Gujarat High Court Holds Opportunity of Hearing Mandatory Before Passing GST Penalty Orders Under Section 129(3)

In a significant decision, the Gujarat High Court has clarified that authorities are required to provide an adequate opportunity of hearing and duly consider objections before passing orders imposing tax and penalty under Section 129(3) of the Central Goods and Services Tax Act, 2017 (CGST Act).

The case arose from the interception and detention of goods belonging to the petitioner, a Maharashtra-registered proprietorship engaged in the supply of aluminum and copper scrap. The goods, while in transit through Gujarat, were detained by State Tax authorities on the ground that the E-way bill was generated for a route from West Bengal to Maharashtra, whereas the vehicle was found within Gujarat. The authorities issued a detention order and subsequently demanded tax and penalty under Section 129(3) of the CGST Act. The petitioner paid the demanded amount to secure release of the goods but challenged the subsequent penalty order on the ground that it was passed without considering its objections or granting a personal hearing.

During the proceedings, the petitioner argued that the impugned order was issued in breach of Section 75(4) of the CGST Act, which mandates an opportunity of hearing before passing any adverse order. The petitioner had submitted detailed objections on 10.09.2025, but these were not addressed in the final order dated 12.09.2025. The petitioner contended that this omission amounted to a violation of the principles of natural justice, specifically the maxim audi alteram partem.

The State, through its counsel, conceded that the petitioner’s objections were not considered in the impugned order and that the order was passed solely on the basis that the petitioner had paid the tax and penalty. The State did not oppose the remand of the matter for fresh consideration.

The High Court, after reviewing the record, found that the impugned order failed to record any reasons for the imposition of penalty or to address the petitioner’s objections. The Court emphasized that it is a fundamental proposition of law that the affected party must be heard and their objections considered before any adverse order is passed. The Court reiterated that the principles of natural justice, including the right to a fair hearing, are integral to such proceedings.

Accordingly, the Court quashed and set aside the impugned order dated 12.09.2025 and remanded the matter to the respondent authority for fresh adjudication. The authority was directed to provide an adequate opportunity of hearing to the petitioner and to pass a reasoned order in accordance with law within four weeks of receiving the Court’s order.

This decision reinforces the mandatory nature of the right to be heard in GST proceedings and underscores the requirement for authorities to provide reasoned orders after considering all objections raised by the assessee.