2022 (5) TMI 1073 - HC - GST

GST levy on penalty amounts post-July 2017 set aside, fresh enquiry proceedings allowed with proper notices

The Managing Director, The Senior Regional Manager, The District Manager/Deputy Collector Versus K. Selvamani S/o. L. Kuppusamy, C. Palanisamy, S. Lakshmanasami, D. Srinivasan

The Madras HC upheld a Single Judge's decision dated 05.01.2021 that set aside GST levy on penalty amounts post-01.07.2017. The appellants' interim stay ... Validity of enquiry proceedings - Learned Single Judge Bench while setting aside the levy of GST on Penalty amount, allowed to continue to initiate enquiry proceedings - Violation of principles of natural justice - HELD THAT:- The learned Judge rendered her finding that 'post 01.07.2017, there can be no levy of GST on the amount of penalty', on 05.01.2021, whereas, the appellants obtained the order of interim stay with respect of GST on penalty, only on 24.03.2021 i.e., much later than the order of the learned Judge. Therefore, the said interim order subsequently obtained, cannot be applicable to the facts of the present case and the order of the learned Judge holds good as on 05.01.2021, which warrants no interference. However, it is made clear that there is no bar for the appellants in proceeding with the enquiry as against the respondents, after issuing show cause notices afresh and providing opportunity of hearing. This writ appeal stands disposed of. Issues:1. Setting aside of order imposing penalty for stock shortage2. Levy of GST on penalty amountSetting aside of order imposing penalty for stock shortage:The appeal was filed against the order passed by the learned Judge in W.P. No.9432 of 2020, setting aside the penalty imposed for stock shortage found in a shop. The appellants argued that the order was based on a previous judgment which was challenged and an interim stay was granted on the calculation of GST on the penalty. The appellants contended that the omitted section 7(1)(d) was not considered, and the findings on GST imposition were against the Central Goods Sales Tax Act, 2017. They claimed that since the shortage was admitted and penalty paid without protest, no domestic enquiry was necessary. The learned Judge's decision was challenged on the grounds of violation of principles of natural justice.Levy of GST on penalty amount:The learned Judge held that 'post 01.07.2017, there can be no levy of GST on the amount of penalty.' This decision was based on earlier orders and interpretations of relevant provisions. The appellants argued that an interim stay was granted later specifically on the calculation of GST on the penalty, but the court found that the interim order did not apply to the facts of the case as the learned Judge's decision predated it. The court allowed the appellants to proceed with the enquiry but stated that the imposition of GST on the penalty amount was subject to the result of the interim stay order. The court upheld the learned Judge's decision on the levy of GST on the penalty amount.In conclusion, the appeal was disposed of with the court upholding the decision on the levy of GST on the penalty amount, stating that there was no bar for the appellants to proceed with the enquiry after issuing show cause notices afresh and providing an opportunity for hearing.