26 July 2025 Legal Updates

S.129 CGST ACT | ASSESSEE DOESN'T WAIVE RIGHT TO CHALLENGE LEVY BY MERE PAYMENT OF PENALTY TO RELEASE GOODS: SUPREME COURT

(a) Case Title:

• M/s ASP Traders v. State of Uttar Pradesh & Others

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• July 24, 2025

(d) Bench:

• Justice J.B. Pardiwala and Justice R. Mahadevan

Facts of the Case

ASP Traders, a registered dealer in Red Arecanut from Karnataka, consigned 17,850 kg of dry Arecanut to Delhi. During transit, goods were transferred to another vehicle, but 7 bags went missing from the original 255 bags. The vehicle was detained by Mobile Squad at Jhansi on January 17, 2022.

Key Events:

Authorities issued detention order and show cause notice under Section 129(3) of CGST Act, 2017. Notice alleged missing bags and questioned the existence of consignee company. ASP Traders filed detailed reply denying allegations. Due to business urgency, ASP Traders deposited ₹7,20,440 as penalty and secured release of goods. However, no final order was passed under Section 129(3) despite repeated requests. Authorities claimed the matter was concluded due to voluntary payment under Section 129(5)

Legal Issues

• Whether authorities are required to pass a formal order under Section 129(3) of CGST Act even after voluntary payment of penalty?
• Whether failure to pass a reasoned order violates Article 265 (no tax without authority of law) and principles of natural justice?

High Court Decision

Allahabad High Court dismissed the writ petition. Held that proceedings stood concluded under Section 129(5) after payment. Ruled no mandamus could be issued to pass an order contrary to law.

Supreme Court's Analysis

Key Legal Provisions Examined:

• Section 129(3) CGST Act: Requires proper officer to "issue notice... and thereafter, pass an order"
• Section 129(5) CGST Act: States proceedings "shall be deemed concluded" upon payment
• Rule 142 CGST Rules: Mandates formal order in Form GST MOV-09 and summary in Form GST DRC-07

Supreme Court's Reasoning:

1. Mandatory Nature of Orders:

Every show cause notice must culminate in a reasoned final order. Section 129(3) uses mandatory language: "shall issue notice... and thereafter, pass an order". The phrase "and thereafter" reinforces the obligation to pass an order regardless of payment

2. Payment Under Protest:

Payment made due to business exigencies cannot be treated as voluntary admission of liability. GST portal doesn't provide mechanism to indicate payment under protest. Written objections filed by taxpayer indicate intention to contest

3. Right to Appeal:

Section 107 of CGST Act provides right of appeal against "orders". Without a formal order, the right of appeal becomes illusory. Taxpayer cannot be deprived of statutory remedies

4. Constitutional Mandate:

Article 265 prohibits levy/collection of tax except by authority of law. Proper adjudication required to justify demand. No acquiescence in tax matters - payment doesn't waive right to challenge.

Supreme Court's Decision

Section 129(5) doesn't dispense with requirement of passing formal order. "Deemed conclusion" only means no further prosecution proceedings. Authorities must pass reasoned order even after payment when objections are filed. Failure to pass order violates constitutional and statutory requirements

COMPLAINT CAN BE AMENDED AT POST-COGNIZANCE STAGE IF NO PREJUDICE IS CAUSED TO ACCUSED: SUPREME COURT

(a) Case Title:

• Bansal Milk Chilling Centre v. Rana Milk Food Private Ltd. & Anr.

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• July 25, 2025

(d) Bench:

• Justice B.V. Nagarathna and Justice K.V. Viswanathan

Facts of the Case

The appellant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging that the respondents had purchased goods and issued three cheques totaling ₹14 lakhs, which were dishonored. Initially, the complaint stated that the respondents had purchased "Desi Ghee (milk products)," but later the appellant sought to amend this to "milk," claiming it was a typographical error. The respondents opposed the amendment, arguing it was impermissible after cognizance and changed the complaint's nature.

Legal Issues

• Whether a criminal court can allow amendment of a complaint under Section 138 NI Act after cognizance is taken
• Whether the proposed amendment was merely a typographical error or substantially changed the complaint's nature
• The test for allowing amendments in criminal complaints

Court's Decision

The Supreme Court allowed the appeal and restored the Trial Court's order permitting the amendment.

Key Legal Principles Established

1. Amendment in Criminal Cases:

• Courts have the power to allow amendments in criminal complaints even after cognizance, provided certain conditions are met.

2. Test for Amendment:

• The cardinal test is whether the amendment would cause prejudice to the accused. If no prejudice is caused, amendments can be allowed.

3. Curable vs. Non-curable Defects:

Courts can permit amendments for easily curable legal infirmities through formal applications, especially when:

• The amendment relates to a simple, curable infirmity
• No prejudice is caused to the other party
• The amendment doesn't alter the fundamental nature of the complaint

4. Stage of Proceedings:

• The stage at which amendment is sought is relevant but not determinative. Even post-cognizance amendments can be allowed if they meet the established criteria.

S. 156(3) CRPC| MAGISTRATE'S ORDER FOR FIR NOT VITIATED MERELY BECAUSE COMPLAINANT DIDN'T AVAIL REMEDY UNDER S.154(3): SUPREME COURT

(a) Case Title:

• Anurag Bhatnagar & Anr. vs. State (NCT of Delhi) & Anr.

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• July 25, 2025

(d) Bench:

• Justice Pankaj Mithal and Justice S.V.N. Bhatti

Background Facts

This case arose from a business dispute between Sunair Hotels Limited (SHL) and VLS Finance Limited (VLS). SHL was allotted land for hotel construction but lacked funds. VLS approached SHL as financial consultants, promising to launch a public issue of shares at a premium. They entered into a Memorandum of Understanding (MoU) in 1995, but SHL later discovered that VLS's promise was legally impossible under SEBI guidelines, as new companies cannot issue shares at premium without a three-year profit track record.

Both parties filed multiple FIRs against each other:

• VLS filed FIRs in 2000 and 2002 against SHL for fraud
• SHL filed FIR against VLS (stayed by High Court)
• SHL then filed another application leading to another FIR against VLS

Legal Issues Decided

1. Section 156(3) CrPC Applications

The Court held that before approaching a Magistrate under Section 156(3) CrPC, an informant must first approach the police station and then the Superintendent of Police if refused. However, direct approach to Magistrate, while procedurally irregular, doesn't invalidate the order if the Magistrate has jurisdiction.

2. Speaking Orders Requirement

The Court emphasized that Magistrates must pass reasoned orders with application of mind when directing FIR registration under Section 156(3) CrPC. This requirement exists from inception, not just after judicial interpretation.

3. Quashing of FIRs After Investigation

Once investigations are complete and chargesheets filed, courts should be reluctant to quash FIRs in exercise of inherent powers under Section 482 CrPC, especially when the original order is not illegal.

4. Civil vs. Criminal Nature of Disputes

The Court noted that while breach of contract may seem civil, elements like inducement, criminal conspiracy, and cheating can make it criminal. Since both parties had filed FIRs based on the same MoU, VLS couldn't claim the dispute was purely civil.

5. Successive FIRs

The Court distinguished between successive FIRs on identical facts versus similar but not identical allegations. Multiple FIRs are permissible if:

• Filed at different police stations
• Have different allegations or parties
• Earlier FIR didn't result in conviction/acquittal

Key Legal Principles

• Exhaustion of Remedies: Before approaching Magistrate under Section 156(3), statutory remedies under Section 154(3) should be exhausted.
• Judicial Mind Application: All judicial orders require application of mind and reasoned decision-making.
• Discretionary Powers: Courts should exercise inherent powers under Section 482 CrPC cautiously, especially when investigations are complete.
• Nature of Offences: Courts shouldn't embark on detailed inquiry into genuineness of allegations at FIR stage - this is for trial court after evidence.

Outcome

The Supreme Court dismissed all Special Leave Petitions, upholding the High Court's refusal to quash FIR No.380/2005. The Court found no legal flaw in the Magistrate's order and noted that with investigations complete and chargesheets filed, interference wasn't warranted.