2019 (8) TMI 1572 - Commissioner - GST

Delayed/Non-payment of GST - huge delay in the realisation of the amounts due from the clients - Non-filing of returns - best judgment orders - Invocation of section 62 - GSTR-3B returns - wilful suppression of facts or not - levy of 100% penalty - levy of interest. HELD THAT - In view of the emerged anomalies involving invoking of Section 62 unlawfully, because the relevant Section 39 does not speak of GSTR-3B in the listed returns, as clarified in the above discussed judgment and in view of the erroneous method adopted by AA for estimating outward taxable supplies through best judgment without mentioning reasons/evidence, hence the tax so levied by the AA of ₹ 36,22,84,718/- is annulled and modified as per actual tax liability of the appellant for the period from Dec., 2017 to Aug., 2018. In the result, the appeal is modified by fixing the actual tax liability from ₹ 36,22,84,718/- (annulled) (to be determined as per GSTR-1 returns of the appellant for the period from Dec., 2017 to Aug., 2018). Levy of penalty of ₹ 36,22,84,718/- - HELD THAT - The AA has invoked Section 122, on which he has supposedly relied and treated the appellant non submission of GSTR-3B as a means for fraudulent and wilful attempt for suppression of liable tax and levied 100% penalty. The basic discrepancy in the AA s interpretation is that it cannot be said that the appellant has acted deliberately to suppress the outward taxable supplies, because the appellant has filed GSTR-1 returns declaring the actual turnovers, hence prima facie no ground can be made for wilful suppression attribution. That means, though the AA has assigned appellant s action with a motive of wilful attempt for suppression of facts, but it is beyond any doubt and the AA also admitted that the appellant has filed GSTR-1 returns declaring the outward taxable supplies, hence attribution of wilful suppression by the appellant does not holds legit. To levy of penalty under Section 122, basically there must be suppression of facts, but in the instant case the appellant has not attempted for suppression of facts and duly declared his outward taxable supplies turnovers thorough GSTR-1 returns filed by them - Though, non-filing of GSTR-3B returns, is certainly an omission on the part of the appellant, but such non-filing shall not lead to penalty under Section 122, because there is no prima facie suppression by the appellant regarding his outward taxable supplies. The additions made by the AA towards the probable suppressions that formed the basis for the levy of penalty should also fall to the ground. It is trite to say that when the tax is set aside the corresponding penalty should also be set aside. Hence, the penalty which is proportionate to the tax additions made towards the probable suppression is also set aside - Besides, there is not even an iota of evidence established by the AA pointing out the wilfulness in the omission to file the return in Form GSTR-3B and/or in the determined suppression of outward tax. None of the facts that could give rise to the inferences of the wilfulness are specified in the very brief pre-common assessment Show Cause Notice and also in the common assessment orders in Form GST ASMT-13. Hence, the levy of penalty @ 100% of determined turnovers are also to be deleted. Levy of interest of ₹ 2,76,31,152/- - HELD THAT - Whenever any dealer failed to discharge applicable tax in time, is liable to pay interest @ 18% for the delayed period - the levy of interest is upheld, but the A.A is directed to compute leviable interest as on date against the actual tax to be paid by the appellant as discussed at above paras. In the end, appeal on this aspect is confirmed. The appellant also not advanced any objections on this aspect. The assessment is partly modified, partly annulled and partly confirmed on the levy made by the assessing authority.

Summary

Issues Involved:
1. Legality of best judgment assessment under Section 62 of the CGST/SGST Act.
2. Interpretation of GSTR-3B as a return under Section 39 of the CGST/SGST Act.
3. Justifiability of penalty imposed under Section 122 of the CGST/SGST Act.
4. Legitimacy of interest levied under Section 50 of the CGST/SGST Act.

Detailed Analysis:

1. Legality of Best Judgment Assessment under Section 62 of the CGST/SGST Act:
The appellant contended that the best judgment assessment by the Assessing Authority (AA) was not based on any dependable and authentic evidence. The AA estimated the appellant’s outward taxable supplies by enhancing the returned outward taxable supplies in the returns in Form GSTR-1 by 50% towards probable supplies, and levied tax thereon at 18%. The AA invoked Section 62 of the CGST/SGST Act, 2017, which allows for best judgment assessment when a registered person fails to furnish the return under Section 39 or Section 45, even after the service of a notice under Section 46.

The judgment highlighted that the AA’s findings were not based on analytical and exhaustive scrutiny, and there was no material collected or any elaborate enquiries conducted to substantiate the assumed turnovers. The AA’s estimation of turnovers was based on mere guesswork and lacked authenticity and legitimacy, making the orders vulnerable to being set aside. The judgment referred to various case laws which establish that best judgment assessments must be based on relevant material and not on arbitrary or capricious estimations.

2. Interpretation of GSTR-3B as a Return under Section 39 of the CGST/SGST Act:
The appellant argued that GSTR-3B is not a statutory return prescribed under Section 39 of the CGST/SGST Act, and hence, Section 62 cannot be invoked for non-filing of GSTR-3B. The judgment referred to the Gujarat High Court’s decision in AAP and Co. v. Union of India, which clarified that GSTR-3B is not a return required to be filed under Section 39 of the CGST/SGST Act. The judgment concluded that since GSTR-3B is not a return prescribed under Section 39, the appellant had not violated the provisions of Section 39, and hence, there was no necessity to assess it under Section 62. Consequently, the best judgment assessment orders were declared as non est/void.

3. Justifiability of Penalty Imposed under Section 122 of the CGST/SGST Act:
The AA imposed a penalty of 100% under Section 122, alleging wilful suppression of turnovers. The appellant contended that it had filed GSTR-1 returns disclosing the outward taxable supplies, and hence, there was no suppression of facts. The judgment highlighted that the AA had not recorded exhaustive reasons for determining the tax and penalty and had passed tax/penalty orders through a single order, which is not legitimate. The judgment referred to the Andhra Pradesh High Court’s decision in Writ Petition No. 33777 of 2018, which mandated that a separate notice for passing penalty orders must be issued before levy.

The judgment concluded that the AA’s attribution of wilful suppression was not justified as the appellant had disclosed the outward taxable supplies through GSTR-1 returns. The penalty imposed under Section 122 was set aside as there was no prima facie suppression of facts by the appellant.

4. Legitimacy of Interest Levied under Section 50 of the CGST/SGST Act:
The AA levied interest of ?2,76,31,152/- under Section 50 for delayed payment of tax. The judgment upheld the levy of interest, stating that whenever any dealer fails to discharge applicable tax in time, they are liable to pay interest at 18% for the delayed period. The AA was directed to compute the leviable interest as on date against the actual tax to be paid by the appellant.

Result of the Appeal:
The assessment was partly modified, partly annulled, and partly confirmed. The tax levied by the AA of ?36,22,84,718/- was annulled and modified as per the actual tax liability of the appellant for the period from December 2017 to August 2018. The penalty of ?36,22,84,718/- was annulled, and the appeal was allowed in favor of the appellant. The levy of interest was confirmed, and the AA was directed to compute the interest based on the actual tax liability.