Punjab & Haryana High Court Orders Refund of Excess Auction Proceeds After VAT Penalty; Holds Penalty Order Final but Department Cannot Retain Amount Beyond Penalty

Case Name: M/s Super Hinges Pvt. Ltd. v. State of Punjab and Others

Date of Judgment: 10 December 2025
Citation: CWP-511-2009 & CWP-19101-2007
Bench: Hon’ble Mr. Justice Jagmohan Bansal and Hon’ble Mr. Justice Amarinder Singh Grewal

Held: The Punjab and Haryana High Court disposed of two connected writ petitions arising from detention, penalty, and auction of goods under the Punjab Value Added Tax Act, 2005. The Court held that since the petitioner had not challenged the penalty order in appeal, the penalty had attained finality and the State was entitled to recover it from auction proceeds. However, the Court ruled that the department could not retain any amount beyond the penalty and directed refund of the excess auction proceeds along with interest.

Summary: The petitioner, engaged in manufacture and sale of hinges, challenged the auction of its detained goods and alleged arbitrary assessment of value and imposition of an exorbitant penalty. The goods had been detained on allegations of misdeclaration of value, following which a penalty was imposed and the goods were ultimately auctioned by the department.

During earlier proceedings, this Court had taken serious note of discrepancies between the value assessed by the department and the actual auction price, and had even directed a high-level inquiry into the conduct of the officers concerned. The inquiry report, however, concluded that the assessing authority had acted bona fide and without mala fides.

In the present proceedings, the Court noted that the petitioner had neither filed a statutory appeal against the penalty order nor succeeded in getting it set aside in earlier writ proceedings. As a result, the penalty order had attained finality, and the department was legally entitled to recover the penalty amount from the auction proceeds.

At the same time, the Court held that once the penalty stood satisfied, the department had no authority in law to retain the balance auction amount. Retention of excess money was held to be impermissible, irrespective of the legality of the penalty proceedings. The Court therefore directed refund of the surplus amount remaining after adjustment of penalty, together with interest.

Decision: Both writ petitions were disposed of. The respondents were directed to refund the excess auction amount of ₹69,750 to the petitioner after deducting the penalty amount, along with interest at 6% per annum, within the stipulated period.