100 % Penalty cannot be Imposed if Show Cause Notice is issued under section 73

[CA Bimal Jain]

The Hon’ble Madras High Court in the case of K.S. JANARTHANAM VERSUS THE DEPUTY STATE TAX OFFICER I, O/O. THE ASSISTANT COMMISSIONER (ST) , CHENNAI - 2024 (2) TMI 795 - MADRAS HIGH COURT disposed of the writ petition, thereby holding that, 100 percent penalty cannot be imposed when Show Cause Notice is issued under Section 73 of Tamil Nadu Goods and Services Act, 2017 (“the TNGST Act”)

Facts:

K.S. Janarthanam (“the Petitioner”) is a civil works contractor registered under GST. The Petitioner received a notice in Form GST-ASMT-10 pertaining to discrepancies in returns filed by the Petitioner. Thereafter, the Petitioner was issued a notice under Section 73 of the TNGST Act. Subsequently, the Revenue Department passed Assessment Order dated September 4, 2023 (“the Impugned Order”) against the Petitioner wherein 100 percent penalty was imposed.

Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Madras High Court.

Issue:

Whether Penalty could be imposed at 100 percent when Show Cause Notice is issued under Section 73 of TNGST Act?

Held:

The Hon’ble Madras High Court in K.S. JANARTHANAM VERSUS THE DEPUTY STATE TAX OFFICER I, O/O. THE ASSISTANT COMMISSIONER (ST) , CHENNAI - 2024 (2) TMI 795 - MADRAS HIGH COURT held as under:

• Opined that, the Impugned Order is required to be interfered with as 100 percent penalty is imposed on the SGST dues when notice is issued under Section 73 of the TNGST Act.
• Held that, the Impugned Order is quashed, thereby disposing the writ petition.
• Directed that, the matter is remanded back to Assessing Officer for re-consideration with respect to the penalty imposed under the Impugned Order.

Relevant Provision:

Section 73(9) of the TGST Act:

“Section 73: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.

(9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.”

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