GSTAT Ernakulam Holds GST Penalty Order Void Ab Initio for Breach of Seven-Day Statutory Timeline Under Section 129(3)

Case at a Glance

Court: GST Appellate Tribunal (GSTAT), Ernakulam
**Appeal No.😗* APL/34/ERN/2026
Parties: Tiger Steels Vs Commissioner of State Tax
Date of Order: 16/09/2026

Background and Factual Matrix

Tiger Steels, Palakkad, a registered dealer in iron and steel bearing GSTIN-32AAJFT9657R1Z5, had executed a sale of 30.940 tons of sponge iron to M/s M. A. Steels Pvt. Ltd., Kanjikode, Palakkad. While the consignment was in transit, the vehicle was intercepted by the Tax Officer attached to Squad No. II, SGST Department, Palakkad.

The sole ground for interception was that the e-way bill accompanying the goods had expired on 25/06/2019, although the vehicle was stopped on 28/06/2019. Upon interception, the officer issued a detention order in Form GST MOV-06 and simultaneously served a notice in Form GST MOV-07 under Section 129 of the SGST Act and CGST Act, demanding Rs. 2,26,108 towards SGST, CGST, and penalty as a precondition for release of the goods and the vehicle.

The assessee furnished a bank guarantee for the demanded amount and secured the release of the consignment. Subsequent to this, the State Tax Officer initiated adjudication proceedings under Section 129(1) of the SGST Act. However, no adjudication order was ever communicated to the assessee.

Escalation to the Kerala High Court

Without receiving any adjudication order, the assessee was alarmed to learn that the State Tax Officer had written to the bank directing it to issue a demand draft for the amount covered under the bank guarantee — effectively seeking to encash it without informing the assessee of any order having been passed.

This prompted the assessee to file W.P. (C) 21211/19 before the Hon'ble High Court of Kerala. By its judgment dated 02/08/2019, the High Court directed the State Tax Officer to furnish a copy of the adjudication order to the assessee and also restrained the authority from invoking the bank guarantee for a period of four weeks. In compliance with these directions, the adjudication order was eventually communicated to the assessee on 06/08/2019.

First Appellate Stage

The assessee preferred a statutory appeal before the Joint Commissioner (Appeals), SGST Department, Palakkad, challenging the Order-in-Original. By Order-in-Appeal No. GSTA-144/2020 dated 25/11/2022, the first appellate authority dismissed the appeal and upheld the original order. The assessee thereafter approached the GSTAT, Ernakulam, by filing APL/34/ERN/2026 against this appellate order.

Critical Chronology Identified by the Tribunal

Before delving into the substantive merits of the detention, the Tribunal took note of a glaring procedural irregularity that emerged from the bare chronology of events:

This meant that while the notice was issued on 28/06/2019, the penalty order was passed only on 26/07/2019 — a gap of 28 days from the date of service of the notice.

The Statutory Provision: Section 129(3)

The Tribunal reproduced the governing provision in its order: