Petition challenging discharge in tax levy dispute: punitive costs held unjustified while tax, interest and penalty challenge still pending

The dominant issue was whether the HC was justified in imposing costs while dismissing a petition challenging an order discharging the accused, when the underlying levy of tax, interest and penalty was already under challenge. The SC held that, in the context of the subsisting challenge to the levy, the petition could not be treated as frivolous so as to warrant punitive costs. Consequently, the SC set aside the costs of Rs. 2 lakhs imposed by the HC and disposed of the SLP.

---

---

The petitioner challenged a High Court order dismissing its criminal revision and imposing costs of Rs. 2 lakhs, arising from discharge of the respondents in a criminal complaint. The High Court treated the revision as frivolous because the underlying demand had been set aside by CESTAT (30.03.2015). However, the record showed the department had pursued appellate remedies against the CESTAT order: an appeal to the High Court was dismissed as not maintainable (16.12.2016), and a further civil appeal to the Supreme Court was later withdrawn due to "low tax effect" (20.09.2024). At the time the criminal revision was filed, the "levy of tax, interest and penalty" imposed by the Commissioner (30.11.2006) was still under challenge. On these facts, the Court held that "the petition filed in the High Court could not be said to be frivolous," and therefore set aside the costs. The dismissal "on merits" of the revision/discharge order was not interfered with, and the special leave petition was disposed of accordingly.

---