Mohammad Hazzak Lohar And Anr. vs. Commissioner State Tax And Anr.

Held

The Court held that the timelines for issuing a show cause notice and imposing penalty under Section 129(3) of the J&K Goods and Services Tax Act, 2017, are mandatory. The Court reasoned that the legislature's use of the word "shall" in this provision signifies its intent for strict adherence. The Court found that the provision regulates the exercise of coercive statutory power, protects valuable rights, and that treating the timelines as directory would defeat the legislative purpose of preventing prolonged detention and seizure. The absence of express consequences for non-compliance does not render the provision directory. The Court noted that the legislative intent, object of the provision, and the nature of the right affected are governing tests, and courts insist on strict compliance when statutes authorize coercive actions. In this case, the final order imposing penalty was passed on September 22, 2025, which was beyond the seven-day period from the date of service of the show cause notice (September 14, 2025). Therefore, the impugned order dated September 22, 2025, was quashed. The Court clarified that proceedings permissible under other provisions of the Act could still be pursued.

Facts

The petitioners, Mohd Hazzak Lohar and Dheeraj Gupta, challenged orders issued by the State Taxes Officer, including a notice in Form GST MOV-02, GST MOV-06, GST DRC-01, and a Summary of Order under Section 129(3) dated September 22, 2025. The challenge was primarily based on the contention that the order under Section 129(3) was passed after the expiry of the stipulated seven-day period. The vehicle belonging to the petitioners was intercepted on September 11, 2025, for transporting goods without proper documentation. A show cause notice proposing a penalty of Rs. 15,05,746/- was issued. The petitioner filed a reply on September 14, 2025, agreeing to furnish a bank guarantee. Subsequently, there were disputes regarding the valuation of goods, leading to revaluation. Further, the J&K Pollution Control Board intervened, declaring the seized polythene as contraband, which led to the exclusion of penalty related to these items. The final order imposing penalty for the remaining goods was issued on September 22, 2025.

Key Issues

1. Whether the timeline of seven days stipulated in Section 129(3) of the J&K Goods and Services Tax Act, 2017, for passing an order for payment of penalty after the service of a show cause notice is mandatory or directory? Petitioner's Contention: The petitioner argued that the timeline prescribed under Section 129(3) of the Act is mandatory. They relied on judgments from the Gujarat High Court in *Allcargo Logistics Limited v. State of Gujarat* and other High Courts, asserting that failure to adhere to this timeline vitiates the order for payment of penalty. Revenue's Contention: The respondent contended that the delay in issuing the order for payment of penalty was occasioned by reasons beyond the control of the State Taxes Officer. They argued that the petitioner should not benefit from unforeseen events encountered during the proceedings.