GST Circular Trading - Penalty Cannot Be Capped at Rs. 10K but levied Equivalent to Full ITC Passed on
Last updated: 23 May 2026
Court :
Madras High Court
Brief :
The Hon'ble Madras High Court in Tvl. SAM Enterprises & Ors. v. Commercial Tax Officer & Anr. [W.P. Nos. 2628 of 2026 and connected matters, dated February 18, 2026] dismissed the writ petitions filed by the assessee-entities engaged in alleged circular trading of medical equipment supplies, thereby upholding the penalty orders passed under Section 74 of the Central Goods and Services Tax Act, 2017 ( “the CGST Act” ). The Court held that the penalty under Section 122(1)(ii) and Section 122(1)(vii) of the CGST Act is mandatorily equivalent to the ineligible Input Tax Credit (ITC) availed or passed on — not capped at Rs. 10,000 — since the language of Section 122(1) of the CGST Act uses the expression "whichever is higher," leaving no discretion with the Assessing Officer to levy the lesser amount.
Citation :
W.P. Nos. 2628 of 2026 and connected matters, dated February 18, 2026
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Bimal Jain
Published in GST
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