Facts of the case:

In this case, the petitioner was subjected to audit for the period July 2017 to 2020. During audit, it was found that common input tax credit (ITC) was availed for both taxable and exempt supplies, attracting reversal under Section 17(2) of the GST Act. The petitioner accepted the audit findings and reversed ITC amounting to ₹62.46 lakhs through DRC-03 in September 2023. However, interest liability was not discharged.

Subsequently, a show cause notice was issued on 27.09.2023, followed by an Order-in-Original dated 28.12.2023 confirming interest demand of ₹48.25 lakhs under Section 50(1). The petitioner claimed that the order was neither served nor uploaded on the portal, and believed that proceedings had concluded upon payment of tax.

Pursuant to the introduction of Section 128A of the CGST Act (w.e.f. 01.11.2024), providing waiver of interest/penalty for specified periods, the petitioner filed an application in Form GST SPL-02 on 18.07.2025. The department rejected the application via Form GST SPL-07 dated 03.11.2025, solely on the ground that it was filed beyond the prescribed period (i.e., beyond three months from 31.03.2025 as notified). Aggrieved, the petitioner approached the High Court.

Issue:

Whether the benefit of waiver under Section 128A of the CGST Act can be denied merely on the ground that the application was filed beyond the prescribed time limit, particularly when the statutory provision uses enabling language.

Held That:

The Court held that the rejection of the waiver application solely on the ground of limitation was legally unsustainable. It observed that the relevant provision governing filing of waiver application uses the expression “may”, which indicates that the timeline is directory and enabling, not mandatory.

The Court found that the department erred in treating the time limit as rigid and absolute, thereby defeating the beneficial intent of Section 128A, which was introduced to grant relief to taxpayers for past periods. Accordingly, the impugned rejection order (Form GST SPL-07) was quashed, and a direction was issued to the authority to consider the waiver application on merits in accordance with law.

Case Name: M/s. Sri Laxmi Borewell Agencies Versus Assistant Commissioner of Central Tax, Hosapete, Assistant Commissioner of Central Tax, Hubballi dated 17.04.2026

To read the complete judgement 2026 Taxo.online 1124