Penalty Follows When Undisputed Tax Is Paid Late; Two-Year Delay Bars Writ: Allahabad High Court

The Allahabad High Court dismissed a building-material trader’s challenge to a Section 74 penalty, holding that tax paid only at the appellate stage, with the amount undisputed, still attracts penalty and interest.

The Allahabad High Court has held that once the quantum of tax is not disputed, its non-payment within time exposes the taxpayer to penalty and interest, and that payment at the appellate stage does not remove the penalty. [Kushwaha Etta and Building Material Suppliar v. State of U.P. & Ors., 2026-juristway.com-3157-HC(Allahabad)-GST]

Justice Vikas Budhwar dismissed the writ petition after counter and rejoinder affidavits had been exchanged.

The petitioner, a building-material trader, had executed works for Nagar Panchayat Kabrai. After a DRC‑01 notice dated 14 Jul 2022, an ex parte order under Section 74(9) was passed on 2 Sep 2022, followed by a further order dated 7 Nov 2022 imposing a penalty of ₹1,44,207. The appeal was rejected on 9 Dec 2024. The memo of appeal showed tax of ₹12,01,725 deposited, with the delay blamed on the munim or accountant.

The petitioner argued that there was no fraud or intent, so Section 74(9) could not apply, and sought an opportunity to show this before the original authority. The State argued that belated payment of undisputed tax amounted to evasion, so penalty followed.

The Court held that, as the petitioner did not dispute the quantum and had paid the tax, the penalty component would also follow. It added that the writ petition was filed on 5 Sep 2026, about two years after the appellate order, showing that the petitioner had not been diligent about its rights. Finding no ground to interfere, it dismissed the petition.

2026-juristway.com-3157-HC(Allahabad)-GST