2023 (10) TMI 145 - HC - GST

Levy of penalties u/s 74(9) read with Section 122(2)(b), 122(1)(i) and 125 of the Central Goods and Service Tax Act issued by the 1st respondent - return filed by petitioner not accepted by 1st respondent - classification dispute - evasion of tax - HELD THAT - As per the Judgment of this Court in the case M/S. CHAKKIATH BROTHERS VERSUS THE ASSISTANT COMMISSIONER, COMMERCIAL TAXES SPECIAL CIRCLE-1, ERNAKULAM 2014 (6) TMI 974 - KERALA HIGH COURT on the basis of a mere dispute in classification, no penalty proceedings can be initiated. In the present case also there is a dispute of classification. In the impugned order the authority had not considered the judgment of this Court in the case Chakkiath Brothers v. Assistant Commissioner. The matter needs to be remanded back to the 1st respondent for passing a fresh order in accordance with law, after taking into consideration the Judgment in the case Chakkiath Brothers v. Assistant Commissioner - matter is remanded back to the file of the 1st respondent to decide the penalty proceedings - Petition allowed by way of remand.

Summary

Issues involved:
The issues involved in the judgment are the imposition of penalties for an alleged offence under specific sections of the Central Goods and Service Tax Act related to the classification and tax liability of hand sanitizers.

Details of the Judgment:

Issue 1: Classification and Tax Liability Dispute
The petitioner manufactured hand sanitizers during the assessment period and classified them under a specific Tariff heading, declaring tax liability at 12%. The return filed by the petitioner was initially accepted by the jurisdictional CGST authority. However, later, the authority initiated action under Section 74(1) by issuing a show cause notice stating that the correct classification was under a different category exigible to GST at 18%. The petitioner paid the assessed amount but disputed the initiation of penalty proceedings, arguing that the issue of classification was debatable and not conclusively decided.

Issue 2: Penalty Proceedings
The petitioner contended that the penalty proceedings were unjustified as there was no tax evasion involved, and the dispute primarily revolved around the classification of hand sanitizers. Citing a previous judgment of the Court, the petitioner argued that penalty proceedings cannot be initiated solely based on a dispute in classification. The Court agreed with the petitioner's argument and held that the matter needed to be remanded back to the authority for a fresh decision, considering the previous judgment on a similar issue.

Conclusion:
The Court allowed the writ petition, setting aside the impugned order imposing penalties and remanding the matter back to the jurisdictional authority for a fresh decision in line with the previous judgment on classification disputes. The authority was directed to reconsider the penalty proceedings while taking into account the legal principles established in the referenced case law.