Procedure in case of departmental appeal against interest/penalty related to Section 128A

Procedure to be followed in department appeal filed against interest and/or penalty only, related to Section 128A of the CGST Act, 2017

CBIC has issued Instruction No. 02/2025-GST dated 07.02.2025 specifying procedure  to  be  followed  in  department  appeal  filed  against  interest and/or penalty only, related to Section 128A of the CGST Act, 2017.

Section 128A of the Central Goods and Service Tax Act, 2017(‘the CGST Act’) read with Rule 164 of the Central Goods and Service Tax Rules, 2017 (‘the CGST Rules’) provides waiver of interest or penalty or both, relating to demands under section 73 of the CGST Act pertaining  to  Financial  Years  2017-18,  2018-19  and  2019-20, subject to certain  conditions. CBIC, vide Circular No. 238/32/2024-GST dated 15^th October, 2024, had already clarified various doubts related to section 128A.

However, it is stated that queries were received by CBIC from  various  field  formations  seeking clarification as to whether the benefit of section 128A be extended to taxpayers  in  cases  where  the  tax  amount  has  been  paid  but  the  department  has  gone  in Appeal on  the  basis  of wrong  arithmetic  calculation  of  interest, or where penalty  is  either not imposed or imposed less than the prescribed threshold etc.

The CBIC observed that at Serial. No. 4 of the Table under para 4 in the aforesaid circular, it has been clarified that cases where the tax due has already been paid and the notice or demand orders under Section73 only pertains to interest and/or penalty involved, the same shall be considered for availing the benefit ofsection 128A. Hence, it is evident that in cases where the taxpayer has paid the full amount of tax and only interest and/or penalty is in dispute by the taxpayer, then he is eligible to avail the benefit of Section 128A of the CGST Act. On the similar pattern, just because the department has gone in appeal or is in the process of filing an appeal, a taxpayer who is otherwise eligible for availing the benefit of section 128A, should not be denied the benefits. Further the intention of the said provision is to reduce litigation and a taxpayer should not be denied the benefit of the provision on mere technicalities.

In view of the above, CBIC has instructed that in cases  where the tax amount has been fully paid by the taxpayer on demands made under section 73 of the CGST Act and the department is in appeal or under the process of filing an appeal only on account of wrong interest  calculation and/or  wrong imposition or non-imposition of penalty amount under the provisions of CGST Act or IGST Act and the taxpayer fulfils other conditions of section 128A and the rules made thereunder, the proper officer may proceed towards withdrawing such appeal filed and in case where the order under section 73 is under review stage only, accept the same.

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