penalty u/s 73(8), Goods and Services Tax - GST

[AMIT BATHAM]

My dear, respected colleague, could you elaborate on the penalty stated in section 73(8) and whether it is mandatory in nature? For example, if the demand in the notice is only for 400 rupees, and the assessee deposits the demand after the Notice's specified period, will they actually be responsible for paying the penalty of 20000.00?

Posts / Replies

[DR.MARIAPPAN GOVINDARAJAN]

Section 73(8) provides no penalty. It provides that where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

[Sadanand Bulbule]

Dear querist

I endorse the legal position clarified by Sri. Govindarajan Sir.

[AMIT BATHAM]

i mean 73(9) & 73(11)

[KASTURI SETHI]

Dear Querist,

If you do not draft your query correctly in the first attempt, what does it indicate ? You can judge yourself. By not drafting query correctly in the first attempt, you waste the time of the experts and TMI Management both.

In both sub-sections 73(9) & (11) , penalty is mandatory. The word, 'shall' mentioned in both sub-sections indicates mandatory nature of imposition of penalty.

[Amit Agrawal]

Section 73(9) reads as follows: The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order.

Relevant portion from Section 126(6) are as under:

"126. (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.

.........................................

(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."

One can argue that penalty u/s 73(9) is NOT mandatory as same is neither a fixed sum nor expressed as a fixed percentage, but same is 'fixed sum or a a fixed percentage, whichever is higher' and then, pled for no penalty using Section 126.

Please note that these should not be taken as my views / opinion per se. But same are just a line of argument in case you want to contest the penalty. As jurisprudence of GST law is at nascent stage and still evolving, these arguments will be thoroughly tested in courts of law over a period in future.

Also, if any amnesty scheme comes in future (one cannot predict or to be sure about it happening), hopefully, your penalty will be dropped. But, for that, you need to contest the penalty and keep alive through judicial means (i.e. by challenging penalty, filing appeal & so on).

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

[Padmanathan Kollengode]

I also endorse the views given by Amit Ji. One can contend that section 126(6) shall be applicable to 73(9) where it provides for both fixed percentage as well as fixed sum, which ever is higher.