2024 (8) TMI 247 - HC - GST

Levy of penalty without taking into consideration the amounts remitted by the petitioner earlier - ineligible Input Tax Credit (ITC) was reversed - HELD THAT - It is evident that the petitioner had remitted a sum of Rs. 59,05,950/- towards ineligible ITC in respect of IGST and a further sum of Rs. 44,62,969/- towards ineligible ITC in respect of CGST. Such remittances were made in 2017 and 2018, which is prior to the issuance of the show cause notice. Learned counsel for the petitioner contends that 10% of such amounts should have been imposed as a penalty in those circumstances and that such imposition contravenes sub-section (9) of Section 73 and the newly introducing Section 128A of applicable GST enactments. These facts and circumstances justify reconsideration only in so far as imposition of penalty is concerned. The impugned order dated 22.11.2022 is set aside only in so far as the imposition of penalty is concerned. Consequently, the matter is remanded to the respondent for the limited purpose indicated above and after providing a reasonable opportunity to the petitioner, including a personal hearing, a fresh order shall be issued in respect of penalty within a period of three months from the date of receipt of a copy of this order. Petition disposed off by way of remand.

Summary

Issues:
Imposition of penalty without considering amounts remitted earlier; Rejection of appeal on the ground of limitation; Interpretation of Section 73 and Section 128A of GST enactments regarding penalty imposition.

Analysis:
The High Court of Madras addressed a writ petition challenging an order imposing a penalty without considering the amounts remitted by the petitioner earlier. The petitioner had reversed ineligible Input Tax Credit (ITC) and requested for dropping the proceedings. The first appellate authority rejected the appeal on the ground of limitation. The petitioner argued that the penalty was imposed despite discharging the liability before the show cause notice and that 10% of the remitted amounts could not be penalized as per Section 73 of GST enactments. The respondent contended that the petitioner's reply was considered, and no interference was warranted as an appeal was lodged. The impugned order revealed that the petitioner had remitted significant sums towards ineligible ITC before the notice. The petitioner argued that the penalty imposition contravened Section 73 and Section 128A of GST enactments, justifying reconsideration only on the penalty issue.

The Court set aside the impugned order in terms of penalty imposition, remanding the matter to the respondent for reconsideration. The respondent was directed to issue a fresh order on penalty within three months, providing a reasonable opportunity to the petitioner, including a personal hearing. The writ petition was disposed of without costs, and connected miscellaneous petitions were closed. The judgment clarified the interpretation of Section 73 and Section 128A of applicable GST enactments regarding the imposition of penalties, emphasizing the importance of considering amounts remitted by the taxpayer before issuing penalties.