BGR Mining & Infra Limited Vs Joint Commissioner (ST) (Telangana High Court)
Summary: The Telangana High Court disposed of the writ petition by granting the petitioner liberty to seek rectification of a GST penalty order under Section 75(8) of the CGST Act, 2017. The penalty of ₹5,54,541 had been imposed by order dated 29.12.2023 for FY 2017-18. The Court noted that the appellate authority, by order dated 04.11.2025, had set aside the tax demand raised through the Order-in-Original dated 19.06.2023, held the petitioner eligible for Input Tax Credit (ITC) of ₹55,35,503, and found that the alleged ineligible ITC of ₹4,955 each under CGST and SGST had not actually been claimed. Although the petitioner’s appeal against the penalty order had been dismissed on the ground of delay and the period for filing a rectification application had expired, the Department submitted that the proper officer would entertain such an application if permitted by the Court. Referring to Section 75(8), which provides that interest and penalty stand modified where the tax determined is modified by the appellate authority, tribunal or court, the High Court directed that if the petitioner files a rectification application within two weeks, the proper officer shall consider it in accordance with law within two weeks thereafter.
Introduction
In BGR Mining & Infra Limited v. Joint Commissioner (ST) & Others, the Telangana High Court considered whether a taxpayer could seek rectification of a penalty order after the tax demand itself had been quashed in appellate proceedings.
The Court observed that although the statutory period for filing a rectification application had expired, the proper officer could still consider the request in view of the statutory mandate contained in Section 75(8) of the CGST Act, which automatically links the quantum of penalty and interest with the amount of tax determined.
Facts of the Case
The petitioner was subjected to:
- A tax demand order dated 06.2023.
- A separate penalty order in Form GST DRC-07 dated 29.12.2023pertaining to Financial Year 2017-18, imposing a penalty of ₹5,54,541.
The petitioner challenged the tax demand before the appellate authority.
By order dated 04.11.2025, the appellate authority:
- Held that the demand relating to excess Input Tax Credit (ITC) was unsustainable.
- Found the petitioner entitled to ITC of ₹55,35,503.
- Held that the alleged ineligible ITC of ₹4,955 each under CGST and SGSThad never been claimed.
- Consequently, set aside the tax demand.
However, despite the tax demand being quashed, the penalty order continued to remain in force, while the appeal against the penalty had been dismissed on the ground of limitation.
Petitioner’s Contentions
The petitioner contended that:
- Once the tax demand had been completely set aside, the penalty based on that demand could no longer survive.
- Since the limitation period for filing a rectification application had already expired, the Court should permit it to approach the proper officer for correction of the penalty order.
Revenue’s Stand
The Department fairly submitted that:
- Although the statutory period of six months for rectification had expired,
- If the High Court considered it appropriate, the proper officer would entertain the rectification application and decide it in accordance with law.
Court’s Observations
The High Court observed that where the appellate authority had already set aside the tax demand, the penalty imposed on the basis of that demand necessarily required correction.
The Court specifically relied upon Section 75(8) of the CGST Act, 2017, which provides that where the amount of tax determined by the proper officer is modified by the appellate authority, appellate tribunal, or court, the amount of interest and penalty shall also stand modified accordingly.
Final Decision
The Telangana High Court:
- Granted liberty to the petitioner to file a rectification application before the proper officer under Section 75(8) of the CGST Act.
- Directed that the application be filed within two weeks.
- Directed the proper officer to decide the application within two weeks thereafter, in accordance with law.
- Disposed of the writ petition without any order as to costs.
Key Takeaways
1. Penalty Cannot Survive Independent of the Tax Demand
Where the underlying tax demand is modified or set aside in appellate proceedings, the corresponding penalty must also be revised.
2. Section 75(8) Provides Automatic Consequential Relief
The decision highlights the importance of Section 75(8), which mandates that modification of tax liability automatically results in modification of the related interest and penalty.
3. Rectification May Be Permitted Even After Expiry of the Normal Time Limit
In appropriate circumstances, particularly where the Revenue itself does not oppose the request, the Court may permit filing of a rectification application despite expiry of the statutory limitation period.
4. Authorities Must Give Effect to Appellate Orders
The judgment reinforces that once an appellate authority alters the tax demand, consequential corrections in penalty and interest should follow to ensure consistency with the appellate decision.
Conclusion
In BGR Mining & Infra Limited v. Joint Commissioner (ST) & Others, the Telangana High Court reaffirmed the principle that penalty cannot continue to operate once the underlying tax demand has been set aside. By invoking Section 75(8) of the CGST Act, 2017, the Court enabled the taxpayer to seek rectification of the penalty order and ensured that the consequential relief flowing from the appellate order would be implemented by the proper officer. The ruling provides valuable guidance on the automatic modification of penalty and interest following appellate relief under the GST regime.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Mr. Mohd. Mukhairuddin, learned counsel appears for the petitioner.
Sri Swaroop Oorilla, learned Special Government Pleader for State Tax, appears for the respondents.
2. By the Order for imposition of penalty and summary of the order in FORM GST DRC-07 dated 29.12.2023 pertaining to the Financial Year 2017-18, the proper officer imposed penalty to the tune of Rs.5,54,541/-. The Order dated 19.06.2023 imposing tax was challenged before the appellate authority, who in turn vide order dated 04.11.2025 held that the demand of tax towards excess Input Tax Credit (ITC) claimed in the order impugned therein is unsustainable in law and on facts and set aside the same. The petitioner was found eligible to the claim of ITC of Rs.55,35,503/-. The alleged ineligible ITC of Rs.4,955/- each under Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) was not actually claimed. Hence, the demand confirmed in the Order-In-Original was held to be unsustainable. However, the summary of the demand in FORM GST APL-04, dated 04.11.2025 reflected the demand raised by the Assessing Authority vide FORM GST DRC-07, dated 19.06.2023. Thereafter the appeal preferred by the petitioner against penalty order was dismissed on grounds of delay. Learned counsel for the petitioner submits that when the tax demand has been dropped, the imposition of penalty could not sustain. The period for filing the rectification application is also over. Therefore, the petitioner seeks liberty to file a rectification application for correction of the demand raised under the penalty order.
3. Learned counsel for the respondent Department submits that though the period of six months for seeking rectification is over, if the Court so deems fit, the proper officer would entertain the rectification application and consider it in accordance with law.
4. Having considered the submissions of the learned counsel for the parties and in the facts and circumstances above, we are of the view that though the appeal has been dismissed on grounds of delay, if the tax demand has been dropped by the appellate authority, the penalty imposed there upon and being shown in the order of penalty dated 29.12.2023 needs to be corrected.
5. Section 75(8) of the CGST Act, 2017 provides that where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified.
6. In such circumstances, the petitioner is granted liberty to approach the proper officer for rectification of the order of penalty in terms of Section 75(8) of the CGST Act, 2017. If such an application is made within a period of two weeks, the proper officer shall consider it in accordance with law within a period of two weeks thereafter.
The Writ Petition is, accordingly, disposed of. There shall be no order as to costs.
Miscellaneous applications pending, if any, shall stand closed.
