Tripura HC Quashes VAT Penalty Notices Issued 9 Years After Transactions and Post Refund Claim as Violative of Art 14 [Read Order]
The Court found that notices under Section 77 of the TVAT Act were issued only after the transporter sought a refund of its deposit, rendering the action mala fide.
![Tripura HC Quashes VAT Penalty Notices Issued 9 Years After Transactions and Post Refund Claim as Violative of Art 14 [Read Order]](https://images.taxscan.in/h-upload/2025/12/19/2113288-tripura-hc-vat-penalty-notices-refund-claim-vat-penalty-vat-notice-taxscan.webp "Tripura HC Quashes VAT Penalty Notices Issued 9 Years After Transactions and Post Refund Claim as Violative of Art 14 [Read Order]")
In a recent case, the Tripura High Court has quashed penalty notices issued nearly nine years after alleged VAT violations, holding them arbitrary, mala fide, and violative of Article 14 of the Constitution. The petitioner, North East Carrying Corporation Ltd, a registered transporter under the TVAT Act, had deposited ₹12 lakh as security in 2013. After GST came into force in...
In a recent case, the Tripura High Court has quashed penalty notices issued nearly nine years after alleged VAT violations, holding them arbitrary, mala fide, and violative of Article 14 of the Constitution.
The petitioner, North East Carrying Corporation Ltd, a registered transporter under the TVAT Act, had deposited ₹12 lakh as security in 2013. After GST came into force in July 2017, the petitioner sought a refund of the deposit in April 2023.
Following this, the Superintendent of Taxes issued show‑cause notices in July 2023 and August 2024 under Section 77 of the TVAT Act, alleging irregularities in delivery permits for the years 2013–2018.
The Court noted that the alleged violations occurred between September 2013 and March 2014, yet notices were issued only in 2023, after a delay of more than nine years.
For subsequent years (2014–2018), notices were issued in 2024, i.e., 6–9 years late. The court observed that the notices were issued only after the petitioner sought a refund, indicating mala fide intent.
Relying on the Division Bench ruling in T.R. Freight Movers v. State of Tripura (2011), the Court reiterated that transporters cannot be saddled with “tax” under Section 77, and penalty can only be imposed in limited circumstances where deliberate defiance or dishonest conduct is proven.
The court observed that penalty powers must be exercised within a reasonable time, even if no express limitation is prescribed. The Court cited the Supreme Court’s decision in SEBI v. Sunil Krishna Khaitan (2023), which held that stale proceedings are invalid.
The Division Bench of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha held that issuing penalty notices nearly a decade later, and only after a refund claim, was arbitrary, illegal, and violative of Articles 14 and 265. Consequently, the court quashed all show‑cause notices and penalty orders, directing a refund of the deposit with interest and costs.
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