GST penalty orders and writ jurisdiction: court declined merits review, upheld statutory penalty structure, and directed parties to appeal.

A writ challenge to GST assessment-cum-penalty orders based on alleged circular trading and wrongful input tax credit was not entertained because an efficacious statutory appeal lay under the GST framework, and the disputed factual and legal issues were better examined in that forum. The court also held that penalty under Section 122 is prescribed as the higher of a fixed sum or the tax/input tax credit involved, leaving no discretion to reduce it below the statutory measure. On the facts, the orders disclosed application of mind and were not vitiated by procedural illegality or patent disproportionality; the petitioners were left to pursue the appellate remedy with ancillary pre-deposit relief.

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Issues: (i) Whether the writ petitions challenging the GST assessment-cum-penalty orders should be entertained in view of the statutory appellate remedy. (ii) Whether the impugned penalty orders under Section 122 of the GST enactment were vitiated by lack of discretion, procedural irregularity, or disproportionality.

Issue (i): Whether the writ petitions challenging the GST assessment-cum-penalty orders should be entertained in view of the statutory appellate remedy.

Analysis: The petitions challenged orders in Form GST DRC-07 passed for multiple tax periods on allegations of circular trading and wrongful availment or passing on of input tax credit. The Court noted that the GST enactment provides an appellate mechanism under Section 107, followed by further appellate recourse, and that the petitioners should not bypass that statutory structure by invoking writ jurisdiction at the first instance. The Court also noted that disputed factual and legal aspects were better left to the appellate forum.

Conclusion: The writ petitions were not entertained on merits and the petitioners were relegated to the appellate remedy.

Issue (ii): Whether the impugned penalty orders under Section 122 of the GST enactment were vitiated by lack of discretion, procedural irregularity, or disproportionality.

Analysis: The Court held that the impugned orders recorded the objective basis for the finding of circular trading and disclosed application of mind. It distinguished the authorities relied on by the petitioners by holding that the language of Section 122, which provides for penalty of ten thousand rupees or the amount equivalent to the tax or input tax credit involved, whichever is higher, leaves no discretion to reduce the penalty to a lower amount. The Court further held that the petitioners had, prima facie, wrongly availed input tax credit and passed it on to inflate turnover, and that the case law on proportionality under other enactments did not control the GST penalty provision.

Conclusion: The penalty orders were not found to suffer from procedural illegality or patent disproportionality, and the petitioners were prima facie liable to penalty under the GST provisions.

Final Conclusion: The challenge to the penalty orders was rejected at the writ stage, while preserving the petitioners' right to pursue the statutory appeal with ancillary relief on pre-deposit.

Ratio Decidendi: Where a GST statute provides an efficacious appellate remedy, a writ petition challenging penalty orders based on disputed factual findings of circular trading and wrongful input tax credit should ordinarily not be entertained, and the penalty prescribed as the higher of a fixed sum or the quantified tax or credit involved admits of no discretion to scale it down below the statutory measure.

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