Tripura High Court Quashes GST Penalty; Payment Under Economic Duress Not Voluntary Admission Of Liability And Cannot Substitute Mandatory Section 129(3) Order
Sanchayita Lahkar
The High Court of Tripura, Division Bench of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha held that a penalty paid under economic pressure to obtain release of detained goods cannot be treated as a voluntary admission of liability, and that tax authorities must still issue a final, reasoned order under the Tripura State GST Act, 2017. The Court directed refund of the penalty with interest after noting that no such order was passed in a matter concerning the detention of electrical goods on allegations of expired e-way bills and vehicle mismatch.
The petitioner, engaged in transporting electrical goods, had a consignment detained on 09.07.2024 by respondent no.6 at Bagma, Gomati, Tripura, on allegations that the documents produced included expired e-way bills and that there was a vehicle mismatch . Form GST MOV-01 and MOV-02 were issued the same day. On 10.07.2024, a physical verification was conducted and a Form GST MOV-04 report was issued, recording “no discrepancies…between the physical goods and those described in the accompanying tax E-Invoices and also as mentioned in the E-Way Bill.”
Despite this, respondent no.4 issued a detention order in Form GST MOV-06 on 10.07.2024 alleging contravention under Section 129 of the CGST Act. On 11.07.2024, a show-cause notice in Form MOV-07 was issued proposing penalty of Rs.4,96,850/-. The petitioner submitted objections on 16.07.2024 and a detailed reply on 18.07.2024, asserting non-uploading of EWB-03 due to technical issues, filing of GSTR-1 by the supplier, and that the MOV-04 inspection found no mismatch. He sought dropping of the allegations.
No order in Form MOV-09 was passed. The petitioner approached the High Court in WP(C) 495/2024 and was directed to furnish security for release of goods. On 26.07.2024, to secure release, the petitioner paid the entire penalty through DRC-03 instead of providing security. A letter dated 26.07.2024 requested that the MOV-09 order be issued so that he could challenge it in appeal. The authorities later stated that no MOV-09 order was passed because the petitioner had “voluntarily” paid the penalty.
The petitioner challenged the continued retention of penalty and the omission to pass the statutory order under Section 129(3) of the Tripura State GST Act.
The Court recorded that respondent authorities admitted that “no order under Section 129(3)…in MOV-09 was passed or was required to be passed” on the ground that the petitioner had paid the penalty voluntarily . The Bench stated, “We are shocked to hear the submission on behalf of the counsel for the respondent no.02–07.”
The Court observed that “notwithstanding the statutory mandate under Section 129(3)…no order was passed by respondent No.4 justifying the imposition of penalty…for more than 16 months.” It stated that after issuing the letter dated 23.07.2024 calling for a personal hearing, “nothing further was done by respondent no.4.”
Referring to the petitioner’s letter dated 26.07.2024, the Court recorded that the petitioner had “specifically stated that he was paying the full penalty amount in dispute and specifically requesting the said officer to pass order confirming penalty in Form MOV-09…so that he can challenge it in appeal.” It observed that this “clearly indicates that the payment…was made…only to secure the release of the goods and vehicle and was not intended to be an acceptance of the liability.”
The Court stated that such payment “under economic duress cannot be treated…as a voluntary payment of penalty exonerating the respondents from passing an order as mandated by the later part of sub-section (3) of Section 129.”
It held that “in the absence of an order passed by respondent no.4 confirming the penalty proposed…with reasons after considering petitioner’s representation… the very levy and collection of penalty…is without authority of law and violates Art.14, Art.19(1)(g), Art.265 and Art.300-A of the Constitution of India.”
The Court recorded that the respondents’ stance provided no justification for withholding the statutory order and that their failure vitiated the collection.
The Court directed: “the Writ Petition is allowed and the respondents are directed to refund to petitioner within 2 months, the entire amount of penalty paid by the petitioner to them with interest @9% per annum from the date of such payment till the date of refund. The respondent no.4 shall also pay costs of Rs.25,000/- to the petitioner for not passing an order justifying the penalty under Sub-Section (3) of Section 129…” The respondent no.2 and 3 to “look into this conduct of the respondent no.4…and if necessary, initiate disciplinary action against him.” It concluded that “Pending application(s), if any, shall stand disposed of.”
Advocates Representing the Parties
For the Petitioners: Mr. Samar Das, Advocate; Mr. Kaushik Paul, Advocate
For the Respondents: Mr. P. Gautam, Senior Government Advocate; Mr. B. Majumder, Deputy Solicitor General of India; Mr. S. Choudhury, Advocate
Case Title: M/s R. G. Group v. Union of India & Ors.
Case Number: WP(C) No.611 of 2025
Bench: Chief Justice M.S. Ramachandra Rao; Justice S. Datta Purkayastha
