GST PENALTY SECTION 122, Goods and Services Tax - GST

[ANIL KUMAR]

My client was issued DRC 01 for discrepancies in returns for the year 2017-18 and 2018-19. On submission of clarifications, there was mismatch the input tax credit between the GSTR-3B and GSTR-2A. As the amounts of difference were below 10000 for both the years, in order to settle the issue and buy peace with the department, the same was accepted by the dealer, and the amounts were paid up and DRC-03 relating to the same was also filed. on receiving the order, it is seen that since the said payments are made after 30 days after receiving the SCN the officer has levied penalty 10000 cgst and 10000 sgst for both the years. My query is whether this levy of penalty under section 122 is mandatory even when the dealer has voluntarily agreed to pay the minor amounts to settle the issues ? and whether this penalty can be levied without giving an opportunity of being heard and it is not even initated separately and in the attachment to the order in form DRC-07 under section 73, it is just made out that the dealer has to pay the penalty under cgst and sgst, without pointing out the reasons for the levy of penalty and when asked they say that in the SCN given it is already stated that if the dues are not paid within 30 days the penalty will be levied without asking. Is this interpretation of the law correct. Is there an appealable case here ? 2017-18 order was pased in jan 24 and 2018-19 in april 24 recently. pl guide what is the way out of this section 122 penalty. thank you.

Posts / Replies

[Sadanand Bulbule]

Dear Sir

In my opinion, despite separate notice was issued under Section 122 of the Act, penalty cannot be levied much before the adjudication. On the other hand, once the adjudication is concluded invoking Section 73 or 74, it would attain the basics of “absolute composite order” culminating in the deemed conclusion of proceedings under Section 122 of the Act.

You may question this before the Appellate Authority, if there is time as provided under Section 107[1].

[Padmanathan Kollengode]

Dear querist,

From your query, without commenting anything on the merits, it prima facie appears that for FY 2017-18, the order u/s 73 is time barred (last date of SCN being 30-9-23 and order being 31-12-23). Hence request you to post the date of SCN and date of order and date of payments for both years. 

[Padmanathan Kollengode]

on receiving the order, it is seen that since the said payments are made after 30 days after receiving the SCN the officer has levied penalty 10000 cgst and 10000 sgst for both the years. My query is whether this levy of penalty under section 122 is mandatory even when the dealer has voluntarily agreed to pay the minor amounts to settle the issues ?

73(8) 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.

73(9) 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.

Thus, even if the amount is minor if you do not pay the tax along with interest within 30 days of SCN, you are liable to penalty under section 73(9) read with section 122(2) of the Act.

whether this penalty can be levied without giving an opportunity of being heard and it is not even initated separately and in the attachment to the order in form DRC-07 under section 73, it is just made out that the dealer has to pay the penalty under cgst and sgst, without pointing out the reasons for the levy of penalty and when asked they say that in the SCN given it is already stated that if the dues are not paid within 30 days the penalty will be levied without asking. Is this interpretation of the law correct.

It appears from section 73 that if the tax along with interest is not paid within 30 days of SCN, then penalty would be imposable. Generally, the SCN would spell out this too as mentioned by you in your case. So in my opinion, there is neither the requirement of fresh notice for penalty nor does a question of natural justice violation arises here. 

Is there an appealable case here ? 2017-18 order was pased in jan 24 and 2018-19 in april 24 recently. pl guide what is the way out of this section 122 penalty.

Yes. Order under section 73 is appealable and one can contest the penalty.

[SUSHIL BANSAL]

The penalty levied correctly.However from the SCN  and order date you may check whether the order is time barred or not.

[KASTURI SETHI]

Dear Querist,

1) The term, “absolute composite order” used by Sh. Sadanand Bulbule Ji, Sir, leaves no doubt in all respects.

2) Penalty is mandatory. in Section 122. Hence the Appellate Authority has no power to reduce or set aside penalty.

3) However, if you are sure that the Adjudication Order has been passed beyond the prescribed time limit, then you can expect relief from the Appellate Authority. Otherwise, you cannot expect.

4) In real terms, voluntary payment of tax is that which is deposited along with interest on one's own. If tax along with interest is deposited on being detected by the Department, then Sections 73, 74, 122 etc. will come into play.

[Shilpi Jain]

If its an order, consider filing an appeal if the time limit still exists.

In the reply make submissions denying liability itself in the first place.

This is the issue with the department and the assessee. Frivolous demands are raised and the taxpayers proceed to pay if the amounts are not too huge.

This increases the confidence of the department to issue more such demands.

Solution is taxpayers become more aware of their rights and consultants to be available at affordable prices for such small demands. 

Only this can help to make tax laws simple and better in India. (Educating officers about law and other qualities can only help to improve tax collections in India)