The Bombay High Court has admitted a writ petition challenging the validity of Circular No. 238/32/2024-GST dated October 15, 2024, which clarifies the scope of relief available under Section 128A of the Central Goods and Services Tax (CGST) Act, 2017. 

The Bench of Justice Suman Shyam and Justice Advait M. Sethna has issued notice to the respondents, observing that the challenge to the Circular merits judicial examination despite the availability of an alternative statutory appellate remedy.

The petitioner/assessee has questioned the legality of the CBIC Circular to the extent it excludes the benefit of Section 128A in cases involving recoveries initiated under Section 75(12) of the CGST Act.

The writ petition specifically challenges the Circular insofar as it denies waiver benefits in the following categories of cases: Firstly, Recovery proceedings arising from short payment of tax reflected in GSTR-3B when compared with GSTR-1; and secondly, interest payable on delayed payment of tax that was otherwise correctly declared in GSTR-3B.

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According to the petitioner, these exclusions are inconsistent with the statutory framework of Section 128A and unlawfully curtail the relief granted by the legislature.

The petition also challenges various GST notices and orders issued against the petitioner, which would ordinarily be appealable under the GST law. The High Court acknowledged that, as a general rule, such disputes should be pursued through the statutory appellate mechanism.

However, the Bench made it clear that the present case stands on a different footing because it directly assails the constitutional validity and legality of the departmental Circular.

The Court observed that since the validity of the Circular itself has been questioned, the matter deserves consideration on merits and cannot be rejected solely on the ground of availability of an alternate remedy. Accordingly, the Court admitted the petition and issued notice to the respondents. 

The Court directed that the matter be listed on August 24, 2026, and granted liberty to the petitioner to mention the matter before the Court if any recovery proceedings are initiated during the pendency of the writ petition. The Court also directed issuance of notice to the remaining respondents, while counsel for certain respondents waived formal service. 

Section 128A was introduced to provide taxpayers with relief from interest and penalty in specified GST disputes upon payment of the underlying tax. The impugned Circular, however, interprets the provision narrowly by excluding certain recoveries made under Section 75(12), thereby limiting the availability of the statutory benefit.

The writ petition raises a broader legal issue of whether an executive circular can impose restrictions that are not expressly contemplated by the statute itself. The High Court’s eventual decision is expected to clarify: Whether the CBIC Circular exceeds the scope of Section 128A; Whether taxpayers facing recovery under Section 75(12) can claim waiver under Section 128A; and the extent to which administrative circulars can restrict statutory concessions granted under the GST law.

Given the widespread reliance on Section 128A by taxpayers seeking settlement of legacy GST disputes, the outcome of the litigation is likely to have substantial implications for GST administration and future interpretation of beneficial provisions under the CGST Act.

According to the interim order, the Court found sufficient grounds to examine the challenge on merits and has formally issued notice to the respondents. 

Circular No. 238/32/2024-GST dated October 15, 2024

Circular No. 238/32/2024-GST was issued by the Central Board of Indirect Taxes and Customs (CBIC) to clarify the implementation of Section 128A of the CGST Act, which provides a one-time waiver of interest, penalty, or both in respect of tax demands raised under Section 73 for the financial years 2017-18, 2018-19, and 2019-20, subject to payment of the entire tax amount within the prescribed timeline. The Circular also lays down the procedural framework for filing applications, making tax payments, processing claims, and disposal of applications through newly prescribed GST forms. 

The Circular clarifies that taxpayers can avail the benefit in cases where notices or orders under Section 73 are pending at different stages of adjudication or appeal, provided the entire tax demanded is paid and any pending appeal or writ petition is withdrawn before seeking relief. It also prescribes separate application forms (GST SPL-01 and GST SPL-02), timelines for payment, and the role of proper officers in granting or rejecting waiver applications. 

Importantly, the Circular answers several practical issues relating to the scope of Section 128A. It permits waiver even where tax had already been paid before Section 128A came into force, extends the benefit to IGST and Compensation Cess demands, covers transition credit disputes under Section 73, and clarifies that payment can generally be made through input tax credit, except in specified situations such as reverse charge liabilities and erroneous refunds. However, it excludes late fee, redemption fine, and customs-related import IGST demands from the waiver scheme. 

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