Section 129(3) GST Penalty Order Quashed for One-Day Delay

The Jammu & Kashmir and Ladakh High Court has held that the seven-day period prescribed under Section 129(3) of the Jammu & Kashmir Goods and Services Tax Act, 2017 is mandatory. Even a one-day delay in passing the penalty order was held sufficient to invalidate the order.

Case Background

In Mohd Hazzak Lohar and Another v. Commissioner State Tax and Another, WP(C) No. 2434 of 2025 with CM No. 6459 of 2025, decided on 23 July 2026, the High Court examined a penalty order issued in proceedings concerning detention of goods in transit.

The petitioners' vehicle was intercepted at Heerpora, Shopian, on 11 September 2025. The driver/representative could not produce documents relating to the consignment, following which a notice under Section 129(3) was issued proposing a penalty of Rs. 15,05,746.

The petitioner subsequently disputed the valuation of the goods and requested revaluation. A revaluation team was constituted on 17 September 2025.

Intervention by the Pollution Control Board

During the proceedings, officials of the Jammu & Kashmir Pollution Control Board inspected the goods on 18 September 2025. The polythene carried in the vehicle was declared contraband under the Plastic Waste Management Rules, 2016.

The Pollution Control Board formally communicated its position on 20 September 2025. The tax authorities consequently excluded the contraband goods from the penalty calculation and proceeded against the remaining goods.

However, the final penalty order under Section 129(3) was passed on 22 September 2025.

High Court's Ruling on the Seven-Day Limit

Section 129(3) provides that the proper officer must issue the relevant notice and thereafter pass an order for payment of the applicable penalty within seven days from the date of service of the notice.

The High Court held that these timelines are mandatory in nature. The Court emphasised that Section 129 permits detention and seizure of goods and conveyances, making strict compliance with the statutory procedure particularly important.

The Court rejected the Revenue's reliance on the intervening circumstances. Even though the delay was only one day, the authority could have passed the order within the prescribed period in respect of the goods other than the prohibited polythene.

Accordingly, the penalty order dated 22 September 2025 was quashed.

Key Takeaways for GST Taxpayers

The judgment is important for businesses and transporters facing detention proceedings under Section 129.

Taxpayers should:

• Carefully record the date on which a Section 129(3) notice is served.
• Track the statutory seven-day period for the penalty order.
• Preserve copies of notices, replies, valuation reports and other correspondence.
• Examine whether the proper officer has complied with the statutory timeline.
• Seek professional advice promptly where goods or vehicles remain detained.

The Court also clarified that quashing the Section 129(3) order does not prevent the authorities from taking action that may otherwise be permissible under other provisions of the GST law.

Conclusion

The decision in Mohd Hazzak Lohar reinforces the principle that statutory timelines governing GST detention and seizure proceedings cannot be casually extended. A delay of even one day may have significant consequences where the statute prescribes a mandatory period.

For businesses involved in the movement of goods, timely review of detention notices and procedural compliance can be crucial in protecting their rights.

For expert guidance on this topic, contact your tax professional today.