“Adjudication Cannot Be Short-Circuited” – Supreme Court Mandates Final Orders under Section 129(3) CGST Act Even After Voluntary Payment
(M/S ASP Traders v. State of U.P., 2025)

1. Introduction

The decision in M/S ASP Traders v. State of Uttar Pradesh & Ors. (2025 INSC 890) clarifies a recurring controversy under the Goods and Services Tax (GST) regime: whether the deposit of tax/penalty for release of detained goods dispenses with the statutory obligation of the “proper officer” to pass a reasoned order under Section 129(3) of the Central Goods and Services Tax Act, 2017 (CGST Act).

The appellant, ASP Traders (a Karnataka-based arecanut dealer), consigned goods to Delhi. En-route, the consignment was detained in Uttar Pradesh for alleged deficiencies and seven missing bags. Faced with business exigencies, ASP Traders paid the demanded penalty (₹7,20,440) under Form GST DRC-03 to secure release of the goods. No final adjudication order ensued. Their repeated requests for an order in Form GST MOV-09 were ignored, prompting a writ petition which was dismissed by the Allahabad High Court. The Supreme Court has now reversed that view, holding that payment—even if labelled “voluntary”—does not eclipse the officer’s duty to adjudicate and issue a speaking order, thereby preserving the taxpayer’s right of appeal under Section 107 CGST.

2. Summary of the Judgment

• Statutory Obligation. Once a notice under Section 129(3) is issued, the officer must pass a reasoned final order (Form GST MOV-09 + summary in Form DRC-07) irrespective of any payment made by the taxpayer.
• Section 129(5) (“deemed conclusion”). The deeming fiction that proceedings “stand concluded” after payment does not nullify the requirement of a formal order; it only bars further coercive action, not adjudication.
• Payment Under Protest. Deposits made to secure release of goods, amid business compulsions and accompanied by written objections, cannot be presumed “voluntary” or a waiver of appellate rights.
• Natural Justice & Article 265. Failure to issue a speaking order violates natural justice and the constitutional mandate that no tax/penalty be collected except by authority of law.
• Directions Issued. The Court set aside the High Court’s dismissal and directed the GST authorities to pass a reasoned order within one month, after giving ASP Traders an opportunity of hearing.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

1. Commissioner of Customs (Import) Mumbai v. Dilip Kumar & Co. (2018) – cited by the State to insist on literal interpretation. The Supreme Court distinguished it, noting that Dilip Kumar dealt with exemption, not procedural fairness.
2. Kranti Associates (P) Ltd. v. Masood Ahmed Khan (2010) – relied on by the appellant and Court for the principle that reasons are integral to fair adjudication and appellate review.
3. Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd. (1953) and Bhau Ram v. Baij Nath Singh (1961) – employed to explain that waiver/acquiescence requires clear abandonment of rights; mere payment does not foreclose remedies.

3.2 Court’s Legal Reasoning

• Textual Interpretation. The language “shall … and thereafter pass an order” in Section 129(3) is mandatory. The conjunctive “and” plus the sequence marker “thereafter” leave no room for dispensing with an order.
• Rule 142 & CBIC Circular 41/15/2018-GST. Rule 142(5) requires uploading a summary order in Form DRC-07 after adjudication. The Circular (binding under Section 168) explicitly obliges the officer to pass Form GST MOV-09 even after payment.
• Natural Justice and Right of Appeal. A taxpayer can appeal only against an “order”. No order → no appeal → right rendered illusory. Such deprivation offends due-process values.
• Article 265. Collection without an adjudicatory foundation lacks “authority of law”. Payment under business compulsion cannot cure that constitutional defect.
• Payment vs. Waiver. The Court drew from contract and equity jurisprudence: waiver must be intentional and unequivocal; deposits made to mitigate loss or secure release are non-conclusive.

3.3 Expected Impact on Future Litigation & GST Administration

1. Uniform Pan-India Practice. Field officers across States must now invariably pass reasoned orders under Section 129(3), avoiding the earlier patchwork approach where some States treated payment as final.
2. Preservation of Appeal Rights. Taxpayers can safely pay to get perishable/urgent goods released without losing appellate remedies.
3. Electronic GST Portal Changes. The judgment indirectly flags the absence of “payment under protest” functionality in Form DRC-03; CBIC is likely to upgrade the portal/work-flow.
4. Reduced Writ Petitions. Clarified procedure should reduce supervisory litigation under Article 226, as taxpayers will have an efficacious appellate forum.
5. Training & Accountability. Departments may have to retrain mobile-squad officers and embed compliance checklists; failure to pass orders could invite personal cost orders in future.

4. Complex Concepts Simplified

Section 129 (Detention & Seizure)

Allows GST officers to detain goods in transit for contravention (e.g., wrong e-way bill). Sub-sec (3) = show-cause notice + order; Sub-sec (5) = proceedings deemed concluded upon payment.

Forms GST MOV-01 to MOV-10

A sequential set of forms: MOV-01 (driver’s statement) → MOV-02 (inspection order) → … → MOV-05 (release order) → MOV-06 (detention order) → MOV-07 (notice) → MOV-09 (final order) → MOV-11 (confiscation order). Think of them as numbered steps in an investigation staircase.

Form GST DRC-03 / DRC-05 / DRC-07

DRC-03 – a challan for “voluntary” payment;
DRC-05 – acknowledgement of such payment;
DRC-07 – electronic summary of the adjudication, creating liability in the taxpayer’s ledger.

Waiver / Acquiescence

Legal doctrines where a person knowingly gives up a right. Requires clear, intentional conduct benefitting the opposite party. Mere silence or compelled payment is not waiver.

Deeming Fiction

When the law “deems” something, courts usually limit it to the purpose for which the fiction is created. Here, “deemed conclusion” means end of detention, not end of adjudication.

5. Conclusion

The Supreme Court has bolstered procedural rigour in GST enforcement. Key take-aways:

• Detention notices must culminate in a reasoned Section 129(3) order, regardless of payment status.
• Section 129(5)’s deeming clause ends only the physical detention, not the adjudicatory duty.
• Taxpayers retain appellate rights even after paying penalty for release of goods.
• Officers ignoring this mandate risk judicial censure and potential illegality of all subsequent recoveries.

By insisting that “adjudication cannot be short-circuited,” the Court harmonises administrative efficiency with constitutional due-process, reinforcing confidence among businesses traversing India’s unified tax landscape.