Penalty imposed on an employee in disciplinary proceeding would not attract GST
Facts of the case
The petitioner challenges order dated 18.05.2020 imposing penalty on account of certain shortages of stocks amounting to Rs.7,95,770/- found in shop No.7215 at Semmanatham, Yercaud, Salem District, maintained by the petitioner. Although the petitioner has objected to the finding of shortfalls in and of itself, it is true that the sum of Rs. 7,95,770 has been transferred
The imposition of the penalty is in accordance with Clause 7(xiv) of the Code of Prevention and Detection of Fradulent Acts in TASMAC 2014, which provides for the imposition of a penalty at 50% of the amount of duty/tax quantified, according to Mr. Satheeskumar, learned Standing Counsel, after the petitioner paid the amount as early as on April 13, 2020.
The Officer also assesses a 4% interest charge and an 18% Goods and Service Tax (GST) charge. Mr. Satheesh, the respondents’ learned counsel would fairly concede that the impugned ruling was made without issuing a show-cause notice. He would also claim that this Court has consistently overturned prior orders of a same nature on the grounds of a violation of natural justice principles.
Observation of court
The issue before the Ld. Judge was whether the penalty imposed in a disciplinary proceeding in a service matter is liable for GST treating the same as Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. The Ld. Judge held that the penalty imposed was in employee disciplinary proceedings, which would not attract GST. , learned counsel for the petitioner relies on the decision of the Madurai Bench of this Court in W.P. No.10355 2020 order dated 18.12.2020 and R.Sivashanmugam Vs. The Managing Director and Others in W.P.No12657 of 2020 and batch, order dated 22.02.2021 wherein the levy of GST in identical circumstances has been set aside. The reasoning appears to be that the provisions of Section 7(1)(d) of the GST Act, 2017 which imposes GST on activities to be treated as supply of goods or supply of services as referred to in Schedule II, stands omitted with effect from 01.07.2017. Thus, post 01.07.2017, there can be no levy of GST on the amount of penalty.
Conclusion
The Court held that since the said interim order was subsequently obtained, it cannot apply to the facts of the present case and that the order of the Ld. Judge holds good as on 5 January, 2021, which warrants no interference
K.Selvamani Vs The Managing Director, Tamil Nadu State Marketing Corporation Ltd.
In the High Court of Judicature at Madras
W.P. No.9432 of 2020
K.Selvamani-Vs-The-Managing-Director-Tamil-Nadu-State-Marketing-Corporation-Ltd.
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