M/s Comfort Battery vs Additional Commissioner Central Goods and Services Tax

GST update /2026-27/0023

GST UPDATE
Hon’ble Court: High Court of Judicature at Allahabad
Case Title: M/s Comfort Battery vs Additional Commissioner Central Goods and Services Tax
Petition No.: Writ Tax No. 2097 of 2026
Date of Decision: 22.04.2026
Outcome: Adjudication Order Set Aside – Penalty demand cannot be confirmed when penalty amount was not specified in statutory Form GST DRC-01.

Brief Facts of the Case
The petitioner, M/s Comfort Battery, was issued a Show Cause Notice dated 24.06.2025 under Section 74 of the CGST/UPGST Act alleging wrongful availment of Input Tax Credit (ITC) for the financial years 2018-19 to 2022-23. Along with the notice, Form GST DRC-01 was issued. However, in the statutory column meant for specification of penalty proposed to be imposed, the amount mentioned was “0”. Subsequently, the adjudicating authority passed order dated 15.12.2025 confirming tax demand along with penalty amounting to ?4,36,18,072/-. Aggrieved by the confirmation of penalty despite absence of any penalty proposal in Form GST DRC-01, the petitioner approached the Allahabad High Court challenging both the SCN and adjudication order.

Relevant Section / Rule / Notification
·       Section 74(1) of the CGST Act, 2017
·       Section 74(5) of the CGST Act, 2017
·       Section 74(8) of the CGST Act, 2017
·       Section 75(7) of the CGST Act, 2017
·       Rule 142 of the CGST Act Rules, 2017

Question before Hon’ble High Court
• Whether penalty can be confirmed where no penalty amount was specified in statutory form DRC-01?
• Whether disclosure of penalty only in annexure to the Show Cause Notice is sufficient compliance with Rule 142 and Form GST DRC-01 requirements?

Brief Arguments by Petitioner
· The petitioner contended that the statutory Form GST DRC-01 specifically mentioned “0” in the penalty column and therefore no penalty proceedings could legally survive.
· It was argued that the adjudication order travelled beyond the Show Cause Notice by confirming penalty not properly proposed in the statutory notice.
· The petitioner submitted that the mandatory disclosure required in Form GST DRC-01 cannot be substituted or cured through statements made in an annexure to the notice.

Brief Arguments by Respondent
The Revenue contended that although Form GST DRC-01 mentioned “0” penalty, the detailed Show Cause Notice specifically proposed penalty equivalent to the ITC demand under Clause 16(iii).
Accordingly, the assessee had complete knowledge of the proposed penalty and no prejudice was caused.

Findings and Judgment
· The High Court observed that Rule 142 mandates issuance of summary of demand in statutory Form GST DRC-01 specifying details of tax, interest, penalty and other dues.
· The Court held that revenue authorities cannot rely solely upon disclosures made in annexures to the statutory form when the statutory form itself does not specify the proposed penalty. Therefore, it was held that to the extent the statutory rules prescribe form DRC-01 for full disclosure of the proposed demand of tax, penalty etc. that disclosure must be made therein, before the demand may be confirmed.
· The Court emphasized that under Section 74(8), the assessee has a valuable right to settle proceedings by paying tax, interest and reduced penalty within prescribed time. Such right can be effectively exercised only when exact penalty amount is clearly disclosed in DRC-01.
· Since the penalty amount was shown as “0” in DRC-01, the Court held that a procedural defect had inched into the proceedings and therefore the penalty demand could not be sustained.
· The adjudication order dated 15.12.2025 was set aside with liberty to the department to issue a corrected notice specifying exact tax, interest and penalty demands.

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GST update /2026-27/0023

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