Order Date – 24 July 2025

Parties: M/S ASP TRADERS Vs STATE OF UTTAR PRADESH & ORS.

Facts –

• The Petitioner, M/s ASP Traders, was transporting a consignment of betel nuts from Nagpur to Delhi when the goods were intercepted by GST authorities in Jhansi, Uttar Pradesh. The vehicle was detained due to alleged discrepancies such as shortage in goods, inaccuracy in consignor details, and doubts over the existence of the consignee.
• A show cause notice under Section 129(3) of the CGST Act was issued. In response, the petitioner paid an amount under protest, and the goods were released. However, no final adjudication order was passed under Section 129(3), prompting the petitioner to approach the High Court, and subsequently, the Supreme Court, seeking relief.

Issue –

• Whether payment of tax and penalty under Section 129(1) and release under Section 129(5) absolves the officer’s duty to issue a speaking, reasoned final order under Section 129(3), preserving statutory right of appeal?

Order –

• The Divisional Bench of the Hon'ble Supreme court held that 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 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.
• 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. 
• Accordingly, the impugned order passed by the High Court is set aside.