Decided 14 October 2026. Where a taxpayer omitted B2C sales from its monthly returns by mistake but paid the full tax through DRC-03 before any show cause notice, the GSTAT Lucknow Bench has set aside the penalty of ₹23.40 lakh under section 73. The interest demand of ₹75.23 lakh, however, was sent back for month-wise recomputation under section 50 read with Rule 88B.
Case at a glance
| Case | M/s Aditi Enterprises v. State Tax Department, Uttar Pradesh |
| Forum | GSTAT, State Bench Lucknow (Division Bench, Court II) |
| Appeal No. | APL/31/LCK/2026 |
| Date of order | 14 October 2026 |
| Period | FY 2020-21 |
| Amounts | Tax ₹2,34,00,000 paid via DRC-03 on 04.03.2022; interest ₹75,23,100; penalty ₹23,40,000 |
| Result | Partly allowed: penalty set aside; interest remanded for recomputation |
Facts of the case
The taxpayer's B2C sales for FY 2020-21 were left out of its monthly returns, though the turnover was recorded in its books and disclosed in the annual return. It paid the entire tax of ₹2.34 crore through DRC-03 on 04.03.2022, before any show cause notice, but without interest.
The department nevertheless confirmed interest of ₹75,23,100 and a penalty of ₹23,40,000 (CGST and SGST ₹11,70,000 each).
Issue before the Tribunal
Is a penalty leviable under section 73 when the full tax was paid voluntarily before the SCN, and how should interest on such delayed payment be computed?
What the Tribunal held
- Section 73(5) and (6) apply: the entire tax was paid before the SCN, the turnover was not in dispute, and the department had itself verified the reconciliation.
- The omission was inadvertent. Given the taxpayer's conduct in paying the full tax voluntarily, the penalty of ₹23,40,000 was not sustainable and was set aside.
- Interest is still payable because tax was paid late. But it cannot be worked out on the full ₹2.34 crore as a lump sum. It must be computed month-wise, considering each month's due date, the date of actual payment and the portion required to be paid through the electronic cash ledger, under section 50 and Rule 88B.
- The interest demand was set aside to the extent of the existing computation and remanded to the proper officer.
Practical takeaways for taxpayers
- If you find an error in past returns, pay through DRC-03 before the department issues an SCN. Penalty can then be avoided under section 73(5)-(6).
- Interest under section 50 is payable only on the net cash portion and must be calculated month-wise; always check the department's interest working.
- Keep reconciliations of books, GSTR-1, GSTR-3B and the annual return ready to show the omission was inadvertent.
Frequently asked questions
Is penalty payable if GST is paid before the show cause notice?
Under section 73(5)-(6), if tax and interest are paid before the notice, no notice should be issued for that tax or penalty. GSTAT Lucknow set aside the penalty on this basis.
How is interest on delayed GST calculated?
Under section 50 read with Rule 88B: month-wise, from each due date to the actual date of payment, and only on the portion paid through the electronic cash ledger.
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This summary is based on the order of the GST Appellate Tribunal, State Bench Lucknow in Appeal No. APL/31/LCK/2026. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.