2022 (9) TMI 373 - HC - GST

Levy of GST - payment of tax through wrong forum - evasion of tax or not - HELD THAT - This is a case where Petitioner has not attempted to evade any tax. This is a clear case where Petitioner has made a mistake and instead of paying the Government of India through the CGST authorities and the State of Maharashtra through the SGST authorities, the entire amount has been paid to Government of India, through Indian Railways. In the Affidavit-in-Reply, Respondent No.5 admits that Petitioner has paid the amount wrongly to Railways and due to huge Railway network, Railway was not in an immediate administrative position to check and react to such wrongful deposits. Respondent No.5 is directed to ensure that the amounts which have been wrongly paid by Petitioner to Railways should be paid to the CGST authorities and SGST authorities within two weeks from today. Petition disposed off.

Summary

Issues:
1. Payment of GST on advertising services provided to Railways.
2. Obligation to pay GST under reverse charge mechanism.
3. Refund or direct payment of wrongly paid GST amounts.
4. Consideration of interest and penalty for the taxpayer.
5. Input tax credit for the taxpayer.
6. Mechanism for correcting the payment of GST.

Analysis:
1. The Petitioner, engaged in advertising services, submitted a bid to Railways, which was accepted. The Petitioner paid service tax as per the contract terms. After the introduction of GST in July 2017, the Petitioner continued paying the amount along with GST at 18% per annum. The issue arose when it was discovered that the GST paid by the Petitioner to Railways was not forwarded to the tax authorities, resulting in a discrepancy.

2. Respondent No.5 contended that under the CGST/SGST Act and IGST Act, the tax liability falls under the reverse charge mechanism, making the recipient of services responsible for paying GST directly to the government. The Respondent provided evidence that the tax invoices indicated the tax was payable on a reverse charge basis. The Petitioner admitted to paying SGST and CGST to Railways instead of the tax authorities.

3. Respondent No.5 acknowledged the wrongful payment by the Petitioner and offered to refund the amount or pay it directly to the tax authorities as per the invoice details. The Court directed Respondent No.5 to ensure the correct payment of the GST amounts to the CGST and SGST authorities within two weeks, emphasizing the mistake made by the Petitioner and the need for rectification.

4. Considering the circumstances where the Petitioner did not evade taxes but made an error in payment, the Court urged the tax authorities to treat the case sympathetically regarding interest and penalty. The judgment aimed to relieve the Petitioner from additional financial burdens due to the inadvertent mistake made in the payment process.

5. Upon the correct payment of GST to the tax authorities, the Court directed that the Petitioner should receive input tax credit. This step ensures that the Petitioner is not financially disadvantaged due to the rectification process and can benefit from the tax credit as applicable under the law.

6. In response to the practical issue of electronic payment systems, the Court directed Respondent No.5 to pay the corrected amount to the Petitioner within one week. Subsequently, the Petitioner was instructed to pay the amount to the tax authorities promptly. The CGST/SGST authorities were directed to facilitate the payment process for the Petitioner, ensuring a seamless correction of the GST payment mechanism.