GST Penalty Challenged: Court Sends Steel Firm Back to Appellate Authority

Get the full picture - access the original judgement of the court order here

Case Name

M/s. Tanish Steels vs. State of Punjab and Another

Court Name: High Court of Punjab and Haryana at Chandigarh

Case No.: CWP-29005-2017 (along with CWP Nos. 2594 and 7861 of 2018)

Decided on: 11th December 2018

Key Takeaways

1. 200% Penalty Challenged: The petitioner was hit with a penalty equal to 200% of the tax under the Punjab GST framework — that’s a massive financial burden.

2. No Appellate Authority = Valid Reason to Approach High Court: When the penalty was imposed, there was no Appellate Authority constituted under the Punjab GST law. This is why the petitioner had no choice but to knock on the High Court’s door.

3. Appellate Authority Later Appointed: By February 2018, the Punjab Government appointed Smt. Parneet Shergill, PCS, Additional Excise and Taxation Commissioner (Administration) as the Additional Commissioner (Appeals) to function as the Appellate Authority under Section 107 of the Punjab Goods and Service Tax Act, 2017.

4. Limitation Period Protection: The Court was kind enough to clarify that if the petitioners file their appeals within 30 days of receiving the certified copy of this order, the Appellate Authority cannot dismiss the appeal on grounds of limitation. This is a very practical and fair relief!

5. Three Petitions Decided Together: The Court disposed of three writ petitions (CWP Nos. 29005 of 2017, 2594 and 7861 of 2018) together since they all involved the same legal issue.

Issue

The central legal question here is:

Can a taxpayer approach the High Court directly to challenge a GST penalty order when no Appellate Authority has been constituted under the Punjab GST law?

And the follow-up practical question:

Now that an Appellate Authority has been appointed, should the petitioner be directed to exhaust that remedy first?

Facts

• Who is the Petitioner? M/s. Tanish Steels is a company engaged in the fabrication and trading of iron and steel products in Punjab.

• What happened? On 04.10.2017, the State Tax Officer (Respondent No. 2) passed a penalty order (Annexure P-8) against the petitioner, imposing a penalty equal to 200% of the tax. That’s a very steep penalty.

• Why go to the High Court? Normally, the petitioner would have filed an appeal against this penalty order. But here’s the catch — at the time, no Appellate Authority had been constituted under the Punjab GST law. So, the petitioner had no forum to appeal to, and therefore filed a writ petition under Articles 226/227 of the Constitution of India before the High Court.

• What changed during the proceedings? While the case was pending, the Punjab Government issued a notification dated 15.02.2018, appointing Smt. Parneet Shergill as the Additional Commissioner (Appeals) to act as the Appellate Authority under Section 107 of the Punjab Goods and Service Tax Act, 2017 and rule 109A of the Punjab Goods and Service Tax Rules, 2017.

• Three cases, same issue: The Court also noted that two other writ petitions — CWP Nos. 2594 and 7861 of 2018 — involved the identical issue, so all three were disposed of together.

Arguments

Petitioner’s Side (M/s. Tanish Steels):

• The penalty order dated 04.10.2017 was illegal and unjust.
• Although the penalty order was an appealable order, the petitioner had no choice but to approach the High Court because no Appellate Authority had been constituted under the Punjab GST law at the time of filing.
• The petitioner sought quashing of the penalty order (Annexure P-8).

Respondent’s Side (State of Punjab):

• The State filed a reply to the writ petition.
• The State produced a copy of the notification dated 15.02.2018 in Court, showing that an Appellate Authority had now been appointed under Section 107 of the Punjab Goods and Service Tax Act, 2017 and rule 109A of the Punjab Goods and Service Tax Rules, 2017.
• Essentially, the State’s position was that since an Appellate Authority now exists, the petitioner should use that remedy.

Key Legal Precedents

In this particular judgment, the Court did not cite any prior case law or judicial precedents. The decision was based purely on the factual development — i.e., the appointment of the Appellate Authority — and the application of the following statutory provisions:

Articles 226/227 of the Constitution of India

Gives the High Court power to issue writs and exercise supervisory jurisdiction

Section 107 of the Punjab Goods and Service Tax Act, 2017

Provides for appeals to an Appellate Authority against orders passed under the Act

Section 3 and Section 4 of the Punjab Goods and Service Tax Act, 2017 (Punjab Act No. 5 of 2017)

Powers under which the Government appointed the Appellate Authority

Rule 109A of the Punjab Goods and Service Tax Rules, 2017

Specifies the designation and appointment of the Appellate Authority

Judgment

Technically, neither side “won” outright — the High Court disposed of the writ petitions without going into the merits of the penalty order. Here’s what the Court decided:

1. Petitioners Relegated to Appellate Authority: Since an Appellate Authority had now been appointed, the Court directed the petitioners to file appeals before the Appellate Authority in accordance with law, rather than having the High Court decide the matter.

2. Protection from Limitation: The Court gave a very important relief — it clarified that if the petitioners file their appeals within 30 days from the date of receipt of the certified copy of this order, the Appellate Authority shall not dismiss the appeals on the ground of limitation. This is significant because the penalty order was from October 2017, and a lot of time had passed!

3. Three Petitions Disposed Together: All three writ petitions — CWP Nos. 29005 of 2017, 2594 and 7861 of 2018 — were disposed of in the same manner.

The Court’s Reasoning:

The logic is straightforward — the High Court generally does not entertain writ petitions when an alternative statutory remedy (like an appeal) is available. The petitioner had a valid reason to approach the High Court initially (no Appellate Authority existed), but once that forum became available, the proper course was to use it. The Court balanced this by protecting the petitioner from any limitation issues.

FAQs

Q1: Why was the penalty 200% of the tax? Isn’t that too high?

The judgment doesn’t go into the reasons for the 200% penalty — it only mentions that such a penalty was imposed. The merits of the penalty were not examined by the High Court. That’s now for the Appellate Authority to decide.

Q2: What is the Appellate Authority under Punjab GST?

It’s the Additional Commissioner (Appeals) appointed under Section 107 of the Punjab Goods and Service Tax Act, 2017. In this case, Smt. Parneet Shergill, PCS was appointed to this role via a notification dated 15.02.2018.

Q3: What happens if the petitioner misses the 30-day deadline to file the appeal?

The Court’s protection only covers appeals filed within 30 days of receiving the certified copy of the order. If the petitioner misses this window, the Appellate Authority may dismiss the appeal on limitation grounds.

Q4: Did the High Court say the penalty was valid or invalid?

No! The High Court did not examine the merits of the penalty order at all. It simply said: “There’s an Appellate Authority now — go there first.” The question of whether the penalty is valid or not will be decided by the Appellate Authority.

Q5: Why were three petitions decided together?

Because all three petitions — CWP Nos. 29005 of 2017, 2594 and 7861 of 2018 — involved the identical legal issue (penalty orders challenged due to absence of Appellate Authority under Punjab GST). So the Court applied the same reasoning to all three.

Q6: What is the significance of Articles 226/227 of the Constitution?

These articles give the High Court the power to issue writs (like certiorari, mandamus, etc.) and exercise supervisory jurisdiction over lower courts and tribunals. The petitioner used this route to challenge the penalty order directly before the High Court.

Q7: Can the petitioner approach the High Court again if they’re unhappy with the Appellate Authority’s decision?

Yes, generally speaking, if the Appellate Authority’s decision is unsatisfactory, the petitioner can explore further legal remedies available under the Punjab GST law or approach the High Court again — but that’s a separate matter not covered in this judgment.

1. This order shall dispose of CWP Nos. 29005 of 2017, 2594 and 7861 of 2018, as according to the learned counsel for the parties, the issue involved in these petitions is identical. However, the facts are being extracted from CWP No.29005 of 2017.

2. Prayer in this writ petition under Articles 226/227 of the

Constitution of India, is for quashing of penalty order dated 04.10.2017

(Annexure P-8), passed by respondent No.2.

3. The petitioner is engaged in fabrication and trading of

different iron and steel products. The petitioner is aggrieved by the

order of penalty dated 04.10.2017 (Annexure P-8) passed by State Tax

Officer-respondent No.2.

4. The primary grievance of the petitioner in the writ petition

is to the penalty order dated 04.10.2017 (Annexure P-8) passed by the

State Tax Officer-respondent No.2 imposing penalty equal to 200% of

the tax. On 19.12.2017, it was recorded that according to the learned

counsel for the petitioner though the penalty order dated 04.10.2017

(Annexure P-8) passed by respondent No.2 was an appealable order,

however, since no Appellate Authority had been constituted so far,

therefore, the petition was being filed.

5. Upon notice of motion having been issued, reply on behalf

of the State has been filed. A copy of the notification dated 15.02.2018

has been produced in Court today which is taken on record. According to

the said notification, Additional Commissioner (Appeals) has been

appointed to perform the functions as an Appellate Authority under

Section 107 of the Punjab Goods and Service Tax Act, 2017 and rule

109A of the Punjab Goods and Service Tax Rules, 2017.

6. The said notification reads as thus:-

“In exercise of the power conferred by Section 3 and

Section 4 of the Punjab Goods and Service Tax Act,

2017 (Punjab Act No.5 of 2017) read with rule 109A

of the Punjab Goods and Service Tax Rules, 2017,

and all powers enabling him in this behalf, the

Government of Punjab, is pleased to appoint Smt.

Parneet Shergill, PCS, Additional Excise and

Taxation Commissioner (Administration), Punjab as

Additional Commissioner (Appeals) to perform the

function as an Appellate Authority under Section 107

of the Punjab Goods and Service Tax Act, 2017 and rule 109A of the Punjab Goods and Service Tax Rules, 2017.

M.P. Singh

Financial Commissioner (Taxation) &

Additional Chief Secretary to

Government of Punjab

Department of Excise and Taxation.”

7. In view of the above, we dispose of the writ petitions by

relegating the petitioners to take recourse to the remedy of appeal before

the Appellate Authority, in accordance with law.

8. However, in view of the fact that the proceedings were

pending before this Court, it is clarified that in case the petitioners file

appeals within 30 days from the date of receipt of certified copy of this

order, the same shall not be dismissed on the ground of limitation by the

Appellate Authority.

(AJAY KUMAR MITTAL)

JUDGE

(MANJARI NEHRU KAUL)

JUDGE