In a significant ruling, the Allahabad High Court has directed the New Okhla Industrial Development Authority (NOIDA) to compensate an assessee for a penalty imposed under Section 73 of the Goods and Services Tax Act, 2017, after it was revealed that NOIDA had deposited the tax under the wrong head.
The case involved a petitioner who had rented out his property located in Gautam Budh Nagar (Noida). As per the provisions of the GST Act, the rent received from the property was subject to tax. The petitioner stated that he had paid a one-time lease rent of Rs. 97,18,500/-, along with GST of Rs. 17,49,330/-, directly to NOIDA.
However, the petitioner explained that although he had filed his return under Section 39 of the GST Act, the tax amount he had deposited with NOIDA was not reflecting in his GSTR-3B form. The issue arose because NOIDA had mistakenly deposited the tax under the wrong head, which led to complications in the return filing process.
Despite producing evidence during proceedings under Section 73 to prove that the tax had indeed been paid, the petitioner was still subjected to both tax recovery and penalties. Even the appellate authority failed to take into account the material facts presented, dismissing the petitioner’s appeal without proper consideration.
The petitioner argued that once NOIDA had accepted and received the tax amount, he should not be penalized for their administrative mistake. According to the petitioner, he had fulfilled his tax obligations in good faith, and the failure was on the part of NOIDA for misclassifying the deposited amount.
During the court proceedings, the counsel for NOIDA admitted that the tax amount had been deposited by the petitioner but confirmed that it was done under the wrong accounting head. Furthermore, NOIDA did not inform the petitioner about this mistake, leaving him unaware and unable to correct it.
While examining the counter affidavit filed by NOIDA, Justice Piyush Agrawal found that NOIDA had clearly acknowledged its error in handling the tax deposited by the petitioner. The Court emphasized that the petitioner could not be forced to bear the consequences of an error committed by a government authority.
“Before parting, it will be relevant to notice that the tax amount paid by the petitioner to the NOIDA authorities was accepted, and deposited under the wrong head, hence the petitioner cannot be permitted to suffer to the mistake committed on the part of NOIDA. The petitioner paid the legitimate tax to NOIDA, which was not deposited under the proper head and therefore, on account of that the petitioner has to face not only the proceedings of GST, but also imposition of penalty,” observed the High Court.
The Court further noted that the mistake by NOIDA directly led to the imposition of a penalty of Rs. 19,22,778/- against the petitioner. Considering the facts and circumstances of the case, the High Court relied on the decision of the Supreme Court in Batliboi Environmental Engineers Limited Vs. Hindustan Petroleum Corporation Limited and Another, which dealt with the principles of compensation.
“In such a situation where the tax was indeed paid, and only deposited incorrectly due to fault of NOIDA, the assessee cannot be penalized further. The loss suffered by the petitioner in form of penalty must be made good by NOIDA,” stated Justice Agrawal.
Accordingly, the Allahabad High Court directed NOIDA to compensate the petitioner with Rs. 19,22,778/-, which was the penalty amount levied by the assessing authority.
This judgment reaffirms that taxpayers cannot be penalized for procedural lapses or administrative mistakes committed by statutory authorities, especially when they have already fulfilled their tax obligations.
Accordingly, the writ petition was disposed of.
Case Title: Surender Gupta vs. Appellate Authority State Gst / Additional Commissioner Grade-Ii And 2 Others 2025 [WRIT TAX No. - 1892 of 2024]
