Penalty Paid Under Economic Duress Not Voluntary Admission Of Liability Under GST Act: Tripura High Court

The Tripura High Court recently held that payment of a penalty under economic duress cannot be treated as a “voluntary” admission of liability, and tax authorities remain legally obligated to pass a final, reasoned order under the Tripura State GST Act, 2017.

The ruling came in the case of R G Group, a Tripura-based supplier of electrical goods, whose consignment was detained in July 2024 by GST enforcement officials over alleged expired E-Way bills and vehicle discrepancies.

The Bench, comprising Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha, in an order passed on November 5, 2025, observed that the penalty paid by the RG Group to secure the release of its goods cannot be considered a voluntary acceptance of liability.

“Such a payment of penalty under economic duress cannot be treated by the respondents as a voluntary payment of penalty exonerating the respondents from passing an order as mandated by the later part of sub-section (3) of Section 129 justifying imposition of penalty on the petitioner.”

The court expressed "shock" at the revenue's stance, noting that despite the clear statutory requirement, no order had been passed by the Superintendent of State Taxes, Tripura justifying the imposition of the penalty on the petitioner for over 16 months.

According to the facts, on July 9, 2024, RG Groups's goods were detained at Bagma, Gomati, with officials alleging expired E-Way bills and a vehicle mismatch. A physical verification on July 10, however, found no discrepancies between the goods and invoices.

Despite this, a detention order and a show-cause notice were issued proposing a penalty of Rs 4.9 lakh .

To secure immediate release of the goods and vehicle, the petitioner paid the full amount on July 26, 2024, while explicitly requesting that a final order be passed so that the penalty could be challenged before the appellate authority.

The government argued that since the penalty was paid, there was no requirement to pass a final order. The High Court rejected this argument, emphasizing that the payment was made under economic duress and not as a voluntary admission of liability.

The court noted that on July 26, 2024, the petitioner sent a letter to the tax officer saying he was paying the full penalty only to get his goods released and asking the officer to issue the final order so he could challenge it later if needed.

"On 26.7.2024, a letter (Annexure-14) was addressed by the petitioner to the respondent no.4 where the petitioner stated that he was payinghe full penalty amount in dispute and specifically requesting the said officer to pass MOV-09 order (under sub-section (3) of Section 129) within the time frame, so that he can challenge it in appeal before the appellate authority. Thus the payment of penalty was obviously made only to secure release of goods and was under economic duress and the petitioner clearly indicated his wish to challenge the order when passed in appeal.”

The court noted that because the authorities did not pass a final order confirming the penalty after considering the petitioner's representation, the collection of the penalty was without legal authority and violated Articles 14, 19(1)(g), 265, and 300-A of the Constitution of India.

Accordingly, the High Court allowed the writ petition, directing the respondents to refund the entire penalty with 9% interest from the date of payment until refund. The court awarded Rs.25,000 in costs against the officer responsible and instructed the State and Commissioner of State Taxes to investigate the officer's conduct and take disciplinary action if necessary. 

Case Title: R.G. Group vs. UOI & Ors.

Case Number: WP(C) No.611 of 2025

For Petitioner: Advocates Samar Das, Kaushik Paul appeared on behalf of the RG Group,

For Respondent: Senior Government Advocate P Gautam, Deputy S.G.I B. Majumder with Advocate S Choudhury.

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