2024 (11) TMI 372 - HC - GST

Direction to petitioner to pay 5% penalty of the prevailing plot cost, for the belated period in implementation of project - HELD THAT - As per Clause 2.1.2.(a) of O.O.No.30 of 2020 dated 31.07.2020, all the existing allottees who have completed 30 months from the date of allotment, shall be checked for minimum 50% plot utilization. If the allottees fail to have a minimum 50% of plot utilization (non-commencement of production or commencement of production with less than 50% plot utilization), deman notices for a penalty of 5% of the prevailing plot cost for the unutilized extent shall be issued on 01.10.2020. Admittedly, the petitioner complied the said clause by utilizing more than 65% of the plot. Even then as directed by this Court, the petitioner had paid the entire penalty amount. Further the petitioner had commenced its production even before raising the invoice. That apart, the pharmaceutical bulk drugs and chemicals were packed and despatched on 18.11.2022 itself, after complying with other conditions such as, QC product specification of the customer. Therefore, even before the despatch of goods, the petitioner company had started the production of the goods. Therefore, after having been paid the penalty amount to the tune of Rs. 55,66,001/- including SGST and CGST as 5% of the total cost of the plots, once against the petitioner cannot be directed to pay penalty of 5% of the prevailing plot cost. This Court finds infirmity and illegality in the impugned order passed by the first respondent and it can not be sustained and liable to be quashed. Accordingly, the impugned order dated 12.08.2023 passed by the first respondent in letter No.I/17051/2023, is hereby quashed - Petition allowed.

Summary

Issues:
Challenge to order imposing penalty for delayed project implementation.

Analysis:
The petitioner, a pharmaceutical manufacturer, acquired a plot on lease basis for project implementation. Due to global recession, the project was delayed, requiring a fresh application for consent. Environmental clearance was obtained, and construction commenced after obtaining necessary approvals. The first respondent issued show cause notices, leading to the petitioner paying penalties and commencing project activities as directed by the Court.

The first respondent later directed the petitioner to pay a 5% penalty for alleged delayed commercial production. The respondent argued that production commenced after the stipulated period, justifying the penalty. However, the petitioner contended that production had started before the specified deadline, as evidenced by the first sale invoice. The Court noted that the date of invoice does not equate to the date of production, and the petitioner had complied with the penalty payment and utilization requirements.

The Court highlighted that the petitioner had exceeded the minimum plot utilization requirement and had paid the penalty in full. It was emphasized that production had begun before invoicing, with goods dispatched on the same day. Considering these factors, the Court found the penalty imposition unjustified and illegal. Consequently, the impugned order was quashed, directing the respondents to acknowledge the project implementation.

In conclusion, the writ petition was allowed, and no costs were awarded. The judgment emphasized the importance of considering the actual project progress and compliance before imposing penalties for delayed implementation, ensuring fairness and legality in such matters.