The Madras High Court ruled that a taxpayer can challenge the imposition of a penalty under the Goods and Services Tax ( GST ), when the liability is paid.
The court directed the GST Department to take an appeal filed solely against the penalty on record, thereby providing relief to the petitioner who had faced rejection of their appeal by the lower authority.
The petitioner, Aatral Associates filed a writ petition challenging the impugned order passed by the first respondent on 21.03.2023. The petitioner’s counsel submitted that a show cause notice dated 20.02.2023 had been issued, following which the first respondent imposed both tax and penalty through the assessment order.
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While the petitioner duly paid the tax amount as required by the authorities, they filed an appeal specifically challenging the penalty imposed. However, the second respondent rejected the appeal, claiming that an appeal challenging the penalty alone is not maintainable.
The petitioner had no choice but to file a writ petition challenging the rejection of their appeal.
The Additional Government Pleader, representing the GST Department, acknowledged the sequence of events and requested the court to issue appropriate directions to the second respondent.
The bench noted that it was improper for the appellate authority to reject the appeal solely because it only challenged the penalty. The court clarified that there is no legal prohibition against challenging only the penalty, especially when the taxpayer has already complied with their tax obligations.
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The petitioner had the right to contest the penalty separately, and the appellate authority should have entertained the appeal rather than dismissing it on procedural grounds, observed the bench of Justice Krishnan Ramasamy.
The court thus set aside the intimation dated 07.02.2024, issued by the second respondent, which had rejected the appeal. The court further directed the second respondent to take the appeal on record and proceed to adjudicate the matter on its merits, while ensuring that the petitioner is provided with sufficient opportunity to present their case.
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