On April 23, 2025, Candour Techtex Limited (formerly Chandni Textiles Engineering Industries Ltd) notified the stock exchanges regarding a penalty order received from the Additional Commissioner, CGST & Central Excise, Palghar Commissionerate. The order, issued under Section 122(1)(vii) of the CGST Act, 2017, mandates the company to pay a penalty of Rs. 1.02 crore.

This disclosure is made pursuant to the Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in line with the SEBI Circular No. SEBI/HO/CFD/PoD2/CIR/P/0155 dated November 11, 2024, which requires companies to disclose any material developments that may impact their financial or operational performance.

Nature of the Penalty

The penalty relates to the alleged wrongful availment of Input Tax Credit under the CGST Act, a critical compliance issue for businesses engaged in the manufacturing and sale of goods and services. Candour Techtex is currently assessing the adjudication order, and the company intends to take appropriate actions within the prescribed timelines, including the possibility of filing a writ petition with the Bombay High Court to obtain a stay on the penalty.

Timeline of Events

The company received the adjudication order on February 3, 2025, outlining the penalty for alleged violations of tax provisions. However, the company’s management and legal advisors took time to interpret the order and seek further advice on the appropriate course of action. This delay in disclosure was due to consultations with legal experts, who advised that the order was perverse and warranted immediate action through legal channels.

As of the announcement date, the company is in the process of filing a writ petition with the Bombay High Court to request a stay order on the penalty. Candour Techtex has shared that the delay in disclosing the penalty to the stock exchanges was because it wanted to ensure proper consultation before making the disclosure.

Financial Impact

The penalty amount of Rs. 1.02 crore is a significant financial liability for Candour Techtex, and it could potentially have an impact on the company’s financials depending on the outcome of the legal proceedings. However, the company has assured investors and stakeholders that it is taking the necessary steps to contest the order and mitigate the impact on its operations.

Company’s Next Steps

Candour Techtex has made it clear that it is actively seeking to resolve the matter legally. The company’s decision to disclose the penalty order comes after discussions with its Executive Directors and legal advisors. The company aims to contest the penalty and ensure that its financial interests are protected during this challenging period.

As the penalty relates to indirect taxes, it reflects broader concerns for businesses operating in the Indian taxation framework, particularly concerning the input tax credit mechanism under the Goods and Services Tax (GST) regime. Companies in similar industries will likely be paying close attention to the outcome of this case, as it may set a precedent for other businesses facing similar scrutiny.

Conclusion

This disclosure represents Candour Techtex's compliance with SEBI’s regulations regarding material event reporting. The company remains committed to transparency and is actively addressing the issue of the CGST penalty. The next steps involve the legal process, where the company seeks to overturn or mitigate the penalty through the Bombay High Court.

This case highlights the importance of regulatory compliance for companies in the manufacturing sector and serves as a reminder of the complexities involved in navigating the Indian GST system. The outcome of Candour Techtex’s legal battle could have broader implications for businesses engaged in similar activities, emphasizing the need for robust tax practices and legal foresight.

As Candour Techtex continues to assess its options and take legal recourse, stakeholders will closely monitor the developments and the potential financial impact on the company’s future performance.

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