The Taxpayer Must Get the Time Promised to Reply
A show-cause notice must give the taxpayer a real chance to explain its position before an adverse order is passed. If the notice allows seven days to reply, the authority cannot ordinarily decide the matter on the very day the notice is served. The taxpayer needs time to understand the allegations, collect documents and prepare its defence. Giving time in the notice but deciding the case before that time expires makes the opportunity meaningless. The absence of an immediate reply cannot justify confiscation when the period allowed for responding is still available.
This issue arose in M/s Shree Wires (Proprietor: Mitul Kiritbhai Gadhia) v. Deputy Commissioner of State Tax (Appeal), Division-10, Rajkot and Another, 2026-VIL-191-GSTAT-RJK, decided on 05.10.2026 . The GST Appellate Tribunal, Rajkot, comprising Shri Pramod Kumar Rai, Member (Judicial), and Shri Kishori Lal, Member (Technical), decided Appeal No. APL/13/RJK/2026. The proceedings concerned goods intercepted while being transported without the appellant’s invoice and e-way bill. Those circumstances required examination, but they did not remove the taxpayer’s right to answer the proposed confiscation.
The confiscation order, the consequential summary order and the First Appellate Authority’s order were set aside because the taxpayer had not received an effective opportunity to defend itself. The matter was sent back for fresh adjudication after providing that opportunity. The relief corrected an unfair procedure; it did not finally clear the disputed movement of goods. The taxpayer still had to present its explanation and supporting records, and the authority had to decide the allegations afresh in accordance with law. Any liability would depend on that fresh examination
Missing Documents Did Not Take Away the Right to Be Heard
Shree Wires, a registered wire manufacturer, supplied 30.28 metric tonnes of MS Round in Coil, valued at Rs.14,01,964, to M/s Motabhai Steel at Amreli. The goods were stated to have originally been supplied by M/s Meenakshi Iron & Steel Traders, Chhattisgarh, to Shree Wires at Rajkot. An invoice and e-way bill dated 17.04.2025 covered that movement. Those documents therefore described a supply from the original supplier to Shree Wires, not the onward supply by Shree Wires to its buyer at Amreli.
The vehicle was intercepted near the buyer’s premises at Amreli on 20.04.2025 at approximately 8:35 a.m. The driver produced the original supplier’s documents for the Chhattisgarh-to-Rajkot movement, but did not produce Shree Wires’ invoice or e-way bill for the onward supply to Motabhai Steel. The judgment also records that Amreli was not on the Chhattisgarh–Rajkot route. Shree Wires generated its own invoice and e-way bill at 9:42 a.m., approximately 67 minutes after interception. The documents available when the vehicle was stopped and those generated afterwards therefore required separate examination.
These facts gave the Department grounds to question the movement of the goods. However, they did not permit it to decide the allegations without allowing the taxpayer the promised time to reply. Shree Wires had to explain the missing documents, the destination and the later generation of its invoice and e-way bill. The authority, in turn, had to consider that explanation and the supporting records before deciding the case. A reason to investigate is not a reason to deny a hearing. The procedural relief did not establish that the documents were sufficient or that generating them after interception cured any earlier failure; those questions remained for lawful adjudication.
The Authority Could Not Decide Before Its Own Deadline Expired
Physical verification took place on 22.04.2025. The verification report recorded the quantity and noted that the goods were being transported to a destination different from that mentioned in the invoice. The authority detained the goods and the vehicle under Form GST MOV-06, invoking Section 129(1) of the CGST Act, 2017. On 25.04.2025, the authority issued Form GST MOV-10, proposing confiscation under Section 130 of the CGST Act, 2017, and the corresponding Gujarat provisions.
The notice expressly allowed seven days from receipt to show cause . Yet it also directed personal appearance at 12:30 p.m. on 25.04.2025, the date of its issuance. The confiscation order in Form GST MOV-11 was passed that very day. Since the order recorded service of the notice on 25.04.2025, the Tribunal treated the allowed reply period as running until 02.05.2025. The Department therefore took the final decision before the taxpayer’s time to respond expired.
The order confirmed a penalty of Rs.2,52,354, a fine in lieu of confiscation of goods of Rs.14,01,964, and a fine in lieu of confiscation of the vehicle of Rs.2,52,354, aggregating to Rs.19,06,672. No tax was demanded in that order. The consequential Form GST DRC-07 followed on 05.05.2025. Its later issuance did not cure the defect in the confiscation order already passed before expiry of the reply period.
A Hearing Must Be Meaningful, Not Merely Mentioned
Section 130(4) of the CGST Act, 2017 prohibits confiscation or penalty orders without an opportunity of being heard. Section 126(3) of the CGST Act, 2017 similarly provides for a hearing before imposing a penalty. The Tribunal read these provisions together and emphasised that the opportunity must be real and reasonable. A mere mention of a hearing in the notice was insufficient when the procedure followed rendered an effective defence unavailable.
The notice itself contemplated an ex parte decision if the taxpayer failed to reply within the stipulated period or failed to appear. However, the authority could not rely on the absence of objections while the reply period was still running. A taxpayer may need time to obtain transport records, explain the transaction, consult its adviser, and prepare supporting documents. Failing to file a reply immediately after receiving a notice differs from failing to reply within the time allowed.
The First Appellate Authority nevertheless concluded that the appellant had appeared and made submissions, and that participation and payment demonstrated compliance with the hearing requirement. The Tribunal found this inconsistent with the confiscation order itself: that order recorded that no objections had been filed and referred to no submission by the appellant. An appellate conclusion could not replace the missing hearing with an assumption unsupported by the adjudication record.
Payment to Release Goods Was Not Acceptance of the Allegations
The appellant paid Rs. 19,06,672 in full through Form GST DRC-03 on 25.04.2025 to secure release of the goods and vehicle. The payment was subsequently reflected in Form GST DRC-03A on 09.05.2025. The appellant stated that it had paid under protest. The Department argued that the payment amounted to an admission of the allegations in their entirety.
The Tribunal rejected that argument. A business may pay to recover its goods and vehicle while continuing to dispute the demand. Detention can interrupt deliveries, increase transport costs and affect commercial commitments. A decision to obtain immediate release does not necessarily indicate agreement with the Department’s legal or factual conclusions. Payment and acceptance of liability are not interchangeable merely because they occur in the same proceedings.
The payment therefore could not be treated as acquiescence, admission of the allegations or waiver of the right to reply and be heard. The taxpayer could deposit the amount and still challenge the demand and seek a refund. This conclusion did not automatically establish entitlement to a refund; it preserved the taxpayer’s right to contest the order despite having paid for release.
The Amount Alone Did Not Determine the Bench Composition
The Tribunal separately considered whether the appeal should be heard by a Division Bench, noting that the aggregate penalty and fines of Rs.19,06,672 were below Rs.50 lakh. It examined Section 109(8) of the CGST Act, 2017, read with Rule 110A of the CGST Rules, 2017, which govern matters that may be heard by a single Member.
The monetary threshold was not the sole consideration. The appeal raised questions concerning the relationship between detention and confiscation, the requirement to record reasons, the adequacy of the hearing, and the inference of intent to evade tax. The Tribunal considered these to involve mixed questions of fact and law. It therefore proceeded as a Division Bench despite the amount being below Rs.50 lakh.
This part of the decision concerns the appropriate composition of the Bench, not the dismissal of a low-value appeal. The Tribunal did not reject the case because the amount was small. A dispute below the monetary threshold may still require consideration by a Division Bench where questions of law arise. Bench allocation must therefore account for the nature of the issues as well as the amount involved.
The Procedural Victory Did Not Settle the Confiscation Grounds
The appellant raised several additional objections. It argued that, after detention under Section 129(1) of the CGST Act, 2017, the officer should have followed the notice and determination procedure under Section 129(3) of the CGST Act, 2017, rather than proceeding directly to confiscation. It also questioned the absence of recorded reasons and tangible material showing an intention to evade tax. The authorities cited in support included Synergy Fertichem Private Limited v. State of Gujarat, Special Civil Application No.4730 of 2019, decided on 19.02.2020 , and Panchhi Traders v. State of Gujarat, 2025-VIL-1269-GUJ, Special Civil Application No.9250 of 2020 and connected matters, decided on 11.12.2025.
The appellant further relied on the original supplier’s documents, the absence of a quantity discrepancy, the subsequent generation of its invoice and e-way bill, banking-channel payment from the buyer, and the claimed reporting and discharge of tax for April 2025. It maintained that the lapse was procedural and that the buyer’s eligibility for ITC made the transaction revenue-neutral. These were submissions requiring examination, not conclusions finally accepted by the Tribunal.
The appeal was decided on the hearing defect alone. Consequently, the decision should not be cited as finally establishing that direct confiscation was impermissible in these circumstances, that the generation of documents after interception cured the earlier omission, or that subsequent tax payment conclusively disproved evasion. The Tribunal expressly left the other contentions and the merits open. The cited High Court decisions were part of the appellant’s case; their application was not finally determined in this order.
A Fresh Decision Must Follow a Fair Hearing
The Tribunal set aside the Form GST MOV-11 confiscation order dated 25.04.2025, the consequential Form GST DRC-07 order dated 05.05.2025, and the Order-in-Appeal dated 06.11.2025. The matter was sent back to the original adjudicating authority for fresh consideration. The taxpayer had to receive sufficient time to submit a written reply and supporting documents, together with an opportunity to attend a personal hearing. The authority must consider that defence before reaching a fresh conclusion. Giving a hearing cannot be a formality followed by automatic repetition of the earlier order.
The appeal therefore succeeded by way of remand: the dispute was reopened, not finally decided in the taxpayer’s favour. Although the appellant had requested repayment with interest, the operative directions did not order an immediate refund, specify an interest rate or prescribe a refund deadline. Equally, the earlier amounts could not simply be treated as confirmed despite the orders being set aside. Any fresh liability had to follow examination of the allegations, the taxpayer’s explanation and the supporting evidence. Neither complete relief nor renewed confirmation was predetermined.
For taxpayers, preserving the notice, proof of service, hearing communications, transaction documents and payment records helps establish both the procedural objection and the substantive defence. For authorities, the responsibility is to honour the time allowed for reply, examine the material submitted and explain the resulting decision. A notice must offer a genuine chance to influence the outcome, not merely announce a process whose result has already been decided. The remand required that opportunity while leaving the alleged contraventions open for lawful determination.
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