This blog discusses a series of recent High Court judgments where GST authorities were pulled up for serious procedural lapses and arbitrary exercise of power. In these cases, the Courts quashed non-speaking GST orders, rejected the routine justification that a “reply was not satisfactory”, and warned GST officers of contempt proceedings for ignoring judicial directions while re-examining matters under Sections 129 and 130 of the CGST Act. The Courts also struck down GST orders involving incorrect GSTINs, demands beyond the scope of show cause notices, improper service of notices, and held that a single composite GST notice covering multiple financial years is illegal and without jurisdiction. Together, these judgments strongly reaffirm that GST proceedings must strictly comply with natural justice, statutory limits, and due process of law.

Court warns GST Officers of Contempt Proceedings, if Directions ignored, while re-examining Section 129 and 130 Case.

KEY Aspects of the Judgments

Gujarat High Court on GST Detention & Confiscation (Sections 129 & 130)

Panchhi Traders vs State of Gujarat (Common CAV Judgment) – 11 Dec 2025

Court: Gujarat High Court
Judge: Hon’ble Mr. Justice A.S. Supehia
Date: 11 December 2025
Case No.: R/Special Civil Application No. 9250 of 2020 with connected matters (including SCA 997/2025, 998/2025, 6877/2025, 9610/2025 & others)
Issue Area: Detention/Seizure of goods in transit (Section 129) and Confiscation (Section 130) under CGST Act, 2017 (post-amendment w.e.f. 01.01.2022)

1) Background of the Dispute (What happened?)

Goods vehicles were intercepted during transit.
Officers examined e-way bill and supporting documents.
Department issued MOV-10 notices proposing confiscation under Section 130, even though the goods were initially detained under Section 129.

Petitioners’ grievance:
Authorities were allegedly mechanically invoking Section 130 (confiscation) immediately after Section 129 interception/detention, which (according to petitioners) is not permissible.

2) Core Legal Question Before the Court

Can the Department invoke Section 130 (confiscation) at the transit stage after detention under Section 129?

Particularly after amendments effective from 01.01.2022, where:

Section 129 retains a non-obstante clause, and
Section 130’s non-obstante clause is deleted.

3) Key Submissions by Petitioners (in simple points)

Petitioners argued mainly that:

(A) Section 129 procedure must be completed first

Once detention starts under Section 129, officer must follow the complete procedure under Section 129 and cannot jump to Section 130 midway.

(B) Section 129 overrides Section 130 post-amendment

Because Section 129 retains “Notwithstanding anything…”, while Section 130 no longer has it—so Section 129 should prevail.

(C) MOV-10 should not be issued prematurely

They objected to issuing MOV-10 (confiscation notice) when proceedings are still at MOV-06/MOV-07 stage.

(D) Section 67(6) provisional release argument

They argued goods should be released provisionally under Section 67(6) even after initiation of Section 130.

(E) “Intent to evade tax” is essential for Section 130

They said confiscation under Section 130 requires intent to evade tax, and this cannot be presumed merely from e-way bill defects.

(F) Case law relied upon by petitioners

M/s ASP Traders vs State of U.P. (2025) 7 TMI 1525 (SC) – cited for procedural lapses/non-action issues.
Gujarat HC: Dhanlaxmi Metals vs State of Gujarat (28.07.2022) – cited for provisional release arguments.
Karnataka HC: Rajiv Traders vs Union of India (2022) 142 Taxmann.com 420 – cited regarding conversion of 129 into 130 and Article 300A.

4) Revenue’s Stand (State’s Arguments)

The State relied heavily on the earlier Gujarat High Court Division Bench decision:

Synergy Fertichem Pvt. Ltd. vs State of Gujarat (2019) 12 TMI 1213 (Guj HC)

Revenue argued that even earlier the Court had held:

Sections 129 and 130 are independent, and
Department can invoke Section 130 even at the threshold, in appropriate cases.

They also cited:

Mohammad Abdul Samad vs State of Telangana (2025) 2 SCC 49 (SC) on understanding non-obstante clauses and conflict principles.

5) Court’s Legal Analysis (Most Important Part)

5.1 Legislative intent behind 2022 amendments

The Court examined:

39th GST Council minutes (14.03.2020) and
Finance Bill/Finance Act explanations

Finding: Parliament intended to delink the proceedings of Section 129 and Section 130 (separate tracks).
However, that does not mean Section 130 becomes unusable during transit.

5.2 Effect of non-obstante clause

Even though Section 129 has a non-obstante clause, the Court held:

A non-obstante clause gives overriding effect only if there is conflict.
The Court found no direct conflict between Sections 129 and 130 because they operate in different spheres.

5.3 When can Section 130 be invoked during transit?

The Court clarified a key principle:

✅ Section 130 can be invoked during transit ONLY when there is material showing “intent to evade tax”.
🚫 It cannot be invoked merely on suspicion, portal discrepancies, or minor mistakes.

5.4 MOV Forms and Circular validity

The Court discussed the MOV forms mechanism from Circular No. 41/15/2018-GST dated 13.04.2018 (issued u/s 168).

Finding: The circular and MOV forms are not invalid merely because they are circular-based, unless they violate the Act. The Court did not find such violation.

5.5 Minor mistakes should not lead to harsh action

The Court referred to CBIC Circular dated 14.09.2018 clarifying that proceedings under Section 129 should not be initiated for minor errors, such as:

spelling mistakes,
small pin-code errors (without affecting validity),
1–2 digit document number error,
minor vehicle number error, etc.

Court’s principle:
For minor / first-degree errors, seizure/confiscation should not happen.
Confiscation is justified only for highest-degree contraventions like:

absence of documents,
fake/forged e-way bill,
fake registration,
complete mismatch of goods, etc. indicating intent to evade.

5.6 Time framework for forming opinion of evasion

The Court linked the “evasion opinion” to timelines under Rule 138C (inspection reports):

Summary report in 24 hours, final report in 3 days (extendable to 6 days).

Meaning: Decision on “intent to evade tax” (for invoking confiscation) should generally be formed within this operational inspection timeline, otherwise proceed under Section 129.

6) Key Takeaways for Taxpayers (Practical Understanding)

✅ Section 129 is the normal rule for transit detention cases

If there is no strong evidence of “intent to evade tax”, then:

follow Section 129 procedure,
determine penalty,
release on payment as per 129.

✅ Section 130 is an exceptional/harsh power

It can be used during transit only when:

the transaction itself shows strong evasion indicators,
not on mere suspicion or third-party portal discrepancies.

✅ “Intent to evade tax” is the dividing line

This is the key distinction between 129 and 130.

7) Final Operative Directions of the Court (What Court Ordered)

The High Court disposed the petitions by remanding matters with strict directions:

A) MOV-10 notices / MOV-11 orders must be re-examined in light of this judgment.
B) If confiscation notice/order is contrary to the Court’s observations, it must be withdrawn.
C) Goods/conveyance must be released under Section 129 where infringement falls under that section.
D) Where goods already released, release remains subject to final outcome of confiscation proceedings; existing stay continues.
E) If authorities still think confiscation is necessary, they must not take action for 2 weeks (to allow petitioners to approach court).
F) Orders must be passed within 12 weeks from receipt of writ/order.
G) Contempt warning: If officers act in defiance of Court’s observations, they may be liable for contempt of court.

8) Case Laws Cited/Discussed (as per judgment text provided)

Synergy Fertichem Pvt. Ltd. vs State of Gujarat (2019) 12 TMI 1213 (Gujarat HC)
Mohammad Abdul Samad vs State of Telangana (2025) 2 SCC 49 (SC)
M/s ASP Traders vs State of U.P. (2025) 7 TMI 1525 (SC) – noted by Court as not directly on same issue
Dhanlaxmi Metals vs State of Gujarat (Guj HC, 28.07.2022)
Rajiv Traders vs Union of India (2022) 142 Taxmann.com 420 (Karnataka HC) – not followed as contrary to Gujarat DB view
Shiv Enterprises vs State of Punjab 2022 (2) TMI 296 (re: portal discrepancies)
State of W.B. vs Kesoram Industries Ltd. (2004) 10 SCC 201 (interpretation principle)

This judgment is significant because it balances GST enforcement with trade realities: confiscation is permitted, but only when intent to evade tax is supported by concrete material—not routine suspicion or minor documentation errors.

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“Reply Not Satisfactory” Is No Reason: Gujarat High Court Quashes Non-Speaking GST Order

Virani Metal Industries vs State of Gujarat (Gujarat High Court, 11 Dec 2025)

1. Case Details (Quick Snapshot)

Case: Virani Metal Industries vs The State of Gujarat & Others
Court: Gujarat High Court
Judge: Hon’ble Mr. Justice Pranav Trivedi
Date of Judgment: 11 December 2025
Case No.: R/Special Civil Application No. 1150 of 2025
Nature of Order: CAV Judgment
Issue Involved: Rejection of application for cancellation of GST registration by a non-speaking order

2. Brief Background of the Case

The petitioner, Virani Metal Industries, was a sole proprietorship firm engaged in manufacturing copper wire from copper scrap and was registered under the Gujarat State GST Act, 2017.
The business was taken over by Copperwrx Tradelink Private Limited through a valid agreement dated 07.03.2024.
Following the transfer:
- The petitioner filed an application for cancellation of GST registration in Form GST REG-16 on 01.05.2024, seeking cancellation w.e.f. 02.04.2024.
- It was specifically declared that:
  - No stock or capital goods were held, and
  - No tax was payable.
The department issued Form GST REG-03 seeking clarification.
The cancellation application was rejected by an order dated 03.10.2024 on the ground that documents relating to merger/amalgamation were not provided.
The petitioner filed a fresh cancellation application on 19.10.2024.
Again, clarification was sought, and the application was rejected on 30.11.2024 by a cryptic order stating only that the “reply was not found satisfactory”.
This rejection order dated 30.11.2024 was challenged before the High Court.

3. Submissions on Behalf of the Petitioner

The petitioner contended that:

Applications for cancellation were properly filed under Rule 20 of the CGST Rules, 2017 using Form GST REG-16.
All required details were furnished, including the fact of business transfer.
The department:
- Failed to pass an order within 30 days, as contemplated under law.
- Issued notices under provisions not applicable to voluntary cancellation.
The impugned order dated 30.11.2024:
- Was unreasoned,
- Did not deal with the explanations given, and
- Merely stated that the reply was “not satisfactory”, making it a non-speaking order.

4. Submissions on Behalf of the State

The State opposed the petition by arguing that:

This was a second round of litigation, and the petitioner had a history of investigation.
The agreement for transfer of business:
- Did not involve consideration,
- Did not transfer liabilities,
- Involved the same individual (proprietor) as a director in the new company.
Necessary approvals (ROC/MCA), valuation, and details of transfer were allegedly missing.
The department suspected that the cancellation application was intended to evade GST liabilities.
A separate show cause notice in Form REG-17 dated 29.04.2025 had already been issued proposing ab-initio cancellation of registration.
Therefore, according to the State, the writ petition had become infructuous.

5. Issue Considered by the High Court

The Court consciously restricted its examination to a narrow and specific issue:

Whether the rejection order dated 30.11.2024 was passed in accordance with law or not.

The Court made it clear that:

It was not adjudicating the merits of:
- The takeover agreement, or
- The subsequent proceedings for ab-initio cancellation.

6. Court’s Findings and Reasoning

6.1 Non-Speaking Order Is Unsustainable

On examining the impugned order dated 30.11.2024, the Court found that:
- The order did not record any reasons, and
- The only ground mentioned was that the reply was “examined and not found satisfactory”.

The Court held:

A mere statement that the reply is “not satisfactory” does not amount to reasons.

Such an order:

Violates principles of natural justice, and
Is legally unsustainable.

7. Effect of Subsequent Show Cause Notice

The Court rejected the argument that the matter had become infructuous due to issuance of a later REG-17 notice for ab-initio cancellation.
It held that:
- The defect of a non-speaking order remains, and
- Issuance of a subsequent notice does not cure that illegality.

The Court clarified:

The petitioner is free to raise all contentions in response to the ab-initio cancellation proceedings, which are still pending.
However, the impugned rejection order could not be sustained.

8. Final Decision of the High Court

The order dated 30.11.2024 rejecting the cancellation application was:
- Quashed and set aside.
The Court did not interfere with:
- The subsequent show cause notice dated 29.04.2025.
Liberty was granted to the petitioner to:
- Raise all legal and factual contentions in the ongoing proceedings.
The petition was allowed to the limited extent of quashing the non-speaking order.
No order as to costs.

9. Key Legal Takeaway for GST Law

A GST authority cannot reject an application by merely stating “reply not satisfactory”.
Every administrative order affecting rights must be a reasoned (speaking) order.

10. Practical Impact for Taxpayers

Cryptic GST orders are liable to be quashed.
Authorities must:
Apply mind, and
Record reasons, especially in registration matters.
Voluntary cancellation proceedings cannot be dismissed mechanically.
Subsequent proceedings do not validate an illegal earlier order.

This judgment reinforces judicial discipline in GST administration and reiterates that procedural fairness is not optional—even in cancellation of registration matters.

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Court Sets Aside GST Order for Multiple Lapses

Incorrect GSTIN, Demand Beyond SCN & Improper Service

Krishi Rakchha Sewa Kendra & Another vs Union of India & Others

(Allahabad High Court, 7 November 2025)

1. Case Details (Quick Snapshot)

Court: Allahabad High Court
Date: 7 November 2025
Case No.: Writ Tax No. 5747 of 2025
Statute Involved: Section 73, Uttar Pradesh GST Act, 2017
Issue: Validity of adjudication order passed under GST law
Demand Raised: ₹41,71,718.30

2. Background of the Case

The petitioner challenged an Adjudication Order dated 30.08.2024 passed by the GST authorities under Section 73 of the UPGST Act, 2017, whereby a tax liability of ₹41,71,718.30 was determined.

The challenge was raised before the High Court by way of a writ petition under Article 226 of the Constitution of India.

3. Grievances Raised by the Petitioner

The petitioner pointed out three serious and fundamental defects in the GST proceedings:

(i) Non-Service of SCN and Adjudication Order

Neither the Show Cause Notice (SCN) nor the Adjudication Order was ever served upon the petitioner.

(ii) Proceedings Based on Wrong GSTIN

Petitioner’s correct GSTIN:
09AHZPA5029R1ZG
However:
- The SCN referred to GSTIN 09AHZPA5029R1ZC, and
- The Adjudication Order referred to GSTIN 09ABLFS0522M1ZV
Both GSTINs did not belong to the petitioner, rendering the proceedings jurisdictionally defective.

(iii) Demand Beyond the Scope of SCN

SCN proposed a tax liability of ₹24,10,004.96
Final adjudication raised demand of ₹41,71,718.30
The adjudication thus travelled beyond the Show Cause Notice, which is impermissible in law.

4. Stand of the Revenue

The learned Standing Counsel sought time to obtain instructions.
It was submitted that, at best, the matter could be remitted following the Division Bench judgment in:

M/s Riya Construction vs State of U.P. & 3 Others, 2025 : AHC : 179271-DB

5. Findings of the High Court

After hearing both sides and perusing the record, the Court recorded the following findings:

5.1 Wrong GSTIN – A Fatal Jurisdictional Error

The Court noted that:
- The SCN and the Adjudication Order were issued against GSTINs not belonging to the petitioner.
Such an error goes to the root of jurisdiction and vitiates the entire proceedings.

5.2 Demand Higher Than SCN Is Unsustainable

The adjudication order created a demand substantially higher than what was proposed in the SCN.
This was held to be contrary to settled principles of natural justice and GST law.

5.3 Non-Service Becomes Secondary

In view of the glaring errors apparent on record, the Court held that:
- The issue of non-service of SCN and order becomes secondary.

5.4 Distinction from Riya Construction Case

The Court clarified that the present case is factually distinguishable from M/s Riya Construction due to:
- Wrong GSTIN, and
- Excess demand beyond the SCN.

6. Final Order of the Court

The High Court held that no useful purpose would be served in keeping the petition pending and passed the following directions:

✅ Orders and Notice Set Aside

Adjudication Order dated 30.08.2024
Subsequent orders dated 11.08.2025 and 31.08.2025
Show Cause Notice dated 22.05.2024

All were quashed and set aside.

7. Liberty Granted to the Department

The Adjudicating Authority was granted liberty to issue a fresh Show Cause Notice under Section 73 of the UPGST Act, 2017, if required.
Such notice must be issued within one month from the date of the judgment.

Limitation Clarification

If a fresh SCN is issued:
- The petitioner cannot claim limitation benefit, since
- The remand was ordered under Article 226 of the Constitution, with consent of parties.

8. Attachment Orders Also Quashed

Any attachment order passed during the pendency of the impugned proceedings was also set aside, pending fresh adjudication, if any.

9. Relevant Statutory Provision

Section 73 – UPGST Act, 2017

Deals with determination of tax not paid or short paid without fraud or wilful misstatement, and mandates that adjudication must remain strictly within the scope of the Show Cause Notice.

10. Key Legal Takeaways

Proceedings initiated against a wrong GSTIN are void.
Adjudication cannot exceed the demand proposed in the SCN.
Glaring jurisdictional and technical defects warrant immediate judicial interference.
Subsequent remand does not validate an otherwise illegal order.

This decision reinforces that GST adjudication must be precise, jurisdictionally correct, and confined to the Show Cause Notice—any deviation is fatal to the proceedings.

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Single Composite GST Notice Covering Multiple Financial Years Is Illegal and Without Jurisdiction

Pramur Homes and Shelters vs Union of India & Others

Karnataka High Court | 11 December 2025

1. Case Details (Quick Snapshot)

Petitioner: Pramur Homes and Shelters
Respondents: Union of India & Others
Court: Karnataka High Court
Date of Order: 11 December 2025
Case No.: Writ Petition No. 33081 of 2025 (T-RES)
Impugned Action: Composite Show Cause Notice dated 30.09.2025
Provision Invoked: Section 74 of CGST/KGST Act, 2017
Period Covered in SCN: FY 2019-20 to 2023-24
Proposed Demand: ₹11,86,86,292 (tax, interest & penalty)

2. Background of the Case

The petitioner is a registered partnership firm engaged in real estate development, including layout development and construction of residential apartments, and is registered under the CGST Act, 2017 w.e.f. 04.02.2020.

The GST Department issued a single composite show cause notice under Section 74 proposing tax, interest and penalty for multiple financial years from 2019-20 to 2023-24, clubbing all alleged liabilities into one notice.

Aggrieved by the jurisdictional validity of such a notice, the petitioner approached the Karnataka High Court under Article 226 of the Constitution of India.

3. Core Legal Issue Before the Court

The Court framed the principal issues as follows:

(i)

Whether clubbing multiple financial years / tax periods in a single show cause notice under Sections 73 or 74 of the CGST/KGST Act is permissible in law?

(ii)

Whether such a composite show cause notice warrants interference as being illegal and without jurisdiction?

4. Statutory Framework Considered by the Court

The Court examined the scheme of the CGST/KGST Act, particularly:

Section 73 – Determination of tax (non-fraud cases)
Section 74 – Determination of tax (fraud / wilful misstatement cases)
Section 16(4) – Financial-year-specific ITC eligibility
Sections 37, 39 & 44 – Monthly/annual returns
Sections 73(10) & 74(10) – Year-wise limitation linked to annual returns
Section 74A (inserted by Finance Act, 2024) – expressly applicable from FY 2024-25 onwards

5. Findings of the High Court (Key Reasoning)

5.1 GST Law Is Built on a Financial-Year-Specific Framework

The Court held that the entire architecture of GST law is financial-year based, including:

Registration and turnover thresholds
Maintenance of accounts (Section 35)
Retention of records (Section 36 – 72 months from annual return)
Filing of returns (monthly and annual)
Determination of tax liability
Limitation for adjudication

A composite SCN collapses this statutory framework and is therefore impermissible.

5.2 Limitation Under Sections 73 and 74 Is Year-Specific

The Court emphasized that:

Limitation begins separately for each financial year, based on the due date of the annual return for that year.
Clubbing multiple years into one SCN artificially alters limitation periods, which is not permitted.

5.3 Composite Notices Enable Colourable Exercise of Power

The Court cautioned that issuing a single notice for multiple years:

Allows the Department to blur the distinction between Section 73 (3 years) and Section 74 (5 years).
May result in bypassing statutory safeguards, especially where some years may fall under Section 73 but are wrongly dragged into Section 74.
Such an approach amounts to a colourable exercise of power and is impermissible.

5.4 ITC Allegations Cannot Be Consolidated Across Years

Referring to Section 16(4), the Court held that:

Input Tax Credit is financial-year specific.
Each invoice, eligibility, and cut-off date is tied to a particular year.
A consolidated allegation of “wrong ITC for multiple years” is conceptually flawed and causes serious prejudice.

5.5 Violation of Principles of Natural Justice

The Court observed that:

Each financial year involves different facts, turnover, contracts, law amendments and reconciliations.
A single notice deprives the assessee of the right to year-wise defence, rebuttal and explanation.
This violates principles of natural justice.

6. Case Laws Relied Upon

The Court relied on and followed a consistent line of judicial precedents, including:

Veremax Technologies Services Ltd. vs ACCT – (2024) 167 taxmann.com 332 (Karnataka)
Bangalore Golf Club vs ACCT – (2024) 166 taxmann.com 642 (Karnataka)
Chimney Hills Education Society vs ACCT – (2024) 168 taxmann.com 12 (Karnataka)
Albatross Builders & Developers LLP vs ACCT – (2024) 169 taxmann.com 598 (Karnataka)
Milroc Good Earth Developers vs Union of India – (2025) 179 taxmann.com 465 (Bombay)
Titan Company Ltd. vs Joint Commissioner of GST – (2024) 159 taxmann.com 162 (Madras)
State of J&K vs Caltex (India) Ltd. – AIR 1966 SC 1350 (Supreme Court)

7. Court’s Final Decision

The Karnataka High Court held that:

A single composite show cause notice covering multiple financial years is illegal and without jurisdiction.
The impugned SCN dated 30.09.2025 was quashed.

Liberty to the Department

The Court clarified that:

The Department is at liberty to issue separate show cause notices,
Independently for each financial year,
In accordance with Sections 73 or 74, as applicable.

8. Key Legal Takeaways

❌ GST demands cannot be clubbed across financial years in one SCN
✅ Each financial year is a separate unit of assessment
❌ Composite notices distort limitation and statutory safeguards
✅ Separate SCNs must be issued for each year

9. Conclusion

This judgment decisively reinforces that GST adjudication must strictly follow the financial-year-specific statutory design. Any attempt to consolidate multiple years into a single show cause notice is jurisdictionally invalid and liable to be quashed.

“Under GST law, each financial year stands on its own—composite show cause notices collapse the statutory framework and cannot survive judicial scrutiny.”

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