The Supreme Court has held that the 100% Goods Service Tax (GST) penalty cannot be imposed without proving fraud and directed the high court to rehear the case.
The bench of Justice B.V. Nagarathna and Justice K.V. Viswanathan has set aside the order of the Andhra Pradesh High Court dismissing a review application filed by M/s Godway Funicrafts. The apex court directed the High Court to reconsider the company’s grievance regarding a 100% penalty levied under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017.
The petitioner/assessee, M/s Godway Funicrafts had initially approached the Andhra Pradesh High Court through a writ petition challenging an order that imposed a steep 100% penalty. The company contended that such a penalty was unjustified since the department had not proved any fraud or wilful concealment, which is a mandatory prerequisite under Section 74 of the CGST Act and its corresponding State provisions.
While the writ petition was dismissed by the High Court in November 2020, a review application was subsequently filed, emphasizing the contention that fraud had not been established. However, the High Court again dismissed the review application in May 2022, noting that the issue was not argued during the original writ proceedings.
The court held that that although the argument on the penalty may not have been expressly pressed during the writ hearing, it was raised in the memorandum of the writ petition and again in the review application.
The Court held that, “In the facts and circumstances of this case, the appellant was entitled to raise the contention regarding the imposition of 100% penalty in the review application… The High Court has to consider the same on merits.”
Accordingly, the Supreme Court restored the review application to the High Court’s file, allowing M/s Godway Funicrafts to fully argue its position regarding both the penalty and the interest imposed.
The Supreme Court directed the High Court to hear the review plea afresh. To allow the appellant to raise all relevant arguments, including the absence of fraud or wilful concealment. To consider the legality of the penalty imposition and any accrued interest thereon. To decide the review application on its merits in accordance with law.
The Court also clarified that if M/s Godway Funicrafts is unsuccessful in the High Court, it may approach the Supreme Court again, but only on the issue of penalty.
Case Details
Case Title: M/S Godway Funicrafts Versus The State Of Andhra Pradesh & Ors
Case No.: Special Leave To Appeal (C) No(S).16833- 16834/2023
Date: JULY 15, 2025
