HC: Charge for Compounding GST Offences Should Not Exceed the Maximum Penalty

The High Court of Bombay High Court at Goa, refusing the order for the compounding of offence ruled, the compounding amount of offence under the GST act would not be more than the maximum penalty mentioned in the act for the same offence.

The applicant Mr Shekhar P Vernekkar dissatisfied with the order of the council, the penalty amount for compounding the GST offence would be ordered to be paid in the sum of Rs.1,00,000. The applicant, for any type of compounding mentioned under Section 53 of the Act that Rs 10000 would be the maximum amount of the penalty. As per the order it stated that it “will not grant any right to the applicant to be treated as registered dealer eligible to claim the GST Input Tax Credit(ITC) and/or collect tax on sales.”

The Revenue encountered that in the facts of the current case and considering that the same was an offence under Section 22(1) of the Act, the maximum penalty would be Rs.25,000 under Section 44 clause(b) of the Act.

Bombay High Court’s Justice G. S. Kulkarni, the applicant’s grievance related to the penalty of Rs 1,00,000 levied via the impugned order is needed to be accepted as exfacie opposite to the statute.

On the grounds of the revenue, under section 44 of the act, the Rs 25000 penalty is the maximum or even when the applicant is correct in his contention about the max penalty amount being Rs 10,000 on 2nd Feb 2012 under the mentioned notification, that the state government issued on either of the courts the impugned order which order for the GST penalty of Rs 1,00,000 could not be upheld, as per the court.

The high court concluded that in context to the petitioner’s grievance related to the wording of the operative part of the order quoted above, it is correct but the same observations might be transparent. It leads to consequences precisely when the substantive petition is due before Appellate Authority strikes the Assessment Order.