In a recent ruling, the Allahabad High Court addressed the procedural obligations of GST authorities concerning the issuance of penalty orders. The case involved M/s Uflex Ltd., whose goods were detained under the GST Act, leading to the payment of a penalty under protest. Despite this payment, authorities failed to issue the necessary Form GST MOV-09/DRC-07, which would have enabled the petitioner to appeal the penalty order.
The petitioner referred to a circular mandating the issuance of penalty orders post-detention and cited a precedent from M/s Aries Agro Ltd. v. State of U.P., where the court had previously directed the issuance of Form MOV-09 even when penalties were paid. The core issue was whether GST authorities must issue this form to preserve the taxpayer's right to appeal, even after penalties are paid under protest.
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The Division Bench found that the matter was already covered by the precedent in M/s Aries Agro Ltd., affirmed by the Supreme Court in M/s ASP Traders v. State of U.P. They ruled that payment under protest does not relieve authorities from issuing Form MOV-09/DRC-07. Without this form, taxpayers lose their right to challenge penalties. Consequently, the court quashed the earlier orders and communications, directing the issuance of Form GST MOV-09 within three weeks and adherence to due procedure thereafter. The writ petition was allowed, with no order as to costs.
Order date: 03 Nov 2025
Parties: M/s Uflex Ltd. V. Union of India & Ors.
Facts –
- The petitioner’s goods were detained under Section 129 of the GST Act, 2017, and to secure release, the petitioner paid the penalty under protest via Form GST DRC-03.
- Despite such payment, the authorities did not issue Form GST MOV-09/DRC-07, depriving the petitioner of the right to appeal against the penalty order
- The petitioner relied on Circular No. 41/15/2018-GST dated 13.04.2018, which mandates issuance of penalty orders in Form MOV-09 after detention proceedings conclude.
- The petitioner invoked the precedent in M/s Aries Agro Ltd. V. State of U.P. (Writ Tax No. 1790/2025, decided 30.04.2025) where the High Court directed issuance of MOV-09 even when penalty was paid.
Issue –
- Whether GST authorities are bound to issue a penalty order in Form GST MOV-09/DRC-07 even after payment under protest, to preserve the taxpayer’s statutory right of appeal?
Order –
- The Division Bench found the issue squarely covered by M/s Aries Agro Ltd. (2025 AHC 67092-DB) and affirmed by the Supreme Court in M/s ASP Traders v. State of U.P. (C.A. No. 9764/2025, decided 24.07.2025).
- It held that payment under protest does not extinguish the officer’s obligation to issue an order in MOV-09/DRC-07. Without it, the assessee loses the right to challenge the penalty.
- The impugned order dated 22.03.2024 and related communications dated 29.04.2024 were quashed and set aside.
- The respondents were directed to issue Form GST MOV-09 within three weeks and follow due procedure thereafter.
- Writ petition allowed; no order as to costs.
