GSTAT Ernakulam Holds 7-Day Limit Mandatory For Penalty Orders, Quashes Order Passed After 445 Days

The Ernakulam Bench of the Goods and Services Tax Appellate Tribunal (GSTAT), on 16 September held that the seven-day time limit under Section 129(3) of the Central Goods and Services Tax Act, 2017 and the Kerala Goods and Services Tax Act, 2017 for passing a penalty order is mandatory.

A Bench comprising Vice-President Subramanya Rayaprol and Technical Member Ramamoorthi Sriram allowed the appeal filed by GMG Electric, Kochi against the order of the Joint Commissioner (Appeals), SGST Department, Kerala, and set aside the penalty order passed against the company. The Tribunal observed:

“We find that in view of the blatant violation of the statutory time limits, order No. VC/V/GST/52/2021-22 dated 4/11/2022 (which has been upheld by the appellate authority). is void ab initio and is a nullity in the eyes of the law.”

GMG Electric, which trades in low and high tension line materials, safety products and hardware, had transported 360 V Cross Arm Clamps and 1,470.600 kg of LT Stay Wire. The vehicle was intercepted on 16 August 2021 after the e-way bills were found to have expired on 15 August 2021. The goods were detained and later released against a bank guarantee.

The proper officer issued a notice under Section 129(3) on 16 August 2021. However, the order confirming the tax and penalty was passed only on 4 November 2022, 445 days after the notice.

The Tribunal noted that Section 129(3) requires the proper officer to pass the order within seven days of serving the notice. It held that the prescribed period was mandatory and that the failure to adhere to it rendered the proceedings unsustainable.

Further, the Bench relied on the GSTAT Thiruvananthapuram decision in Siddhivinayak Automobiles as well as consistent High Court rulings holding that non-compliance with the statutory time limit vitiates the proceedings.

Accordingly, the GSTAT set aside the appellate order and allowed GMG Electric's appeal with consequential relief.