2020 (11) TMI 712 - HC - GST

Imposition of penalty under Section 122 of CGST Act - case of the Petitioner is that, he has paid total GST liability of ₹ 4,69,92,664/- for the period of February 2018 to December 2018 and filed GST DRC-03, and having accepted the GST liability, interest and late fees, as per the provisions of CGST Act, imposing penalty of ₹ 4,27,19,192/- under Section 122(1) of CGST Act, AP GST Act, is illegal - HELD THAT - It is to be noted that, Section 122 of CGST Act which deals with Penalty for certain offences states that, wherever there is a violation, a taxable person shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher . It is well settled that, as per the procedure contemplated under Section 73 and 74 of CGST Act, a show-cause notice has to be necessarily issued and same has to be adjudicated following due process of law. Though, the learned counsel for the Petitioner pleaded that, such a notice was never issued, but no effective reply came to be made in the counter denying the said pleading. In fact, a perusal of the material on record show that, a notice under Form GSTR-3A came to be issued, on 15.01.2019, for filing of GSTR-3B returns for the period from February to December 2018 under Section 46 of CGST Act, which was received, on 15.01.2019, itself. Without waiting for statutory period stipulated under the Act, assessment Order came to be issued in Form GSTR ASMT-13 under Section 62 of CGST Act, on 29.01.2019, directing the Petitioner to pay huge sum of money including penalty. The order came to be passed without following the principles of natural justice, the Writ Petition is allowed setting aside the impugned Order - the matter is remanded back to the authorities concerned to deal with the same afresh, in accordance with law, after giving an opportunity of hearing to the Petitioner - Petition allowed by way of remand.

Summary

Issues:
1) Legality of penalty imposed under CGST Act and AP SGST Act.
2) Violation of Articles 14 and 21 of the Constitution of India.
3) Jurisdiction of the 5th Respondent to impose penalty.
4) Compliance with principles of natural justice in penalty imposition.
5) Procedure under Sections 73 and 74 of CGST Act.
6) Adherence to statutory notice requirements.
7) Assessment order validity under Section 62 of CGST Act.
8) Applicability of penalty under Section 122 of CGST Act.

Analysis:
1) The Writ Petition challenged the penalty imposed under the CGST Act and AP SGST Act as illegal, arbitrary, and contrary to statutory provisions. The Petitioner contended that the penalty of ?4,27,19,192/- was unjustly levied without following due process, violating Articles 14 and 21 of the Constitution of India.

2) The Petitioner, a Company engaged in alcohol manufacturing, argued that the 5th Respondent lacked jurisdiction to impose the penalty without adhering to the prescribed procedures. The Petitioner had already paid the GST liability for the relevant period and filed necessary returns, questioning the authority's actions.

3) The Counsel for the Petitioner highlighted three main issues: the violation of natural justice principles in penalty imposition, the jurisdictional competence of the 5th Respondent, and the redundancy of demanding payment already collected through garnishee orders. The Respondent countered, stating the Petitioner's failure to pay GST liabilities and submit timely returns justified the penalty.

4) The Court examined Sections 73, 74, and 122 of the CGST Act to assess the legality of the penalty imposition. It noted that the statutory procedure necessitated a show-cause notice, which was not effectively issued in this case. The assessment order under Section 62 was deemed premature and lacking in procedural fairness.

5) Emphasizing the importance of natural justice, the Court found the penalty imposition flawed due to the absence of a proper show-cause notice and adjudication process. The Petitioner's contention of procedural irregularities was upheld, leading to the setting aside of the impugned order and remanding the matter for fresh consideration.

6) The judgment underscored the necessity of following due process and providing a fair opportunity of hearing before imposing penalties under the CGST Act. The Court's decision to quash the penalty order highlighted the significance of procedural regularity and adherence to legal requirements in tax assessments.

7) The ruling ultimately favored the Petitioner, directing the authorities to reevaluate the penalty imposition in accordance with the law and principles of natural justice. The decision exemplified the judiciary's commitment to upholding procedural integrity and safeguarding taxpayers' rights in tax matters.