The Himachal Pradesh High Court has set aside a GST order that imposed interest and penalty totaling over Rs. 2.43 crore terming the tax department’s actions as “totally perverse” and “unsustainable in law.”
The Bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja has observed that once the petitioner had deposited the amount ‘under protest’, the same could not have been considered to be an admission of liability because the necessary corollary of deposit under protest is that the amount towards the alleged liability has been deposited without admitting the liability and he has inherent right to challenge the order.
The bench noted that ‘Under protest’ has been defined in Black’s Law Dictionary Tenth Edition, Page 1419 as “3. A formal statement, in writing disputing a debt’s legality or validity but agreeing to make payment while reserving the right to recover the amount at a later time. *The disputed debt is described as ‘under protest’. A taxpayer’s statement to the collecting officer that payment is being made unwillingly because the taxpayer believes the tax to be invalid.
The bench held that the adjudicating authority completely erred and failed to take note that Input Tax Credit to the tune of Rs. 1,11,45,134 could not have been reversed, merely on the basis of the suspicion without carrying out any independent investigation coupled with other evidence. The department was required to conduct an impartial inquiry regarding the amount and could not have based its decision solely on summary of show cause notice in Form DRC-01.
The petitioner, a Nagaland-registered power infrastructure company engaged in executing hydro-electric transmission projects in Himachal Pradesh, was accused of availing Input Tax Credit (ITC) worth ₹1.11 crore based on purchases from three suppliers. Following an audit by the state GST department, Shyama Power was issued a show cause notice, and subsequently, interest of ₹1.32 crore and an equal amount as penalty were levied.
Fearing coercive action and under continuous departmental pressure, the company reversed the ITC “under protest” on March 31, 2023, through DRC-03, while continuing to assert that its claim was legitimate.
The Court quashed the order under Section 74 that levied interest of ₹1.32 crore and penalty of ₹1.11 crore.
The court directed the adjudicating officer to issue a fresh DRC-07, reflecting only the disputed tax amount of ₹1.11 crore, enabling the petitioner to file an appeal. The petitioner is free to raise all legal and factual grounds before the authorities during the appeal process.
Case Details
Case Title: Shyama Power India Ltd. Versus State of H. P. & Ors.
Case No.: CWP No. 6990 of 2025
Date: 19.06.2025
Counsel For Petitioner: Rakesh Sharma and Sakshi Gautam
Counsel For Respondent: Anup Rattan
