GST Tax & Penalty Order Challenged — Court Directs Appeal Route

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Case Name

M/s Arya Sudharma Tradex Pvt. Ltd. vs. State of Punjab & Ors.

Court Name: High Court of Punjab and Haryana at Chandigarh

Case No.: CWP-29501-2018

Date of Decision: 20.02.2019

Key Takeaways

1. GST orders are appealable — The court reinforced that orders passed under GST law are not to be directly challenged in the High Court when a statutory appeal remedy exists.

2. Section 107 of Punjab General Goods and Service Tax Act, 2017 provides the proper channel to challenge such tax and penalty orders.

3. The goods were already released and the tax + penalty had already been deposited by the petitioner before the court gave its order.

4. The Appellate Authority must act expeditiously and give the petitioner a fair hearing — the court specifically directed this.

5. This is a classic example of courts directing parties to exhaust statutory remedies before approaching the High Court.

Issue

Can a company directly approach the High Court under Articles 226 and 227 of the Constitution to challenge a GST tax and penalty order, when a statutory appeal remedy is available under Section 107 of the Punjab General Goods and Service Tax Act, 2017?

In short — No, not without first trying the appeal route provided by the GST law itself.

Facts

• The Petitioner, M/s Arya Sudharma Tradex Pvt. Ltd., is a company that was subjected to a tax and penalty order by the GST authorities.
• On 24.07.2018, an order was passed by Respondent No. 3 (a State Tax Officer), which the petitioner found to be “illegal, arbitrary and against the provisions of PGST Act, 2017.”
• The company then filed a writ petition in the High Court under Articles 226 and 227 of the Constitution of India, asking the court to quash that order.
• After the court issued notice, the State filed a reply. Along with the reply, they attached Annexure R-2 — which turned out to be a slightly different order dated 25.07.2018 (one day later than the one challenged), imposing:
• Tax of ₹75,060/- under the Integrated Goods and Services Tax Act, 2017, and
• Penalty of ₹75,060/- on the petitioner.
• By the time the matter came up in court, the goods had already been released and the petitioner had already deposited the tax and penalty amount.
• The State pointed out that the order was appealable under Section 107 of the Punjab General Goods and Service Tax Act, 2017.

Arguments

Petitioner’s Side (M/s Arya Sudharma Tradex Pvt. Ltd.)

• The order dated 24.07.2018 was challenged as being illegal, arbitrary, and contrary to the provisions of the PGST Act, 2017.
• They approached the High Court directly via a writ petition under Articles 226 and 227 of the Constitution of India, seeking to have the order quashed.

State/Respondents’ Side (State of Punjab & Ors.)

• The State argued that the goods had already been released and the tax and penalty had been deposited.
• More importantly, the State pointed out that the impugned order is appealable under Section 107 of the Punjab General Goods and Service Tax Act, 2017 — meaning the petitioner should have gone to the Appellate Authority first, not the High Court.

Key Legal Precedents

The judgment in this case is quite brief and does not cite any prior case law or judicial precedents. The court’s decision was based purely on the statutory provision available under:

• Section 107 of the Punjab General Goods and Service Tax Act, 2017 — This section provides for an appeal mechanism against orders passed by GST authorities. The court relied on this provision to direct the petitioner to pursue the appeal remedy rather than entertaining the writ petition directly.

• Articles 226 and 227 of the Constitution of India — These were invoked by the petitioner to approach the High Court. However, the court implicitly applied the well-established principle that when an adequate alternative remedy (like a statutory appeal) exists, the High Court should ordinarily not entertain a writ petition.

Judgment

Outcome: Petition Disposed Of — Petitioner Directed to File Appeal

• The High Court did not quash the impugned order.
• Instead, the court disposed of the writ petition by giving the petitioner permission to file an appeal against the order dated 25.07.2018 (Annexure R-2) before the Appellate Authority.
• The court also gave a specific direction that if an appeal is filed, the Appellate Authority must:
• Decide it expeditiously, and
• Give the petitioner a proper opportunity of hearing in accordance with law.
• The judgment was delivered by Hon’ble Mr. Justice Ajay Kumar Mittal and Hon’ble Mrs. Justice Manjari Nehru Kaul on 20.02.2019.

FAQs

Q1: Did the company win or lose this case?

It’s neither a clear win nor a loss. The High Court didn’t rule on the merits of whether the tax/penalty was valid. It simply told the company to use the proper appeal channel — Section 107 of the PGST Act, 2017.

Q2: Why didn’t the High Court just decide the case?

Because Indian courts generally follow the principle of exhaustion of alternative remedies. Since the GST law itself provides an appeal mechanism under Section 107, the High Court felt it was more appropriate for the Appellate Authority to hear the matter first.

Q3: What is Section 107 of the Punjab General Goods and Service Tax Act, 2017?

It’s the provision that allows a person aggrieved by a GST order to file an appeal before a designated Appellate Authority. This is the first step in challenging a GST order — before going to the High Court.

Q4: The petitioner had already paid the tax and penalty — can they get a refund?

That would depend on the outcome of the appeal before the Appellate Authority. If the appeal succeeds, the petitioner may be entitled to a refund. The High Court’s order doesn’t address this directly.

Q5: What was the total amount of tax and penalty imposed?

The tax imposed was ₹75,060/- under the Integrated Goods and Services Tax Act, 2017, and an equal amount of ₹75,060/- was imposed as penalty — totalling ₹1,50,120/-.

Q6: Is the Appellate Authority bound by the High Court’s direction?

Yes! The High Court specifically directed that the appeal, if filed, must be decided expeditiously and after giving the petitioner a fair hearing. This gives the petitioner some assurance of a timely and fair process.

Q7: What’s the difference between the order dated 24.07.2018 and 25.07.2018?

The petitioner originally challenged the order dated 24.07.2018. However, the State filed an order dated 25.07.2018 (Annexure R-2) as part of their reply, which is the one that actually imposed the tax and penalty. The court directed the appeal to be filed against the 25.07.2018 order.

1. The present writ petition has been filed under Articles 226 and

227 of the Constitution of India for issuance of writ of Certiorari for

quashing the order dated 24.07.2018 (Annexure P-8) passed by respondent

No.3 claiming to be illegal, arbitrary and against the provisions of PGST

Act, 2017.

2. Upon notice, reply has been filed by way of affidavit of

Sh. Bhupinder Pal Singh Bhatia, State Tax Officer-cum-Excise and

Taxation Officer on behalf of respondents No.1 to 3. Along with the written

statement Annexure R-2 has been appended, which is an order passed on

25.07.2018 imposing tax of ` 75,060/- under Integrated Goods and Services

Tax Act, 2017 and an amount of ` 75,060/- as penalty upon the petitioner.

3. It was stated by learned counsel for the State that the goods

have been released and the amount of tax and penalty has been deposited by the petitioner. It was further stated that the impugned order is appealable

under Section 107 of Punjab General Goods and Service Tax Act, 2017.

4. After hearing learned counsel for the parties, we dispose of the

present petition by permitting the petitioner to file an appeal assailing the order dated 25.07.2018 (Annexure R-2) before the Appellate Authority. It

is however, clarified that in case any appeal is filed by the petitioner, the same shall be decided by the Appellate Authority expeditiously after

affording an opportunity of hearing to the petitioner in accordance with law.

(AJAY KUMAR MITTAL)

JUDGE

(MANJARI NEHRU KAUL)

JUDGE