The Allahabad High Court has quashed a Goods and Services Tax (GST) show cause notice and consequential penalty order imposing an aggregate penalty of ₹50,000, after noting that the taxpayer had already filed the required return and paid the applicable late fee and that the penalty imposed exceeded the maximum limit prescribed under the Uttar Pradesh Goods and Services Tax Act, 2017.

The Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary has observed that  the “impugned penalty order dated 03.02.2025 is for a sum of Rs.50,000/- which exceeds the maximum limit provided under the U.P. G.S.T. Act, 2017.

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The writ petition was filed under Article 226 of the Constitution of India challenging proceedings initiated under Section 125 of the Central Goods and Services Tax Act, 2017 and the Uttar Pradesh Goods and Services Tax Act, 2017.

The dispute arose from a show cause notice dated January 1, 2025 issued in Form GST DRC-01 under Section 125 of the CGST Act and the UPGST Act.

The proceedings culminated in an order dated February 3, 2025 in Form GST DRC-07. Through the order, the tax authorities imposed a penalty of ₹25,000 under the CGST Act and another ₹25,000 under the UPGST Act, aggregating to ₹50,000.

The taxpayer approached the High Court seeking a writ of certiorari for quashing both the penalty order and the underlying show cause notice.

The petitioner also sought a direction restraining the authorities from giving effect to or enforcing the impugned show cause notice and consequential proceedings.

While examining the challenge, the High Court specifically recorded that the petitioner had already filed the return and had also paid the late fee in accordance with law.

This circumstance assumed significance because the authorities had nevertheless proceeded with the impugned penalty proceedings under Section 125.

The Court observed, “it is to be noted that the petitioner has already filed his return and has paid the late fees in accordance with law.”

The High Court further examined the quantum of penalty imposed by the authorities. The penalty order required payment of ₹50,000 in aggregate.

The Bench found that the amount exceeded the maximum limit provided under the UPGST Act, 2017.

The central issue before the High Court was therefore the sustainability of the penalty proceedings when the return had already been filed with payment of the prescribed late fee and, importantly, the penalty imposed exceeded the statutory maximum.

Following this finding, the Division Bench did not merely interfere with the final penalty order. It also quashed the show cause notice from which the penalty proceedings had originated.

The High Court held, “In light of the same, impugned show cause notice and the impugned penalty order both are quashed and set aside.”

Accordingly, both the January 1, 2025 show cause notice in Form GST DRC-01 and the February 3, 2025 penalty order in Form GST DRC-07 were quashed and set aside. The writ petition was consequently disposed of.

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