GST Penalty Order Passed Beyond 7 Days Of Show Cause Notice Is Invalid: Jammu & Kashmir and Ladakh High Court

The Jammu & Kashmir and Ladakh High court has held that the seven-day timeline prescribed under Section 129(3) of the Jammu & Kashmir Goods and Services Tax Act, 2017 for passing a penalty order is mandatory. It ruled that a penalty order passed even a day beyond the statutory period cannot be sustained.

A Division Bench of Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani observed that where the legislature has used the word "shall" while prescribing timelines for the exercise of coercive powers, the requirement must be strictly complied with. It added that fiscal statutes must be be construed strictly.

"From the plain reading of Subsection (3) of Section 129 of the Act of 2017, it is abundantly clear that the legislature by using the expression “shall” in respect of show cause notice as well as notice for payment of penalty has signified its intent that adherence to timeline is mandatory. Otherwise also, the Act of 2017 is a fiscal statute and, therefore,required to be construed strictly. It is true that Subsection (3) of Section 129 of the Act of 2017 does not provide for consequence of nonadhering to the timelines but that alone cannot be a determining factor to come to a conclusion that seven days' period stipulated in Subsection (3) of Section 129, is not mandatory in nature," the court ruled.

The petitioners moved the high court after state tax authorities intercepted their vehicle carrying goods and initiated penalty proceedings. A show cause notice under Section 129(3) was served on September 14, 2025.

The statute required the proper officer to pass the penalty order within seven days of service of the notice. The order, however, was passed on September 22, 2025, one day beyond the prescribed period.

Representing the tax authorities, the state argued that the delay was caused after the petitioners sought revaluation of the seized goods. It also said the Jammu & Kashmir Pollution Control Board later declared some of the seized goods to be prohibited plastic carry bags. According to the State, these developments delayed the proceedings.

The court was not persuaded. It held that the intervening circumstances did not excuse non-compliance with the mandatory timeline under Section 129(3). It noted that the provision authorises detention and seizure of goods, which are coercive powers. As a result, the statutory procedure must be followed strictly.

The bench further observed that the timelines under Section 129(3) were introduced to prevent arbitrary detention, prolonged seizure, and harassment of traders. It held that the absence of an express consequence for non-compliance did not make the requirement directory.

Allowing the writ petition, the court quashed the penalty order dated September 22, 2025. It held that the order had been issued beyond the statutory period. The court clarified that proceedings, if any, permissible under other provisions of the GST Act could still be pursued by the tax authorities.

For Petitioner: Advocate M. Tufail

For Respondents: Senior Additional Advocate General Mohsin Qadri assisted by Advocate Maha Majeed,