GST amnesty waiver applications cannot be mechanically rejected

GST amnesty waiver applications cannot be mechanically rejected for delays as the timeline is directory, not mandatory.

Issue

Whether the tax authority was legally justified in summarily rejecting the petitioner’s interest and penalty waiver application (Form GST SPL-02) under Section 128A solely on the grounds of a filing delay, when the governing notification utilized the enabling term “may” for the three-month submission window.

Facts

The petitioner is a GST-registered works contractor engaged in bore-well drilling activities.
Following a departmental audit for the tax periods July 2017 to March 2020, a common Input Tax Credit (ITC) reversal was determined, which the petitioner paid using Form GST DRC-03.
The Revenue subsequently issued a Show Cause Notice (SCN) and passed an Order-in-Original (OIO) fastening an interest liability onto the petitioner.
The petitioner contended that the OIO was neither physically served nor uploaded onto the GST portal, and they only discovered its existence later via an email communication.
A statutory amnesty scheme was introduced via Section 128A, with a notification dated October 8, 2024, specifying March 31, 2025, as the deadline for full tax payment to qualify for a waiver of interest and penalties.
The notification stipulated that the waiver application “may” be filed within three months from the notified date; the petitioner filed their application in Form GST SPL-02 on July 18, 2025.
The tax authority summarily issued an order in Form GST SPL-07 rejecting the application solely because it was submitted beyond the three-month window.

Decision

Held, in favour of the assessee (matter remanded): The impugned rejection order in Form GST SPL-07 is quashed, and the authority is directed to consider the waiver application afresh on its merits.
Timeline is Directory: The use of the word “may” in the procedural notification indicates that the timeline is enabling and directory in nature, rather than a rigid, mandatory cutoff.
Strict Rejection Constitutes Legal Error: Treating a procedural timeline as an absolute, non-extendable statute of limitation to deny substantive amnesty benefits constitutes a clear legal error.
Merits Must Be Evaluated: The tax authority must evaluate the petitioner’s waiver application on its actual merits, notwithstanding the fact that it was filed after the initial three-month window.

Key Takeaways

“May” vs. “Shall” in Amnesty Schemes: In beneficial tax amnesty provisions, procedural timelines containing directory language like “may” should be interpreted flexibly to advance the scheme’s objective of relief rather than defeating it through technicalities.
Substance Over Form: When the primary condition of an amnesty scheme—such as the full payment of the core tax demand by the notified date—is satisfied, minor procedural delays in filing the declaration forms should not result in an automatic forfeiture of benefits.
Portal and Service Failures: Technical glitches, non-uploading of orders, and lack of proper service continue to serve as strong equitable foundations for courts to condone secondary procedural delays by taxpayers.

HIGH COURT OF KARNATAKA

Akshaya Borewells

Assistant Commissioner of Central Tax and Central Excise^*

Ms. Jyoti M., J.

WRIT PETITION NO. 102788 OF 2026 (T-RES)

APRIL 17, 2026

Shashank Hegde and Josheph Vargees, Advs. for the Petitioner. Shivaraj S. Balloli and Sourabha A. Mirje, Advs. for the Respondent.

ORDER

1. Sri.Shashank Hegde., counsel for the petitioner and Sri.Sourabha A.Mirje., counsel on behalf of Sri.Shivaraj.S.Balloli., for the respondents have appeared in person.

Sri.Josheph Vargees., counsel for the petitioner has appeared through video conferencing.

2. The petition is filed seeking following reliefs:

“i) Issue of writ of Certiorari quashing the FORM GST SPL-07 dated 03.11.2025 bearing Reference No:ZD291125014481O and referred as Annexure-A1;

(ii) Issue a writ of Mandamus directing the Respondent No.1 to accept the application filed by the petitioner in FORM GST SPL-02 vide Reference No.BEL/GST/000/DIVH/ASC/KST/25/2324 filed on 18.07.2025 and referred as Annexure-F (Colly) and further issue FORM GST SLP-05 in favour of the Petitioner;

(iii) Consequently, issue a writ of Certiorari quashing the show cause notice under section 73 of the Act dated 27.09.2023 vide SCN Sl.No:08/2023-24/HBL(GST Audit) bearing DIN No.20230957TG000000B20C issued by the Respondent No.2 and referred as Annexure-A2.

(iv) Consequently, issue a writ of Certiorari quashing the Summary of show cause notice in Form DRC-01 dated 30.09.2023 vide Reference No: DRC01_201756 issued by the Respondent No.2 and referred as Annexure-A3.

(v) Consequently, issue a writ of Certiorari quashing the Order-in-Original No.BEL / GST / 000 / DIVH / ASC /KST/25-2023-24 bearing DIN No:20231257TC050000E2FB dated 28.12.2023 passed by Respondent No.1 and referred as Annexure-A4.

(vi) Pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.”

3. The short facts are as follows:

The petitioner is engaged in the business of work contract service for the drilling of bore wells. The petitioner is registered with the GST department with GSTIN No.29ANFPK1003K2Z6. The departmental Audit Officers of Hubli Audit Circle, Hubli, conducted an audit on the records of the petitioner for the period from July 2017 to March 2020. It was also observed that the petitioner is making taxable supplies as well as exempted supplies. The aforesaid input/ input services are common and have been used in making taxable supplies as well as exempted supplies. Section 17(2) of the Act restricts Input Tax Credit in cases where a common input tax credit is used for effecting taxable as well as exempted supplies. The revenue arrived at the common Input Tax Credit, liable to be reserved a sum of Rs.41,91,146/-. The petitioner agreed with the audit observations and paid the Input Tax Credit a sum of Rs.41,91,146/- vide DRC-03 DC2906230310949/DI2906230349803 dated 23.06.2023. The second respondent subsequently issued a show cause notice on 27.09.2023. The petitioner, in response to the show cause notice, filed a response on 26.05.2023 vide e-mail, and another reply vide letter in Form DRC-06 dated 20.10.2023.

As the matter stood thus, on 28.12.2023, the first respondent proceeded to pass an Order in Original under Section 73 of the Act. The Order in Original confirmed the demand of interest under Section 50 (1) of the Act and a sum of Rs.30,64,745/-. It is stated that the Order in Original was not received by the petitioner, nor was the same uploaded on the GST portal. In the meanwhile, the GST Council vide its 53^rd meeting recommended the insertion of Section 128A with effect from 01.11.2024 to provide for waiver of interest or penalty or both, relating to demands under Section 73 of the CGST Act pertaining to financial year 2017-18, 2018-19 and 2019-20. Subsequently, based on the recommendations, Rule 164 was inserted in the CGST Rules 2017 with effect from 01.11.2024, vide Notification No.20/2024-Central Tax, dated 08.10.2024, providing for procedure and conditions for closure of proceedings under Section 128A of the CGST Act.

Further, vide Notification No.21/2024-Central tax dated 08.10.2024, 31.03.2025 was notified under sub-section (1) of Section 128A of the CGST Act, as the date on or before which the full payment of tax demanded in the notice/ statement/ order needs to be made by the taxpayer to avail the benefit of waiver of interest or penalty or both. The petitioner was under a bona fide impression that the proceedings were dropped as the petitioner had paid the tax dues. However, an email was sent to the petitioner’s email ID and intimated about the order passed under Section 73 of the Act. The petitioner, on being aware of the existing demand, filed a waiver application in Form GST SPL-02 on 18.07.2025. In response to the waiver application, the first respondent issued Form GST SPL-03 dated 11.09.2025, asking the petitioner to produce relevant documents in Form GST SPL-04 to support the claim as to why the application filed should not be rejected.

Thereafter, the first respondent rejected the application because it was filed late. Under these circumstances, the petitioner is now before this Court on the grounds detailed in the writ petition memorandum.

4. Counsel for the respective parties urged several contentions. Heard the arguments and perused the papers with care.

5. The issue lies within a narrow compass and relates to the rejection of the waiver application. It is undisputed that vide Notification No.21/2024-Central tax dated 08.10.2024, 31.03.2025 was notified under sub-section (1) of Section 128A of the CGST Act, as the date on or before which the full payment of tax demanded in the notice/ statement/ order needs to be made by the taxpayer to avail the benefit of waiver of interest or penalty or both. The notification clarifies that any person who wishes to file an application under sub-rule (1) or sub-rule (2) may do so within a period of three months from the date notified under sub-section (1) of Section 128A.

The notified date was March 31, 2025. The petitioner filed an application for a waiver on July 18, 2025. According to the first respondent, the waiver application should have been filed within three months of the notified date. Consequently, the application was rejected solely because it was belated. This rejection is untenable. The reason is apparent. The provision in question uses the word ‘may,’ which is enabling and directory in nature, rather than the mandatory ‘shall.’ Therefore, the department erred in law by interpreting this discretion as a strict time-bound obligation, rendering the rejection of the application unlawful. Therefore, the first respondent is directed to consider the waiver application filed by the petitioner.

6. For the foregoing reasons, the FORM GST SPL-07 dated 03.11.2025 vide Annexure-A1 is quashed. A Mandamus is ordered directing the first respondent to consider the application filed by the petitioner on 18.07.2025 as referred in Annexure-F in accordance with the law. Till the consideration of the application, the show cause notice dated 27.09.2023 vide Annexure-A2, Summary of show cause notice dated 30.09.2023 vide Annexure-A3 and Order in Original dated 28.12.2023 vide Annexure-A4 are kept in abeyance.

7. With the above observations, the Writ Petition is disposed of.