Penalties for GST violations must align with legislative mandates; courts may not intervene unless penalties are grossly disproportionate to offenses. Mandatory penalties apply irrespective of the perceived severity of actions.

ORDER :

C. SARAVANAN, J.

Ms.Amirtha Poonkodi Dinakaran, learned Government Advocate takes notice for the Respondent in W.P.Nos.2628, 2630, 2633, 4191, 3953 and 3949 of 2026, Mr.C.Harsharaj, learned Special Government Pleader takes notice for the Respondent in W.P.Nos.3206, 3211, 4088, 4101 and 4097 of 2026, Mrs.P.Selvi, learned Government Advocate takes notice for the Respondent in W.P.Nos.4107, 4113, 4117 and 3963 of 2026 and Mr.V.Prashanth Kiran, learned Government Advocate takes notice for the Respondent in W.P.Nos.2912, 2925, 2927 and 2982 of 2026.

2. These Writ Petitions are being disposed of at the time of admission with the consent of the learned counsel for the Petitioners, learned Special Government Pleader and the learned Government Advocates for the Respondents.

3. In these Writ Petitions, the respective Petitioners have challenged the respective Assessment Orders in Form GST DRC-07 passed under Section 74 of the respective GST Enactments for the Tax Periods from 2020-2021 to 2024-2025.

4. The details of the Writ Petitioners and the impugned Orders passed for the respective Tax Periods are detailed below:-

5. The issue involved in these Writ Petitions pertain to imposition of penalty under Section 122(1)(vii) and Section 122(1)(ii) of the respective GST Enactments on the respective Petitioners, the ineligible Input Tax Credit availed by the respective Petitioners and the alleged fake sales for passing such ineligible Input Tax Credit.

6. By the impugned Orders, the penalty imposed equivalent to the Input Tax Credit availed on circular trading is as detailed below:-

7. The case of the Petitioners is that though in the impugned Orders it has been recorded that the respective Petitioners were involved in circular trading and have 1% or less original transactions out of the transactions which were supposed by carried on to portray themselves as genuine tax payers, it has been stated that this is not the case.

8. It is submitted by the learned counsel for the Petitioners that in the impugned Orders it has been recorded that the Petitioners (tax payers) have boosted up their turn over and have billed themselves without any movement of goods and that their aim was to not transfer fake Input Tax Credit but to boost up their business turn over to get bank loans to create an image that they are big players in the medical equipment supply business.

9. Relevant portion from the Order dated 23.10.2025 (wrongly typed as 23.10.2024) for the Tax Period 2024-2025 in the case of Tvl.Sri Sana Enterprises was invited. It reads as under:-

“Total Purchase and sales Turnover of suspected tax payers involved in circular trading (Turnover is from period when circular trading was initiated not from the period of registrations for all tax payers except Tvl.Sana Enterprises)

(* CT refers to Circular Trading)

The above table shows that the above tax payers are involved in circular trading and has 1% or less original transactions that too were done to portray themselves as genuine tax payers but that is not the case. The above tax payers just to boost up their turnover has billed themselves without any goods movement and their aim is not transfer fake ITC but to boost up their business turnover to get bank loans, to create an image that they are big players in this medical equipment supply business.”

10. Learned counsel for the Petitioners would submit that in terms of Section 122(