2025 (3) TMI 1302 - HC - GST

Challenge to communication sent by the 2nd respondent - Issuance of summons u/s 70 of the GST Act seeking information and details from the petitioner - HELD THAT - Section 74 of the CGST Act becomes applicable when there is evasion or payment of tax by way of willful proposition misstatement or fraud in the payment of tax. In such circumstances the authorities are permitted to levy penalty amounting 100% of the tax which has not been paid. However the very same provision also provides for graded response. That is personal liability to pay tax can reduce his liability of penalty from 100% to various percentages of penalty depending on the stage at which the person liable to pay tax admits his liability and pays the short paid tax along with penalty. In this process if the person admits short payment and pays the tax along with 15% of the tax penalty no further steps would be taken under Section 74 of the CGST Act. In the present case the communication sent by the 2nd respondent is in line with the provisions of Section 74 of the CGST Act - The aforesaid communication does not in any manner create any liability on the petitioner nor would amount to initiation of any proceedings against the petitioner. In such circumstances the competence of the 2nd respondent who issued such communication would not arise as it is a general communication setting out the law. This writ petition is closed leaving it open to the petitioner to set out its grounds of opposition to any proceedings initiated against the petitioner for short payment of tax or willful evasion of tax or wrongful availment of ITC.

Summary

The Andhra Pradesh High Court, presided over by Honourable Justices R. Raghunandan Rao and Dr. K. Manmadha Rao, addressed a writ petition involving the petitioner, registered under the GST Act, and the 2nd respondent, a Senior Intelligence Officer from the Directorate General of GST Intelligence, Visakhapatnam. The petitioner challenged a communication dated 30.07.2027, claiming it amounted to an initiation of tax and penalty proceedings by an incompetent authority.The Court examined the provisions under Section 74 of the CGST Act, which pertains to tax evasion or misstatement, allowing for a penalty of up to 100% of the unpaid tax. However, the section also provides for reduced penalties if the taxpayer admits liability and pays the tax with a 15% penalty. The 2nd respondent's communication was deemed to align with Section 74, serving merely as an informational notice rather than an initiation of proceedings.The Court concluded that the communication did not impose any liability or initiate proceedings against the petitioner, thus rendering the question of the 2nd respondent's competence moot. The writ petition was closed, allowing the petitioner to oppose any future proceedings for short payment or evasion of tax. No costs were ordered, and any pending miscellaneous petitions were also closed.