The Goods and Services Tax Appellate Tribunal (GSTAT) Kolkata Bench, has held that belated payment of outstanding GST does not absolve a taxpayer of interest and penalty where the tax, along with interest, was not paid within 30 days of issuance of the show cause notice.

The Bench of S.G. Chattopadhyay (Judicial Member) and Anindya Mitra (Technical Member) have upheld the first appellate authority’s order confirming the disputed liability.

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The dispute concerned short payment of GST for the financial year 2018–19. Proceedings were initiated under Section 73 of the Central Goods and Services Tax Act, 2017, and the adjudicating authority confirmed the demand through an order dated February 27, 2024.

The taxpayer challenged that decision before the first appellate authority. However, by an order dated April 30, 2025, the authority upheld the demand of ₹29,246 each under CGST and SGST, aggregating to ₹58,492, together with applicable interest and penalty.

Appearing for the taxpayer, Advocate Priyanka Singh submitted that the outstanding tax had already been paid through the appropriate return.

The  taxpayer argued that the penalty was arbitrary and illegal because a failure to pay tax within the prescribed time did not, by itself, justify penal consequences. According to the taxpayer, penalty could not be imposed without establishing that it had acted in conscious disregard of its statutory obligations.

In support of this argument, the taxpayer relied on the Supreme Court’s decision in Hindustan Steel Ltd. v. State of Odisha, reported in AIR 1970 SC 253.

The taxpayer referred to the Supreme Court’s observations that penalty for breach of a statutory obligation should not ordinarily be imposed merely because the law permits it. The cited decision also addressed the relevance of deliberate defiance, dishonest or contumacious conduct, and breaches arising from a bona fide belief.

The department acknowledged that the taxpayer had paid the outstanding tax. The liabilities towards interest and penalty continued. The department maintained that these were statutory liabilities that could not be dispensed with merely because the principal tax amount had subsequently been paid.

The Tribunal examined the taxpayer’s reliance on Hindustan Steel and found that the factual setting of that decision was distinguishable.

It noted that the Supreme Court case involved proceedings under the Orissa Sales Tax Act, including a penalty for failure to register as a dealer. The observations relied upon by the taxpayer arose while considering whether that registration-related penalty was justified.

In the present dispute, the Tribunal observed, the taxpayer’s liability arose from an admitted short payment of GST. Both the adjudicating authority and the first appellate authority had upheld that liability.

The Bench held that the taxpayer could not avoid its strict statutory liabilities under the CGST and SGST enactments by relying on the cited judgment.

The Tribunal accepted that the taxpayer had eventually made good the short payment. However, it held that interest remained payable because the tax had been paid belatedly.

On penalty, the Bench specifically noted that the taxpayer had failed to pay the tax together with interest within 30 days of issuance of the show cause notice.

In those circumstances, the Tribunal found no error in imposing penalty under Section 73(9) of the CGST Act and the corresponding provisions of the SGST Act.

The decision therefore turned on both the admitted delay in paying the tax and the failure to discharge tax and interest within the period identified by the Tribunal. Subsequent payment of the principal tax amount did not, on the facts of this case, extinguish the remaining liabilities.

Finding no reason to interfere with the first appellate authority’s order, the Tribunal dismissed and disposed of the appeal. The interest and penalty upheld by the appellate authority consequently remained undisturbed.

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