Levy of General Penalty Under Section 125, Goods and Services Tax - GST

[Ashiesh Prremji]

Dear Experts,

We applied GST REG -13 for amendment in Principal Place of Business after prescribed time (50 days) as per Rule 19 (1) as on 08-08-22.

We got SCN dated 02-09-22 mentioning Levy of penalty u/s 125 as we contravened provision of rule 19(1) read with Section 28 (1).

My point is whether this SCN is valid as per Rule 19(2) & (5) although 19(2) use the word "may"?

Thank You !

Posts / Replies

[Amit Agrawal]

Rule 19 (2) deals with a situation where amendment sought under sub-rule (1) is either not warranted or the documents furnished therewith are incomplete or incorrect as per officer, then he is entitled to issue notice therein proposing 'rejection of amendment sought'. In such a case, 'may' means 'shall' in my view.

However, said rule 19 (2) does not allow rejection of any application of amendment on account of delay to making such application u/r 19 (1).

Similarly, Rule 19 (5) deals with a situation where officer fails to take action within time specified in any of two events.

Hence, I am unable to understand how validity of SCN proposing general penalty u/s 125 for making delayed application for amendment u/r 19 (1) read with Section 28 (1) has got anything to do with what Rule 19 (2) & 19 (5) says.

Can you please elaborate context of your question?

[Rajagopalan Ranganathan]

Sir,

You are right that there is no provision to impose penalty for late filing of GST REG-13 for amending the Registration Certificate. However the Department will insist that penalty can be imposed under Section 125 since the section says that any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees.

Rue 19 (1) stipulates that where there is any change in any of the particulars furnished in the application for registration in FORM GST REG-01 or FORM GST REG-07 or FORM GST REG-09 or FORM GST REG-10 or for Unique Identity Number in FORM GST-REG-13, either at the time of obtaining registration or Unique Identity Number or as amended from time to time, the registered person shall, within a period of fifteen days of such change. The delayed filing of GST REG 13 is in violation of provisions of rule 19 (1) and no separate penalty is provided therefor. Therefore such violation will attract provisions of Section 125. However you may have to approach the jurisdictional High Court (Since Tribunals under GST Act are yet to formed) seeking relief from imposing penalty under section 125.

[Amit Agrawal]

W.r.t. general penalty u/s 125 which a penalty which may extend to twenty-five thousand rupees, kindly note that such penalty is neither mandatory nor fixed (i.e. its up to 25K and not 25K always).

Please also note Section 126 (i.e. General disciplines related to penalty) which reads as follows:

(1) No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.

Explanation.––For the purpose of this sub-section,––

(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than five thousand rupees;

(b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record.

(2) The penalty imposed under this Act shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach.

(3) No penalty shall be imposed on any person without giving him an opportunity of being heard.

(4) The officer under this Act shall while imposing penalty in an order for a breach of any law, regulation or procedural requirement, specify the nature of the breach and the applicable law, regulation or procedure under which the amount of penalty for the breach has been specified.

(5) When a person voluntarily discloses to an officer under this Act the circumstances of a breach of the tax law, regulation or procedural requirement prior to the discovery of the breach by the officer under this Act, the proper officer may consider this fact as a mitigating factor when quantifying a penalty for that person.

(6) The provisions of this section shall not apply in such cases where the penalty specified under this Act is either a fixed sum or expressed as a fixed percentage.

[Amit Agrawal]

In continuation of my last post, I feel that you can use said Section 126 (read to your reasons for delay in making the application etc.) to defend yourself against SCN proposing general penalty u/s 125 for making delayed application for amendment u/r 19 (1) read with Section 28 (1) OR alternatively, to ensure minimum penalty and not highest penalty amount of 25,000/-.

Some of relevant provisions u/s 126 are highlighted by me in earlier post. However, you need to first submit reply with grounds of defense and defend yourself including using opportunity of personal hearing.

And if not satisfied with the resultant order, you can file appeal to first appellant authority and then & if still required, to the tribunal (as and when formed & made operation) too.

All these are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Lastly, in my humble view, either no penalty or very minimal penalty u/s 125 should be imposed in given circumstances based on sub-section (1) & sub-section (5) of Section 126 as 'prescribed time-limit' for making application for amendment u/r 19 (1) is a procedural requirement , specially (& presumably) when such application of amendment was made by you prior to the discovery of the breach of any Dept's officer.

I hope that you achieve desired objective before original adjudicating authority itself. But, you should be ready to defend yourself judicially including appellate stage/s if so required to achieve this.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Kindly also note that if concerned officer had failed to take any action on your application dated 08.08.2022 within a period of fifteen working days there-from OR within a period of seven working days from the date of the receipt of the reply to the notice to show cause under sub-rule (3) (your query does not talk about receipt of any such notice, though subject to accuracy of my present understanding of your facts read with my legal understanding as explained in post at serial no. 1 above), the certificate of registration stands amended to the extent applied for and the amended certificate should be made available to you on the common portal as per Rule 19 (5).

However, this does not invalidate SCN proposing general penalty u/s 125 for making delayed application for amendment u/r 19 (1) read with Section 28 (1).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion

[KASTURI SETHI]

The word, 'may' stands for discretion of range of penalty between minimum and maximum (not exceeding). You have missed the word, 'shall' in Sections and Rules. Discretion implies that action is to be taken in view of the gravity of offence. Whether habitual offender or not ?

However, such minor offences should be exonerated, if not habitual.

Legal aspect

The department takes the stand that rules have been framed to be honoured and respected and not meant for flouting like anything. So one must be careful rather blaming the department.

Most of the assessees cross the deadline and then expect extension.

[KASTURI SETHI]

I also concur with the views of both experts.

[Ashiesh Prremji]

Thank you so much Amit Sir & Kasturi Sir for your views !

In totality, at first place i need to request for condonation of delay.

Amit Sir, my query on SCN validity was due to Rule 19 (5) which says -

If the proper officer fails to take any action,- (a) within 15 working days from the date of submission of the application, or (b) within 7 working days from the date of the receipt of the reply to the Show cause Notice, the certificate of registration shall stand amended to the extent applied for and the amended certificate shall be made available to the registered person on the common portal.

I had submitted application on 08.08.22 & SCN issued on 02.09.2022. that was beyond 15 days from submission.

[KASTURI SETHI]

Sh. Ashiesh Prremji Ji,

My sincere advice

Right, practical, rational & logical approach is not to pick holes in the SCN. File reply to the SCN on merits in a humble way. Challenging the date of issuance of the SCN is negative approach.

If you make your submissions with reasonable and genuine grounds and in a humble and polite way, you will be able in getting your problem solved.

First delay is on your part. Pl. do not forget this fact.

Sh.Amit Agrawal Ji has rightly advised you in all aspects. Take benefit of his advice Now the art of presentation is yours.

[Amit Agrawal]

Dear Shri Ashiesh Prremji Ji,

W.r.t. your elaboration in post at serial number 9 above, kindly note that notice u/r 19 (5) deals with time-limit to issue notice / SCN to reject application for amendment u/r 19 (2).

But and as explained in my earlier posts, said time-limit to not applicable for issuance of SCN proposing general penalty u/s 125 for making delayed application for amendment u/r 19 (1) read with Section 28 (1).

Aspects consequent to issuance of such SCN, I believe, are covered in my earlier posts. Still any doubt remains or you need clarity any further on any aspects, please feel free to revert.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Please read first para of my last post above as follows:

W.r.t. your elaboration in post at serial number 9 above, kindly note that time-limit prescribed u/r 19 (5) (a) is for issuance notice / SCN to reject application for amendment u/r 19 (2), in my view.

[Ashiesh Prremji]

Respected Sir,

Got the points & many thanks for giving insight clarity of provisions.

[KASTURI SETHI]

No insightful prefers litigation, especially, keeping in view of rigours inherent therein.