2023 (11) TMI 1020 - HC - GST

Challenge to order of penalty levied under Section 122 of GST Act - delay in depositing the tax so collected beyond a period of three months - HELD THAT - There is no material on record or even an allegation against the petitioner that the amount was collected but not paid or evaded, but only allegation is that the amount was not pad within the time prescribed and was paid after a delay. Even if the said allegation for the sake of argument is treated to be correct, the only penalty imposable against the petitioner would be Rs. 10,000/- as no amount of tax has admittedly been evaded by the petitioner. Even otherwise, the Appellate Authority or even the Assessing Authority has failed in following the general disciplines relating to penalty, specifically the mandate of Section 126(2) of the Act. In the present case, in terms of the Notification dated 01.06.2021, the Government in exercise of its powers under Section 128 of the Act had issued guidelines waiving the late fee for filing the returns, this factor had to be validly considered while imposing the penalty in terms of mandate of Section 126(2) of the Act. In the facts of case, the maximum penalty imposable was Rs. 10,000/- or the tax evaded, whichever was more; there being no allegation of tax evasion, the maximum penalty that could have been imposed was Rs. 10,000/- which could even be lower than the said amount if the Taxing Authority as well as the Assessing Authority had considered the mandate of Section 126(2) of the Act read with Notification dated 01.06.2021. The said exercise clearly has not been done. The petitioner states that the petitioner is ready and willing to accept the penalty of Rs. 10,000/- to give quietus to the litigation - Considering the scope of the provisions as discussed herein above as well as the offer made by the petitioner, the orders impugned are set aside. The petitioner shall pay a penalty of Rs. 10,000/- in both the cases within a period of two weeks from today by depositing the same with the department - Petition disposed off.

Summary

Issues involved: Challenge to penalty orders under Section 122 of GST Act for delay in tax payment, consideration of Covid-19 impact on payment timeline, interpretation of penalty provisions under Sections 122, 123, 126, 127, and 128 of the Act.

The judgment addresses two petitions challenging penalty orders under Section 122 of the GST Act. The petitioner, a private limited company providing manpower supply services, contested penalties imposed for delay in tax payment. The petitioner received a show-cause notice alleging failure to pay GST collected within the prescribed time, leading to penalties of Rs. 28,00,476 each for CGST and SGST. The petitioner's appeal was dismissed, citing Section 122(1)(iii) of the Act as justification for the penalty. The State defended the penalties based on the petitioner's delayed tax payment without adequate justification. The petitioner argued that the penalty should not exceed Rs. 10,000 as no tax evasion occurred.

The petitioner highlighted the impact of Covid-19 on payment timelines and referenced Section 123, 126, 127, and 128 of the Act. The petitioner pointed out a Ministry of Finance notification waiving late fees for certain periods due to Covid-19, suggesting a similar consideration for penalties. The court noted that no tax evasion was alleged, indicating a maximum penalty of Rs. 10,000 should apply. The court found that authorities failed to follow penalty guidelines under Section 126(2) of the Act and overlooked the impact of the waiver notification.

The petitioner offered to pay the reduced penalty of Rs. 10,000 to resolve the matter. The court set aside the penalty orders in both cases, emphasizing the need to consider Covid-19 impacts and penalty provisions correctly. The court directed the petitioner to pay Rs. 10,000 penalty in each case within two weeks. Both writ petitions were disposed of accordingly.