Tripura High Court Orders Refund of Penalty Collected Under Duress

Court rules penalty collection without statutory compliance violates constitutional rights; directs refund with interest.

In a significant ruling, the Tripura High Court has ordered the Union of India to refund a penalty amount collected from M/S R. G. Group, citing a violation of constitutional rights and statutory provisions under the Central Goods and Services Tax Act, 2017. The court found that the penalty was imposed and collected under economic duress without following the mandatory procedures outlined in Section 129(3) of the Act. This decision underscores the importance of adhering to statutory mandates and upholding constitutional guarantees.

The case arose when the petitioner, M/S R. G. Group, was transporting electrical goods which were detained by the authorities due to expired E-Way Bills and a mismatch with the vehicle. Despite a verification report indicating no discrepancies in the goods, the authorities proceeded to issue a detention order and subsequently a show-cause notice proposing a penalty of Rs.4,96,850/-. The petitioner paid the penalty under duress to secure the release of the detained goods and vehicle, a move that the court emphasized was not a voluntary acceptance of liability.

The High Court, presided over by Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha, was critical of the respondents for failing to pass the mandatory order justifying the penalty under Section 129(3). The court noted that the absence of such an order rendered the penalty collection unlawful and contrary to Articles 14, 19(1)(g), 265, and 300A of the Constitution, which protect against arbitrary taxation and ensure the right to property and freedom to carry on trade.

In its judgment, the court directed the respondents to refund the penalty amount with 9% interest per annum from the date of payment until the date of refund. Additionally, the court imposed costs of Rs.25,000 on the respondents for failing to comply with statutory provisions and recommended disciplinary action against the officer responsible for the oversight.

This ruling serves as a reminder of the judiciary's role in safeguarding citizens' rights against administrative actions that contravene statutory and constitutional provisions. The case highlights the need for authorities to ensure compliance with legal mandates to avoid infringing on individual rights and incurring legal penalties.

Bottom Line:

GST Laws - Payment of penalty under economic duress for securing release of goods cannot be treated as voluntary acceptance of liability - Failure of authorities to pass mandatory order justifying penalty under Section 129(3) of CGST Act violates constitutional rights and renders the penalty collection unlawful.

Statutory provision(s): Central Goods and Services Tax Act, 2017 Section 129(3), Constitution of India, 1950 Articles 14, 19(1)(g), 265, 300A.

M/S R. G. Group v. Union of India, (Tripura)(DB) : Law Finder Doc Id # 2807778