Without proving fraud, the 100% Goods Service Tax (GST) penalty cannot be levied, the Supreme Court ruled and asked the High Court to rehear the case.
The order of the Andhra Pradesh High Court has been set aside by the bench of Justice B.V. Nagarathna and Justice K.V. Viswanathan, dismissing a review application filed by M/s Godway Funicrafts. The Supreme Court asked HC to reconsider the grievance of the company for a 100% penalty imposed u/s 74 of the CGST Act, 2017.
The applicant, M/s Godway Funicrafts, via a writ petition, has approached the Andhra Pradesh High Court contesting an order that levied a 100% penalty. It was ruled by the company that the same penalty was not explained as the department has not established any fraud or wilful concealment, which is an obligatory condition u/s 74 of the CGST Act and its related State provisions.
The High Court dismissed the writ petition in November 2020, and a review application was submitted thereafter, outlining that the fraud had not been proved. But the High Court dismissed the review application in May 2022, specifying that the problem was not claimed in the original writ proceedings.
As per the court, the claim on the penalty may not have been outlined in the writ hearing; it was raised in the memorandum of the writ petition and again in the review application.
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The Court ruled that, “In the facts and circumstances of this case, the appellant was entitled to raise the contention regarding the imposition of 100% penalty in the review application… The High Court has to consider the same on merits.”
As per that, the Apex court restored the review application to the High court’s file, permitting M/s Godway Funicrafts to claim its position for both the penalty and the interest levied.
The Apex court asked the HC to hear the review appeal afresh. To permit the appellant to raise all the related claims, along with the lack of fraud or wilful concealment. To acknowledge the legality of the levied penalty and any accused interest thereon. To determine the review application on its merits as per the law.
The Court said that if M/s Godway Funicrafts is not successful in the High Court, it may approach the Apex Court again, but merely on the issue of penalty.
| Case Title | M/S Godway Funicrafts v/s The State Of Andhra Pradesh & Ors |
| Case No. | NO(S).16833-16834/2023) |
| counsel for The Appellant | Sri Veera Raghavan |
| Counsel for the Respondent | Sri Sahil |
| Supreme Court | Read Order |
