Facts of the Case

The petitioner, Pharmaceuticals and Medical Devices Bureau of India (PMBI), formerly known as the Bureau of Pharma Public Sector Undertakings of India, approached the Kerala High Court in relation to proceedings initiated under Section 129 of the CGST/SGST Act.

The grievance of the petitioner was that, despite initiation of proceedings under Section 129, the competent officer had not issued an adjudication order under Section 129(3) in Form GST MOV-09. Because no such adjudication order had been issued, the petitioner’s statutory appeal was not maintainable.

The record referred to invoices dated 13 February 2020 and various proceedings in Forms GST MOV-01, MOV-02, MOV-04, MOV-06 and MOV-07 dated 15 February 2020. The petitioner had also produced a payment receipt dated 21 February 2020, Form GST DRC-03 dated 21 February 2020 and Form GST DRC-05 dated 21 February 2020.

The petitioner was aggrieved by the rejection of its appeal under Section 107 of the CGST/SGST Act, in circumstances where the underlying adjudication order in Form GST MOV-09 had not been issued.

Issues Involved

The principal issues before the Kerala High Court were:

  1. Whether the proper officer is bound to issue an adjudication order under Section 129(3) of the CGST/SGST Act in Form GST MOV-09, even where the person concerned opts to make payment under Section 129(1)(a).
  2. Whether the provisions of Section 129(5) dispense with the requirement of passing an adjudication order under Section 129(3).
  3. Whether rejection of an appeal under Section 107 can be sustained when the absence of Form GST MOV-09 itself prevents effective maintenance of the statutory appeal.
  4. Whether the proper officer must also issue the corresponding summary of the order/demand in Form GST DRC-07.

Petitioner’s Arguments

The petitioner submitted that the Kerala High Court had already considered similar issues in W.P.(C) Nos. 17454 of 2022 and 17463 of 2022.

It was argued that, in those matters, the High Court had taken the view that even where a person opts to make payment under Section 129(1)(a) of the CGST/SGST Act, the concerned officer remains bound to issue an adjudication order under Section 129(3).

The petitioner further relied upon the proposition that this requirement continues notwithstanding the provisions contained in Section 129(5).

Accordingly, the absence of an adjudication order in Form GST MOV-09 had effectively obstructed the petitioner’s statutory appellate remedy, since the petitioner’s appeal was not maintainable without the necessary adjudication order.

Respondent’s Arguments

The learned Senior Government Pleader confirmed before the Court that the Kerala High Court had considered a similar issue in W.P.(C) Nos. 17454 of 2022 and 17463 of 2022.

The respondent side also confirmed that the present writ petition could be disposed of in the light of the findings contained in those judgments.

Court’s Findings

The Kerala High Court accepted the position that the issue was covered by its earlier consideration in W.P.(C) Nos. 17454 of 2022 and 17463 of 2022.

The Court proceeded on the basis that even in respect of persons who opt to make payment under Section 129(1)(a), the concerned officer is required to issue an adjudication order under Section 129(3), notwithstanding Section 129(5).

The Court found it appropriate to set aside the order rejecting the petitioner’s appeal under Section 107 and directed the proper officer to complete the required adjudicatory process.

Court Order

The Kerala High Court allowed the writ petition and passed the following directions:

  1. Ext. P11, being the order rejecting the appeal filed by the petitioner under Section 107 of the CGST/SGST Act, was set aside.
  2. The 1st respondent was directed to upload an adjudication order in Form GST MOV-09 under Section 129(3) of the CGST/SGST Act.
  3. The 1st respondent was also directed to issue a corresponding summary of the order/demand in Form GST DRC-07.
  4. These steps were directed to be completed within 15 days from the date of receipt of a certified copy of the judgment.
  5. The Court expressly clarified that, after issuance of the adjudication order, it would be open to the petitioner to file an appeal in the manner prescribed under Section 107.
  6. The petitioner was directed to appear before the 1st respondent at 11:00 A.M. on 9 August 2022.
  7. The 1st respondent was directed to issue the adjudication order after affording an opportunity of hearing to the petitioner.

Important Clarification

The significant clarification emerging from the judgment is that payment under Section 129(1)(a) does not, by itself, eliminate the requirement of an adjudication order under Section 129(3) where such an order is necessary to complete the statutory adjudicatory framework and preserve the appellate remedy.

The judgment recognizes the legal importance of a formal adjudication order in Form GST MOV-09. A taxpayer’s right to pursue an appeal under Section 107 cannot effectively operate where the necessary adjudication order has not been issued.

The Court’s reasoning also makes clear that Section 129(5) cannot be treated as dispensing with the requirement of an adjudication order under Section 129(3) in the circumstances considered by the Court, even where payment has been made under Section 129(1)(a).

Further, the adjudication order is to be accompanied by the corresponding summary in Form GST DRC-07, and the affected person must be afforded an opportunity of hearing before the adjudication order is issued.

Related Case Law Referred to in the Judgment

The petitioner specifically relied upon, and the Court recognized the similarity with:

  • W.P.(C) No. 17454 of 2022
  • W.P.(C) No. 17463 of 2022

These earlier writ petitions were referred to for the proposition that even persons opting to make payment under Section 129(1)(a) are entitled to issuance of an adjudication order under Section 129(3), notwithstanding the provisions of Section 129(5).

Sections Involved

  • Section 129(1)(a) of the CGST/SGST Act — Payment of applicable tax and penalty in proceedings relating to detention or seizure of goods and conveyances in transit.
  • Section 129(3) of the CGST/SGST Act — Issuance of notice and passing of an adjudication order determining tax and penalty.
  • Section 129(5) of the CGST/SGST Act — Conclusion of proceedings upon payment of the amount referred to in Section 129(1).
  • Section 107 of the CGST/SGST Act — Statutory appeal against an appealable decision or order.
  • Form GST MOV-09 — Order determining tax and penalty in proceedings under Section 129.
  • Form GST DRC-07 — Summary of the order/demand.

 Link to download the order -https://mytaxexpert.co.in/uploads/1783673040_3059.pdf

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