CGST Act, 2017 —Sec. 129(5) - Civil Appeal- Appellant was a registered dealer in Red Arecanut operating from Channagiri, Davangere, Karnataka. In 2022, it consigned 17,850 kg of dry Arecanut valued at Rs. 51,72,930/-, packed into 255 bags to one M/s. Diamond Trading Company, Delhi through a vehicle accompanied by E-Way Bill- During transit, the goods were transhipped and loaded onto another vehicle for onward journey to Delhi. However, only 248 bags were loaded onto the new vehicle, with 7 bags missing from the original consignment- said vehicle was detained by the Mobile Squad and the driver's statement was recorded in Form GST- Following physical inspection, a report was generated alleging certain deficiencies- detention order was also issued and subsequently, a notice under Section 129(3) of the CGST Act was issued, highlighting the discrepancy of 7 missing bags and the resulting shortfall in quantity from 18220 kg to 17670 kg- Appellant submitted a representation seeking an order to enable it to pursue statutory remedies and the Mobile Squad Official stated that the Appellant's representative orally requested withdrawal of earlier reply and sought release of goods, and hence, no further proceedings were deemed necessary- Appellant denied having made any such request and sent further communications seeking a copy of the order, if any. Receiving no response, it approached the High Court, which dismissed its Writ Petition- Appellant submitted a representation seeking an order to enable it to pursue statutory remedies and the Mobile Squad Official stated that the Appellant's representative orally requested withdrawal of earlier reply and sought release of goods, and hence, no further proceedings were deemed necessary- Appellant denied having made any such request and sent further communications seeking a copy of the order, if any. Receiving no response, it approached the High Court, which dismissed its Writ Petition- Hence the present appeal- observation- "While Section 129(5) of the CGST Act, 2017 provides that proceedings shall be deemed to be concluded upon payment of tax and penalty, this deeming fiction cannot be interpreted to imply that the assessee has agreed to waive or abandon the right to challenge the levy - a right that is protected by the very enactment itself. The term "conclusion" as used in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated- does not absolve the responsibility of the proper officer to pass an order concluding the proceedings - principles of natural justice mandate that when a taxpayer submits a response to a show cause notice, the adjudicating authority is required to consider such response and render a reasoned, speaking order. This is not a mere procedural formality, but a substantive safeguard ensuring fairness in quasijudicial proceedings. The right to appeal under Section 107 of the CGST Act, 2017, is predicated upon the existence of a formal adjudication. An appeal can lie only against an 'order', and in the absence of a reasoned order passed under Section 129(3) of the Act, the taxpayer is effectively deprived of the statutory remedy of appeal-Such a deprivation undermines the foundational principles of fairness, due process, and access to justice, rendering the right of appeal illusory or nugatory. It is now settled law that failure to issue a speaking order in response to a show cause notice creates a legal vacuum. Any consequential action including imposition of tax or penalty, would then be unsupported by authority of law, thereby potentially violating Article 265 of the Constitution of India, which prohibits the levy or collection of tax except by authority of law- held- there must be much more than an abandonment of a right to plead waiver or acquiescence and the payment, by itself, cannot be treated as a waiver or abandonment, especially when the Appellant has clearly objected to the demand and when there is a statutory mandate to pass an order and a corresponding right to Appeal. "It is now settled law that failure to issue a speaking order in response to a show cause notice creates a legal vacuum. Any consequential action including imposition of tax or penalty, would then be unsupported by authority of law, thereby potentially violating Article 265 of the Constitution of India, which prohibits the levy or collection of tax except by authority of law- Proper Officer was under a clear statutory obligation to pass a final order under Section 129(3) of CGST Act and the refusal by the High Court to direct the passing of such an Order, has the effect of frustrating the Appellant's statutory right to Appeal and is contrary to well established legal principles governing tax adjudication and procedural fairness. Accordingly, the Apex Court allowed the Appeal, set aside the High Court's Judgment, and directed the Respondent to pass a reasoned final Order.
Held: (Para 12-22)
Result: Appeal allowed