2020 (10) TMI 433 - HC - GST

Demand of interest and penalty - the contention of the petitioner is essentially that she must be permitted to avail the option envisaged under Section 74 without paying the interest and penalty amounts that are stipulated as conditional payments for avoiding the show cause notice envisaged under the said provision - HELD THAT - The contention of the petitioner that she should be exempted from the requirement of paying interest and penalty while availing the option of payment of tax for the purposes of avoiding the show cause notice cannot be accepted. The scheme of making a payment of tax together with interest and 15% of the amount as penalty envisaged under Section 74 is for the purposes of enabling an assessee to avoid the show cause notice contemplated under the said provision. What is offered to the petitioner under the provision is an option of either (i) paying the tax intimated by the statutory authorities, together with interest thereon and a fixed amount towards penalty, in which event a show cause notice would not follow or (ii) denying her liability to tax, interest and penalty and contest the show cause notice that would follow. When the scheme under Section 74 for avoiding a show cause notice is one that is optional to an assessee, the assessee has either to opt for it or look away from it. If she opts for the scheme, she has to comply with the terms under which the option is made available under the statute. She cannot seek a variation of the said scheme. Petition dismissed.

Summary

Issues:
1. Challenge to intimation under Section 74(5) of KGST Act with respect to tax, penalty, and interest payment.
2. Claim of exemption from payment of interest and penalty while availing the option of tax payment to avoid a show cause notice under Section 74(1) of the Act.

Analysis:

Issue 1: Challenge to Intimation under Section 74(5) of KGST Act
The petitioner, a registered dealer under the Kerala State Goods and Services Tax Act, challenged an intimation (Ext.P1) issued to her under Section 74(5) of the KGST Act, regarding tax, penalty, and interest payment to avoid a show cause notice under Section 74(1) of the Act. The petitioner contended that although she paid the tax amount, she should not be liable to pay interest and 15% of the penalty, as the tax amount became payable only from the date of the intimation. The court considered the petitioner's argument but held that the scheme under Section 74 provides an option for the assessee to pay the tax, interest, and penalty to avoid a show cause notice. The court emphasized that the petitioner cannot seek exemption from paying interest and penalty while opting for this scheme, as it is not permissible under the statute.

Issue 2: Claim of Exemption from Interest and Penalty Payment
The court rejected the petitioner's claim for exemption from interest and penalty payments while availing the option of paying tax to avoid a show cause notice. The court noted that the statutory scheme under Section 74 offers the assessee a choice between paying the tax with interest and penalty to avoid a show cause notice or contesting the notice. The court emphasized that the petitioner cannot seek to benefit from the scheme while avoiding the payment of interest and penalty, as it goes against the statutory provisions. The court dismissed the writ petition, stating that the petitioner must comply with the terms of the scheme if choosing to avail of the option provided under Section 74. The court also clarified that the judgments cited by the petitioner's counsel did not support the petitioner's case, as they dealt with different issues.