The Madras High Court has stayed a GST penalty order after observing that the tax authorities had, at least prima facie, wrongly invoked Section 73(11) of the Central Goods and Services Tax (CGST) Act.
The bench of Justice Senthilkumar Ramamoorthy noted that Section 73(11) can be invoked only in cases involving non-payment of self-assessed tax, and not in every penalty proceeding.
The petitioner approached the High Court challenging an order imposing a penalty under the GST regime. During the hearing, the petitioner’s counsel argued that while the show cause notice proposed imposition of penalty under Section 122(1)(xvii) of the CGST Act, the final order imposed penalty by referring to Section 73, resulting in an apparent legal inconsistency.
Buy Now: 130 GST Judgments – E-Magazine July 2026
According to the petitioner, the proceedings initiated under one statutory provision could not culminate in a penalty founded upon another provision without satisfying the statutory requirements applicable to that provision.
After examining both the show cause notice and the impugned penalty order, the High Court observed that both Section 122(1)(xvii) and Section 73(11) had been referred to during the proceedings. The Court held that such invocation raised a serious legal issue requiring consideration.
The court observed that Section 73(11) cannot be invoked unless the case relates to non-payment of self-assessed tax. Since the materials before the Court did not indicate that the dispute fell within that category, the Court held that the petitioner had established a prima facie case warranting interim protection.
Considering the apparent statutory inconsistency, the High Court granted an interim stay of the impugned penalty order as well as all consequential proceedings arising from it. The stay will remain in force until the next hearing of the writ petition.
The Court directed that the matter be listed for further hearing on 3 September 2026, when the respondents are expected to present their defence regarding the legality of the penalty proceedings.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
