section 129(5),
all proceedings stood concluded, and no further order was
required to be passed.
13. To appreciate the rival submissions, it is relevant to refer to the
discharge order dated 27.01.2022 issued under Form GST MOV- 05
by Respondent No.3 which reads as under:
“Commercial Tax Department, Uttar Pradesh
Office AC (Mobile Squad) - 2, Jhansi
FORM GST MOV-05
No. : 21-22/HA000326
MOV-05 No.: 212210583051054
MOV-05 dated 27.01.2022
DISCHARGE ORDER
Ref. FORM GST MOV-02S./Dated 212210283051049 /
18.01.2022
The goods being transported from vehicle No. HR38U0152
were checked by the undersigned on 18.01.2022 and after
investigation, in the detention order FORM GST MOV-06
on 20.01.2022 and in the notice FORM GST MOV-07, the
vehicle in-charge was served on the 21.01.2022.
• Appeared the goods owner, the proposed due tax and
penalty have been paid in the proceedings.
[2025] 7 S.C.R. 1483
M/s ASP Traders v. State of Uttar Pradesh & Ors.
In the light of the above, the goods and the vehicle are
hereby being released on 27.01.2022 at 01:20 PM.
Sd/-
Santosh Kumar Tiwari-II
AC (Mobile Squad)-2, Jhansi
Acknowledgment
I hereby duly declare that I have obtained a copy of the
said discharge order.
Sd/- (Shakil)
Signature Owner/Vehicle Incharge”
13.1. Evidently, the discharge order merely records that the detained
goods and vehicle were released upon payment of the proposed
tax and penalty. It makes no mention of any withdrawal of
objections or of the conclusion of proceedings initiated under
Section 129(3) of the CGST Act, 2017.
14. It is a well settled principle that every show cause notice must
culminate in a final, reasoned order. While Section 129(5) of the
CGST Act, 2017 provides that proceedings shall be deemed to be
concluded upon payment of tax and penalty, this deeming fiction
cannot be interpreted to imply that the assessee has agreed to waive
or abandon the right to challenge the levy – a right that is protected
by the very enactment itself. The term “conclusion” as used in Section
129(5) merely signifies that no further proceedings for prosecution
will be initiated. It does not absolve the responsibility of the proper
officer to pass an order concluding the proceedings. Therefore, the
proper officer is duty-bound to pass a formal order in Form GST
MOV-09 and upload a summary thereof in Form GST DRT 07 as
mandated under Rule 142(5) and the Circular dated 13.04.2018, so
as to enable the taxpayer to avail the appeal remedy as per law.
15. In the present case, payment was made under protest, and objections
had already been filed by the appellant. Once objections are filed,
adjudication is not optional, it becomes imperative to pass a speaking
order to justify the demand of tax and penalty, to safeguard the right
of appeal under Section 107 of the CGST Act, 2017. The language
of section 129(3) is categorical in stating that the officer “shall issue
a notice… and thereafter, pass an order”. The use of the words “and
1484 [2025] 7 S.C.R.
Supreme Court Reports
thereafter” reinforces the mandatory nature of passing a reasoned
order, regardless of payment, particularly where protest or dispute
is raised.
16. Although the respondents claim that the objections were orally
withdrawn and that the payment was made voluntarily by the appellant,
no written material has been placed on record to substantiate the
same. As between a written reply and an oral submission contrary to
such written submission/reply, the written reply would prevail, and the
authorities are duty-bound to consider that reply and pass speaking
orders addressing each and every contention. Significantly, the GST
payment portal permits payments only through Form GST DRC-03,
which is automatically classified as a voluntary payment, and does
not provide any mechanism for an assessee to indicate that the
payment is being made under protest. In the absence of such an
option, payments made under commercial compulsion or business
necessity – such as for securing release of detained goods – may
be erroneously construed as voluntary, resulting in undue prejudice.
Under such circumstances, the written objections become significant
to understand the intention of the assessee/owner or transporter.
Upon such payment, the system auto-generates Form GST DRC-05,
thereby concluding the proceedings without any formal adjudication.
Such procedural limitations cannot be allowed to defeat the rights of
the taxpayer, particularly where the detention of goods is ultimately
found to be unlawful. We are, therefore, of the considered opinion
that the payment made by the appellant in the present case cannot
be treated as voluntary, and the absence of a mechanism to record
protest should not operate to the detriment of the assessee, especially
when objections were already on record and the payment was clearly
necessitated by business exigences.
16.1. Further, the payment by an assessee will not absolve the
responsibility of the proper officer to pass an order justifying the
demand of tax and penalty. The assessee, even by election,
cannot be treated to have waived his right against the illegality
committed by the proper officer or acquiesced to the demand,
as by the constitutional mandate under Article 265 of the
Constitution, no tax can be levied or collected except with the
authority of law. There is not only a bar against levy but also
against collection. Therefore, the action of the proper officer
must always be justifiable and fall within the four corners of law,
as it is well settled that there can be no acquiescence in tax.
[2025] 7 S.C.R. 1485
M/s ASP Traders v. State of Uttar Pradesh & Ors.
16.2. A waiver, as settled, is an abandonment of a right by express
terms or by implication. It is an act by which a party elects
to abandon his right to pursue a particular remedy with full
knowledge of its existence, making the other party to alter his
position or legal status. Acquiescence, on the other hand, will
imply the conduct of a party, who refrains from taking any action
for a long period of time, despite the knowledge of the violation
of his right, thereby precluding his future right to agitate the
issue, as it would be hit by laches. It will be useful to refer to
the following judgments on waiver and acquiescence:
(i) Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd.4
“12. The appeal Court, it will be observed, reversed
the decision of the trial Judge and decided the appeal
against the Company on two grounds only, namely, (1)
that the Company had by the conduct of its two members
abandoned its right to challenge the forfeiture, and (2)
that the form of the order could not be supported as one
validly made under section 38 of the Indian Companies
Act. The learned Attorney-General, appearing in support
of this appeal, has assailed the soundness of both these
grounds. The learned Attorney-General contends, not
without considerable force, that having, in agreement with
the trial Court, held that no plea of acquiescence, waiver
or estoppel had been established in this case, the appeal
Court should not have allowed the Mills to raise the question
of abandonment of right by the Company, inasmuch as no
such plea of abandonment had been raised either in the
Mills’ affidavit in opposition to the Company’s application or
in the Mills’ grounds of appeal before the High Court. Apart
from this, the appeal Court permitted the Mills to make out
a plea of abandonment of right by the Company as distinct
from the pleas of waiver, acquiescence and estoppel and
sought to derive support for this new plea from the well
known cases of Prendergast v. Turton 62 E.R. 807, Clark &
Chapman v. Hart 6 H.L.C. 632; 10 E.R. 1443] and Jones v.
North Vancouver Land and Improvement Co. [1910] A.C.
4 MANU: SC/011/1952 : AIR 1953 SC 98
1486 [2025] 7 S.C.R.
Supreme Court Reports
317. A perusal of the relevant facts set out in the several
reports and the respective judgments in the above cases
will clearly indicate that apart from the fact that some of
them related to collieries which were treated on a special
footing, those cases were really cases relating to waiver
or acquiescence or estoppel. Indeed in Clarke’s case [6
H.L.C. 632; 10 E.R. 1443], while Lord Chelmsford referred
to the decision in Prendergast’s case 62 E.R. 807, as a
case of abandonment of right, Lord Wensleydale read it as
an instance of acquiescence and estoppel. Unilateral act
or conduct of a person, that is to say act or conduct of one
person which is not relied upon by another person to his
detriment, is nothing more than mere waiver, acquiescence
or laches, while act or conduct of a person amounting to
an abandonment of his right and inducing another person
to change his position to his detriment certainly raises the
bar of estoppel. Therefore, it is not intelligible how, having
held that no plea of waiver, acquiescence or estoppel had
been established in this case, the appeal Court could,
nevertheless, proceed to give relief to the Mills on the plea
of abandonment by the Company of its rights. If the facts
on record were not sufficient to sustain the plea of waiver,
acquiescence or estoppel, as held by both the Courts, we
are unable to see how a plea of abandonment of right
which is an aggravated form of waiver, acquiescence or
laches and akin to estoppel could be sustained on the
self-same facts. Further, whatever be the effect of mere
waiver, acquiescence or laches on the part of a person on
his claim to equitable remedy to enforce his rights under
an executory contract, it is quite clear, on the authorities,
that mere waiver, acquiescence or laches which does not
amount to an abandonment of his right or to an estoppel
against him cannot disentitle that person from claiming
relief in equity in respect of his executed and not merely
executory interest. (See per Lord Chelmsford in Clarke’s
case 6 H.L.C. 632 : 10 E.R. 1443). Indeed, it has been
held in The Garden Gully United Quartz Mining Company v.
Hugh McLister L.R. 1 App. Cas. 39, that mere laches does
not disentitle the holder of shares to equitable relief against
an invalid declaration of forfeiture. Sir Barnest Peacock
[2025] 7 S.C.R. 1487
M/s ASP Traders v. State of Uttar Pradesh & Ors.
in delivering the judgment of the Privy Council observed
at pages 56-57 as follows:
“There is no evidence sufficient to induce their
Lordships to hold that the conduct of the plaintiff did
amount to an abandonment of his shares, or of his
interest therein, or estop him from averring that he
continued to be the proprietor of them. There certainly
is no evidence to justify such a conclusion with regard
to his conduct subsequent to the advertisement of
the 30th of May, 1869. In this case, as in that of
Prendergast v. Turton 62 E.R. 807, the plaintiff’s
interest was executed. In other words, he had a legal
interest in his shares and did not require a declaration
of trust or the assistance of a Court of Equity to create
in him an interest in them. Mere laches would not,
therefore, disentitle him to equitable relief : Clarke
and Chapman v. Hart 6 H.L.C. 632 : 10 E.R. 1443. It
was upon the ground of abandonment, and not upon
that of mere laches, that Prendergast v. Turton 62
E.R. 807, was decided.”
13. Two things are thus clear, namely, (1) that abandonment
of right is much more than mere waiver, acquiescence or
laches and is something akin to estoppel if not estoppel
itself, and (2) that mere waiver, acquiescence or laches
which is short of abandonment of right or estoppel does
not disentitle the holder of shares who has a vested
interest in the shares from challenging the validity of
the purported forfeiture of those shares. In view of the
decision of the Courts below that no case of waiver,
acquiescence, laches or estoppel has been established
in this case it is impossible to hold that the principles
deducible from the judicial decisions relied upon by the
appeal Court have disentitled the Company to relief in
this case. The matter does not rest even here. Assuming,
but not conceding, that the principle of piercing the veil of
corporate personality referred to in Smith, Stone & Knight
v. The Birmingham Corporation (1939) 4 All E.R. 116,
can at all be applied to the facts of the present case so
as to enable the Court to impute the acts or conduct of
1488 [2025] 7 S.C.R.
Supreme Court Reports
Govindaraju Chettiar and Sundara Ayyar to the Company,
we have yet to inquire whether those acts or conduct do
establish such abandonment of rights as would, according
to the decisions, disentitle the plaintiff from questioning
the validity of the purported declaration of forfeiture. There
can be no question that the abandonment, if any, must be
inferred from acts or conduct of the Company as such or,
on the above principles, of its two members subsequent
to the date of the forfeiture, for it is the right to challenge
the forfeiture that is said to have been abandoned. In
order to give rise to an estoppel against the Company,
such acts or conduct amounting to abandonment must be
anterior to the Mills’ changing its position to its detriment.
The resolution for forfeiture was passed on the 5th
September, 1941. The five thousand forfeited shares were
allotted to 14 persons on the 16th November, 1941, and
it is such allotment that made it impossible for the Mills
to give them back to the Company. In order, therefore,
to sustain a plea of abandonment of right or estoppel,
it must be shown that the Company or either of its two
members had done some act and/or had been guilty of
some conduct between the 5th September, 1941, and
the 16th November, 1941. No such act or conduct during
such period has been or can be pointed out. On being
pressed advocate for the Mills refers us to the conduct
of Sundara Ayyar in opposing O.P. No. 10 of 1942 filed
by the Mills and O.P. No. 11 of 1942 by the Income-tax
authorities for restoring the Company to the register of
companies and it is submitted that such conduct indicates
that Sundara Ayyar had accepted the validity of the
forfeiture. This was long after the Mills had reallotted
the forfeited shares. Further, a perusal of paragraph 9
of the affidavit in opposition filed by Sundara Ayyar in
O.P. No. 10 of 1942 will clearly show that he not only did
not accept the forfeiture as valid but actually repudiated
such forfeiture as wholly beyond the competence of the
Board of Directors of the Mills. The reason for opposing
the restoration of the Company may well have been that
Sundara Ayyar desired, at all cost, to avoid his eventual
personal liability as a shareholder and director of the
[2025] 7 S.C.R. 1489
M/s ASP Traders v. State of Uttar Pradesh & Ors.
Company. In any case, Sundara Ayyar did make it clear
that he challenged the validity of the purported forfeiture
of shares by the Mills and in this respect this case falls
clearly within the decision in Clarke’s case [6 H.L.C. 632 :
10 E.R. 1443], relied upon by the appeal Court. The only
other conduct of Sundara Ayyar relied on by learned
advocate for the Mills in support of the appeal Court’s
decision on this point is that Sundara Ayyar proceeded
with his suit against Palaniappa Chettiar even after his
suit as well as his appeal had been dismissed as against
the Mills. In that suit Sundara Ayyar sued the Mills as
well as Govindaraju Chettiar and the Official Receiver of
Salem representing the latter’s estate and Palaniappa
Chettiar. In the plaint itself the validity of the forfeiture was
challenged. The claim against Palaniappa Chettiar was in
the alternative and it was founded on the agreement of
the 30th June, 1939. The suit was dismissed as against
the Mills only on the technical ground that Sundara Ayyar
had no locus standi to maintain the suit. The contention
of the Company that the forfeiture was invalid and the
claim for rectification of the share register of the Mills by
restoring the name of the Company cannot possibly have
been affected by this decision. Sundara Ayyar’s claim
against Palaniappa Chettiar was based on the agreement
of 1939 and it was formulated as an alternative personal
claim. In view of the clear allegation in the plaint that the
forfeiture was invalid and not binding on the Company,
the continuation of the suit by Sundara Ayyar to enforce
his personal claim against Palaniappa Chettiar cannot be
regarded as an abandonment by Sundara Ayyar of the
right of the Company. It must not be overlooked that the
Company stood dissolved on that date and Sundara Ayyar
had no authority to do anything on behalf of the Company.
In our opinion there is no evidence of abandonment of the
Company’s right to challenge the validity of the purported
forfeiture.
……
22. In the first place, waiver and abandonment are in their
primary context unilateral acts. Waiver is the intentional
1490 [2025] 7 S.C.R.
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relinquishment of a right or privilege. Abandonment is the
voluntary giving up of one’s rights and privileges or interest
in property with the intention of never claiming them again.
But except where statutory or other limitations intervene,
unilateral acts never in themselves effect a change in
legal status because it is fundamental that a man cannot
by his unilateral action affect the rights and interests of
another except on the basis of statutory or other authority.
Rights and obligations are normally intertwined and a man
cannot by abandonment per se of his rights and interests
thereby rid himself of his own obligations or impose them
on another. Thus, there can be no abandonment of a
tenancy except on statutory grounds (as, for example, in
the Central Provinces Tenancy Act, 1920) unless there is
acceptance, express or implied, by the other side. It may,
for example in a case of tenancy, be to the landlord’s
interest to keep the tenancy alive; and so also in the case
of shares of a company. It may be to the interests of the
company and the general body of shareholders to refrain
from forfeiture if, for example, the value of unpaid calls
exceeds the market value of the shares. Such a position
was envisaged in Garden Gully United Quartz Mining
Co. v. Hugh Mc Lister (1875) 1 App. Cas. 39. So also with
waiver. A long catena of illustrative cases will be found
collected in B. B. Mitra’s Indian Limitation Act. Thirteenth
Edition, pages 447 and 448.
23. This fundamental concept brings about another
repercussion. Unless other circumstances intervene, there
is a locus poenitentiae in which a unilateral abandonment
or waiver can be recalled. It would be otherwise if the
unilateral act of abandonment in itself, and without the
supervention of other matters, effected a change in legal
status. In point of fact, it is otherwise when, as in the
statutory example I have quoted, the law intervenes and
determines the tenancy. It is, therefore, in my opinion,
fundamental that abandonment and waiver do not in
themselves unilaterally bring about a change in legal
status. Something else must intervene, either a statutory
mandate or an act of acceptance, express or implied, by
[2025] 7 S.C.R. 1491
M/s ASP Traders v. State of Uttar Pradesh & Ors.
another person, or, as Lord Chelmsford put it in Clarke
& Chapman v. Hart (1858) 10 E.R. 1443, acts which are
equivalent to an agreement or a licence, or an estoppel
in cases where an estoppel can be raised.”
(ii) Bhau Ram v. Baij Nath Singh and Ors.5
“7. It seems to us, however, that in the absence of some
statutory provision or of a well-recognised principle of
equity, no one can be deprived of his legal rights including
a statutory right of appeal. The phrase “approbate and
reprobate” is borrowed from Scotch Law where it is used
to express the principle embodied in the English doctrine
of election, namely, that no party can accept and reject
the same instrument (per Scrutton, L.J., in Verschures
Creameries v. Hull and Netherlands Steamship Co.
[[1921] 2 K.B. 608.]. The House of Lords further pointed
out in Lissenden v. C.A.V. Bosch Ltd. [[1940] A.C. 412.]
that the equitable doctrine of election applies only when
an interest is conferred as an act of bounty by some
instrument. In that case they held that the withdrawal by
a workman of the compensation money deposited by the
employer could not take away the statutory right of appeal
conferred upon him by the Workmen’s Compensation Act.
Lord Maugham, after pointing out the limitations of the
doctrine of approbate and reprobate observed towards
the conclusion of his speech:
“It certainly cannot be suggested that the receipt of the
sum tendered in any way injured the respondents. Neither
estoppel nor release in the ordinary sense was suggested.
Nothing was less served than the principles either of equity
or of justice.” (pp. 421-422).
……
12. It seems to us that a statutory right of appeal cannot be
presumed to have come to an end because the appellant
has in the meantime abided by or taken advantage of
5 MANU/0031/SC/1961 : AIR 1961 SC 1327
1492 [2025] 7 S.C.R.
Supreme Court Reports
something done by the opponent under the decree and
there is no justification for extending the rule in Tinkler’s
case (1849) 4 Ex. 187 : 154 E.R. 1176 to cases like
the present. In our judgment it must be limited only to
those cases where a person has elected to take benefit
otherwise than on the merits of the claim in the lis under
an order to which benefit he could not have been entitled
except for the order. Here the appellant, by withdrawing
the pre-emption price has not taken a benefit de hors the
merits. Besides, this is not a case where restitution is
impossible or inequitable. Further, it seems to us that the
existence of a choice between two rights is also one of the
conditions necessary for the applicability of the doctrine of
approbate and reprobate. In the case before us there was
no such choice before the appellant and, therefore, his
act in withdrawing the pre-emption price cannot preclude
him for continuing his appeal. We, therefore, overrule the
preliminary objection. The appeal will now be set down for
hearing on merits. The costs of this hearing will be costs
in the appeal.”
Therefore, it is clear that there must be much more than an
abandonment of a right to plead waiver or acquiescence. The
payment, by itself, cannot be treated as a waiver or abandonment,
especially when the appellant has clearly objected to the demand
and when there is a statutory mandate to pass an order and a
corresponding right to appeal.
17. Furthermore, the respondents’ reliance on section 129(5) to avoid
issuing a final order under section 129(3), in our view, is a non-
starter and overlooks the statutory scheme. Where objections are
filed or payment is made under protest or compulsion, adjudication
is indispensable. The invocation of the decision in Dilip Kumar &
Co. (regarding strict interpretation of exemption) by the respondents
is entirely misplaced, as the issue involved herein pertains not to
tax exemption, but to compliance with due process and procedural
safeguards.
18. The principles of natural justice mandate that when a taxpayer submits
a response to a show cause notice, the adjudicating authority is
required to consider such response and render a reasoned, speaking
[2025] 7 S.C.R. 1493
M/s ASP Traders v. State of Uttar Pradesh & Ors.
order. This is not a mere procedural formality, but a substantive
safeguard ensuring fairness in quasi-judicial proceedings. The right
to appeal under Section 107 of the CGST Act, 2017, is predicated
upon the existence of a formal adjudication. An appeal can lie only
against an ‘order’, and in the absence of a reasoned order passed
under Section 129(3) of the Act, the taxpayer is effectively deprived
of the statutory remedy of appeal. Such a deprivation undermines
the foundational principles of fairness, due process, and access to
justice, rendering the right of appeal illusory or nugatory. It is now
settled law that failure to issue a speaking order in response to a
show cause notice creates a legal vacuum. Any consequential action
including imposition of tax or penalty, would then be unsupported
by authority of law, thereby potentially violating Article 265 of the
Constitution of India, which prohibits the levy or collection of tax
except by authority of law.
18.1. In this context, useful guidance may be drawn from the decision
in M/s. Kranti Associates (P) Ltd & Anr. v. Masood Ahmed
Khan & Ors.6, wherein, this Court emphasized that fairness,
transparency, and accountability are inseparable from the
duty to provide reasons. The Court held that failure to furnish
reasons violates the principles of natural justice and renders
the right of appeal or judicial review illusory. In paragraph 51
of the judgment, the Court distilled the following key principles:
“a. In India the judicial trend has always been to
record reasons, even in administrative decisions, if
such decisions affect anyone prejudicially.
b. A quasi-judicial authority must record reasons in
support of its conclusions.
c. Insistence on recording of reasons is meant to
serve the wider principle of justice that justice must not
only be done it must also appear to be done as well.
d. Recording of reasons also operates as a valid
restraint on any possible arbitrary exercise of judicial
and quasi-judicial or even administrative power.
6 (2010) 9 SCC 496 : (2010) 3 SCC (Civ) 852 : 2010 SCC OnLine SC 987 at page 504
1494 [2025] 7 S.C.R.
Supreme Court Reports
e. Reasons reassure that discretion has been
exercised by the decision maker on relevant grounds
and by disregarding extraneous considerations.
f. Reasons have virtually become as indispensable a
component of a decision making process as observing
principles of natural justice by judicial, quasi-judicial
and even by administrative bodies.
g. Reasons facilitate the process of judicial review
by superior Courts.
h. The ongoing judicial trend in all countries committed
to rule of law and constitutional governance is in
favour of reasoned decisions based on relevant
facts. This is virtually the life blood of judicial decision
making justifying the principle that reason is the soul
of justice.
i. Judicial or even quasi-judicial opinions these days
can be as different as the judges and authorities who
deliver them. All these decisions serve one common
purpose which is to demonstrate by reason that the
relevant factors have been objectively considered.
This is important for sustaining the litigants’ faith in
the justice delivery system.
j. Insistence on reason is a requirement for both
judicial accountability and transparency.
k. If a Judge or a quasi-judicial authority is not candid
enough about his/her decision making process
then it is impossible to know whether the person
deciding is faithful to the doctrine of precedent or to
principles of incrementalism. l. Reasons in support
of decisions must be cogent, clear and succinct. A
pretence of reasons or `rubber-stamp reasons’ is not
to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine
qua non of restraint on abuse of judicial powers.
Transparency in decision making not only makes the
judges and decision makers less prone to errors but
[2025] 7 S.C.R. 1495
M/s ASP Traders v. State of Uttar Pradesh & Ors.
also makes them subject to broader scrutiny. (See
David Shapiro in Defence of Judicial Candor (1987)
100 Harward Law Review 731-737).
n. Since the requirement to record reasons emanates
from the broad doctrine of fairness in decision making,
the said requirement is now virtually a component of
human rights and was considered part of Strasbourg
Jurisprudence. See (1994) 19 EHRR 553, at 562
para 29 and Anya vs. University of Oxford, 2001
EWCA Civ 405, wherein the Court referred to Article
6 of European Convention of Human Rights which
requires, “adequate and intelligent reasons must be
given for judicial decisions”.
o. In all common law jurisdictions judgments play
a vital role in setting up precedents for the future.
Therefore, for development of law, requirement of
giving reasons for the decision is of the essence and
is virtually a part of “Due Process”.
19. Therefore, even assuming that the payment was made by the
appellant, voluntarily or otherwise, the proper officer could not be
absolved of the statutory obligation to pass a reasoned order in
Form GST MOV-09 and upload the corresponding summary in Form
GST DRC-07. Compliance with these procedural requirements is
essential not only for ensuring transparency and accountability in
tax administration, but also for safeguarding the taxpayer’s appellate
rights under the CGST Act, 2017. Such adherence is in consonance
with the constitutional mandate under Article 265 of the Constitution
of India.
20. In view of the foregoing discussion, and taking into account that
objections were filed, payment was stated to have been made
under protest due to business exigencies, and the appellant seeks
to challenge the levy, the proper officer was under a clear statutory
obligation to pass a final order under section 129(3) in Form GST
MOV-09 and DRC-07. The refusal by the High Court to direct the
passing of such an order, has the effect of frustrating the appellant’s
statutory right to appeal and is contrary to well established legal
principles governing tax adjudication and procedural fairness.
1496 [2025] 7 S.C.R.
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21. Accordingly, the impugned order passed by the High Court is
set aside. Respondent No.3 is directed to pass a reasoned final
order under section 129(3) of the CGST Act, 2017, in Form GST
MOV-09, after granting an opportunity of being heard as mandated
under Section 129(4), and upload the summary thereof in Form
GST DRC-07 within a period of one month from the date of receipt
of a copy of this judgment. Thereafter, it shall be open to the
appellant to pursue appropriate legal remedies against such order,
in accordance with law.
22. This appeal stands allowed on the above terms. No order as to
costs. Connected miscellaneous application(s) shall stand closed.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Ankit Gyan
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