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2025 Supreme(Guj) 1317
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
M/s Bhavani Tractor - Appellant
Versus
Union of India and Others - Respondents
Special Civil Application No. 13787 of 2024
Decided On : 10-07-2025
Advocate Appeared:
For the Appellant : Uchit N. Sheth
For the Respondents: Deepak N. Khanchandani, Hetvi H. Sancheti
The court ruled that absence of willful misstatement justifies directing reassessment under Sec.75(2) of the GST Act instead of penalties under Sec.74, allowing for the benefit of Sec.128A post-legislation.
Headnote:(A) Central / State Goods & Services Tax Act, 2017 - Sections 73, 74(5), 75(2), and 128A - Petition seeks to quash orders demanding interest and penalties related to GST liabilities - Court observed no wilful suppression or misstatement by the petitioner to invoke Sec.74, emphasizing the need to provide an opportunity for fresh orders post-implementation of Sec.128A. (Paras 6 and 7)
(B) Writ Jurisdiction - The role of the High Court under Article 227 includes reviewing the legitimacy of lower court orders, but not substituting judgment unless a legal error exists. (Para 6)
Facts of the case:
The petitioner, an authorized dealer, incurred a tax liability of Rs.51,12,570/- while having sufficient input tax credit in the electronic ledger, which was not offset due to a technical error. The GST authority introduced demands for penalties and interest post-audit, which led to the current petition.
Findings of Court:
The petitioner inadvertently failed to utilize their electronic credit for liabilities; thus, the imposition of interest and penalty was found unwarranted.
Issues: Whether the GST authority rightly imposed penalties under Sec.74 despite the lack of wilful suppression.
Ratio Decidendi: The court directed the authority to reassess the matter under Sec.73 due to the absence of wilful misconduct, enabling the petitioner to benefit from newly introduced provisions under Sec.128A.
Result: Petition allowed, orders of the lower authorities quashed and remanded for new consideration.
| Table of Content |
|---|
| 1. tax liability offsetting and penalties (Para 3) |
| 2. arguments for waiver of interest and penalty (Para 4) |
| 3. court's analysis on intent and compliance (Para 6) |
| 4. order for fresh de novo proceedings (Para 7) |
| 5. final disposition of the petition (Para 8) |
ORDER :
1. Heard learned advocate Mr. Uchit Sheth for the petitioner and learned advocate Ms. Hetvi Sancheti for the respondents.
2. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs:
“A This Hon’ble Court may be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order quashing and setting aside impugned order dated 14.06.2024 (annexed at Annexure A) as well as order dated 20.10.2023 (annexed at Annexure J) as being wholly without jurisdiction, arbitrary and illegal.
B. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith refund the amount of penalty deposited under Section 74(5) of the GST Acts along with approprite interest on such refund.”
3. The brief facts of the case are as under:
3.1 The petitioner is an authorised dealer of Mahindra Tractors and is duly registered under the provisions of the Central / State Goods & Services Tax Act, 2017 (for short ‘the GST Act’).
3.2 It is the case of the petitioner that for the year 2019-20, there was outstanding tax liability of Rs.51,12,570/- and there was input tax credit available of higher amount and offset of such liability against input tax credit was pending to be made. Pursuant to the Audit of the records of the petitioner for the period from July 2017 to March 2020, a query memo was raised regarding the alleged outstanding liability on 21.12.2022 which was responded by the petitioner stating that it was only a technical error as input tax credit was very much available in the electronic credit ledger of the petitioner.
3.3 The petitioner, thereafter, filed Form GST DRC-03 dated 05.01.2023 under Sec.73(5) of the GST Act offsetting the input tax credit balance against the output tax liability. The petitioner also paid the principal amount of tax along with the penalty under Sec.74(5) of the GST Act to avoid the litigation as in view of the remark made by the Auditor, the tax under the GST Act was also payable by the petitioner in respect of the items shown in “other income” which was in nature of commission, sale of oil, spares, workshop income etc.
3.4 The petitioner, therefore, made a prayer that since the entire tax liability has been discharged through electronic credit ledger, no interest was leviable by virtue of sec.50 of the GST Act and no penalty was leviable on the petitioner as the petitioner has made the payment of tax and penalty prior to issuance of any intimation or show-cause notice by the competent authority.
3.5 The contention of the petitioner for non levy of interest and penalty was not accepted by the GST authority in audit. As per their letter dated 11.04.2023, an intimation was issued in Form GST DRC-01A demanding interest and penalty under the GST Act. The petitioner by reply dated 20.04.2023, submitted that no interest was leviable since the entire tax penalty was made by debiting the electronic credit ledger. It was also contended that no penalty under Sec.74 of the GST Act can be levied as there was no malafide intention to evade payment of tax by the petitioner as it was only a delayed offset of output tax liability against available input tax credit.
3.6 However, a show-cause notice in Form DRC-01 was issued on 25.05.2023 under sec.74 of the GST Act proposing to demand interest and penalty from the petitioner which was replied by the petitioner on 22.09.2023 objecting to the same. The adjudicating authority, however, passed the Order-in-Original dated 20.10.2023 confirming the demand of interest and penalty. Being aggrieved, the petitioner preferred an appe
