THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

In a recent legal milestone, the Allahabad High Court delivered a consequential judgment in the case of Writ Tax No. 5 of 2023, delving into crucial aspects of Goods and Services Tax (GST) penalties. This article aims to dissect the key elements of the judgment, shedding light on the intricacies of GST law and the court's stance on penalty imposition.

 

Background of the Case:

The focal point of the case revolves around a private company engaged in providing manpower supply services. The petitioner contested the imposition of a substantial penalty under Section 122 of the GST Act. The petitioner, having received a show-cause notice for delayed GST payment, faced a penalty amounting to Rs. 56,00,952.72. With the appeal dismissed, the case found its way to the Allahabad High Court for further deliberation.

 

Key Arguments:

Central to the petitioner's argument was the assertion that, even if a penalty was deemed necessary, it should be limited to Rs. 10,000. This plea was grounded in the absence of any allegations of tax evasion. The court, in its analysis, referred to Sections 123, 126, 127, and 128 of the GST Act, emphasizing the principles of proportionate penalties and the right to a fair hearing.

 

Government Guidelines:

During the proceedings, the petitioner's counsel drew attention to a noteworthy government notification dated 01.06.2021. This notification, while waiving late fees for returns, did not extend to penalties. However, the counsel argued that the government's decision to waive late fees should influence the imposition of penalties, as stipulated in Section 126(2) of the Act.

 

Court's Observations:

The Allahabad High Court meticulously examined the case, critiquing the failure to adhere to penalty-related disciplines. The court underscored that even if a delay in payment was acknowledged, the maximum penalty should be Rs. 10,000, especially given the absence of tax evasion allegations.

 

Court's Decision:

The judgment rendered by the Allahabad High Court was decisive. It set aside the orders dated 25.08.2021 & 14.09.2022 in Writ Tax No. 5 of 2023 and the orders in Writ Tax No. 1 of 2023 dated 15.03.2021 & 14.09.2022. The court directed the petitioner to pay a reduced penalty of Rs. 10,000 in both cases within a two-week timeframe.

This landmark judgment from the Allahabad High Court serves as a pivotal precedent, reaffirming the principles of proportionality and fair hearing in the realm of GST penalties. The decision also highlights the importance of considering government guidelines, providing valuable insights for businesses and legal practitioners navigating the intricate landscape of GST jurisprudence. As this judgment paves the way for future interpretations, stakeholders should stay attuned to its implications in shaping the evolving landscape of tax law.

Read Jugments/Order - Here