Kappa Chakka Kandhari Foods Private Limited Vs Commissioner of GST and Central Excise (Madras High Court)
Summary: Madras High Court set aside the appellate order dated 17.07.2026 which had rejected the petitioner’s GST appeal solely for failure to pre-deposit 10% of the penalty. The petitioner contended that the underlying detailed order dated 18.12.2025 imposed liability towards tax, interest and penalty and also recorded payment of tax and interest. Therefore, according to the petitioner, the proviso to Section 107(6) of the CGST Act, 2017 was not attracted.
The detailed adjudication order dropped demand of Rs.51,88,983/- out of the total demand of Rs.2,17,22,663/- for 2018-19. It confirmed and appropriated tax of Rs.1,65,33,680/- under Section 74(9) of the CGST/TNGST Act, 2017, comprising Rs.28,74,872/- for 2018-19, Rs.49,57,592/- for 2019-20 and Rs.87,01,216/- for 2020-21. It also confirmed and appropriated interest of Rs.25,19,134/- under Section 50(1) and imposed penalty of Rs.1,65,33,680/- under Section 74(9) read with Section 122(2)(b).
The High Court observed that the detailed order confirmed liability towards tax, interest and penalty and recorded that the tax and interest had been paid. Since only the penalty remained unpaid, Form DRC-07 was issued only in respect of the penalty. The Court described the detailed order as akin to a judgment of a civil Court and Form DRC-07 as akin to a decree. It then examined the proviso to Section 107(6), which applies where an order demands penalty without involving any demand of tax and requires payment of 10% of such penalty before an appeal can be filed.
The Court held that the proviso applies only to an order demanding penalty without involving any demand of tax. In the present case, the underlying order confirmed demand towards tax, interest and penalty. Consequently, the proviso to Section 107(6) was inapplicable. Since the petitioner’s appeal had been rejected solely on that ground, the appellate order was held unsustainable and set aside. The appeal was restored for adjudication on merits. The writ petition was disposed of without costs and the connected miscellaneous petition was closed.
FULL TEXT OF THE ORDER OF MADRAS HIGH COURT
Challenging the appellate order dated 17.07.2026 rejecting the petitioner’s appeal solely on the ground that the petitioner had not pre-deposited 10% of the penalty, the present writ petition has been filed.
2. Referring to detailed order dated 18.12.2025, learned counsel for the petitioner points out that said order imposes liability towards tax, interest and penalty. He submits further that the order records the payment of both tax and interest. Consequently, he contends that the proviso to sub-section (6) of Section 107 is not attracted.
3. Mr.A.P.Srinivas, learned senior standing counsel, accepts notice for the respondent.
4. The detailed order records, in the operative paragraph, as under:
“i. I drop the demand of Rs.51,88,983/- (Rupees Fifty-one lakh Eighty-eight thousand Nine hundred Eighty-three only) out of the total demand of Rs.2,17,22,663/- raised in SCN No.08/2025-26 ADC(HPU) dated 07.05.2025 for the year 2018-19.
ii. I confirm and appropriate the demand of Rs.1,65,33,680/- (Rupees One Crore Sixty Five Lakh Thirty Three Thousand Six Hundred and Eighty only) (Rs.28,74,872 paid for the period 2018-19, Rs.49,57,592/- paid for the period 2019-20 and Rs.87,01,216/- paid for the period 2020-21) under Section 74(9) of CGST/TNGST Act,2017.
iii. I confirm and appropriate the payment of interest amounting to Rs.25,19,134/- (Rupees Twenty Five Lakh Nineteen Thousand One Hundred and Thirty Four only) (Rs.6,31,884/- paid for the period 2018-19, Rs.11,99,614/- paid for the period 2019-20, Rs.6,87,636/- paid for the period 2020-21) under Section 50(1) of CGST/TNGST Act, 2017 as detailed above.
iv. I impose penalty of Rs.1,65,33,680/- (CGST Rs.82,66,840/- SGST Rs.82,66,840/-) [Rupees One Crore Sixty five Lakhs Thirty three thousand Six hundred & Eighty only] in terms of Section 74(9) of CGST/TNGST Act, 2017 r/w Section 122(2)(b) of CGST/TNGST Act, 2017.”
5. As can be seen from the above extract, the detailed order confirms liability towards tax, interest and penalty. It also records that tax and interest were paid. Said detailed order is akin to a judgment of a civil Court. Because only the penalty portion remained unpaid, an order in Form DRC 07 was issued only in respect of penalty. This is akin to a decree.
6. The proviso to sub-section (6) of Section 107 reads as under:
“Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten percent of the said penalty has been paid by the appellant.”
7. As can be seen from the text of the proviso, said proviso is attracted to cases wherein an order demanding penalty is made without involving any demand of tax. In this case, the order confirmed the demand towards tax, interest and penalty. Hence, the proviso to sub-section (6) of Section 107 is inapplicable to this case. Because the petitioner’s appeal was rejected solely on this ground, the appellate order is unsustainable and is hereby set aside. As a consequence, the appeal is restored for adjudication on merits.
8. This writ petition is disposed of on the above terms. There shall be no order as to costs. Consequently, the connected writ miscellaneous petition is closed.
