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TMI Blog2019 (8) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 Attended 2. 9-4-2019 23-4-2019 Adjournment filed 3. 24-4-2019 6-5-2019 Attended 4. 15-5-2019 20-6-2019 Not Attended 5. 1-6-2019 12-7-2019 Not Attended 6. 5-8-2019 19-8-2019 A.R. Attended 3. Sri P. Phani Raj, Executive Director and Authorized Representative of the supplier (hereinafter referred to as 'A.R.') has appeared on some occasions and finally on 19-8-2019 for personal hearing. Finally, he was heard personally. Statement of facts : 4. The appellant is an assessee on the rolls of the AA and doing the business of supplying the security services. 5. The AA stated in his assessment orders (GST assessment 13), which were passed separately for each month from December, 2017 to August, 2018, that the appellant has been filing the returns in Form GSTR-1 by declaring the outward taxable supplies under the GST Act, but not filed the returns in Form GSTR-3B for the above tax periods, and not paid liable tax on its outward supplies as declared in the returns in Form GSTR-1. 6. The AA stated that he has issued notices for filing of the returns in Form GSTR-3B, but the appellant failed to file the same. As per the AA's remarks, he is left w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) As stated in the background facts, and as an elaboration to the same, the appellant would like to explain the practical difficulty faced at the time of committing default of non-filing of return, which had occurred purely as a result of helplessness and was undoubtedly without any malicious intention of evading taxes. (3) Appellant submits that the main reason for delayed/Non-payment of GST is due to huge delay in the realisation of the amounts due from the clients. The ideal average time taken for the realisation is 90 days from the date of raising the invoice. Whereas, the appellant has to pay the salaries to the security personnel on monthly basis and certain clients allow raising invoice only after the payment of salaries to them. The interest/finance cost on the overheads (mainly salaries to the security personnel) is almost shelling out the margins of the appellant. Adding to the above difficulties, the GST at the rate of 18% has to be paid immediately on raising of the invoice which is becoming an added burden to the appellant. All these led to huge working capital crisis, ultimately leading to cash crunch in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained above, the appellant states that, Section 62 requires that a notice under Section 46 be issued before passing any Best Judgment Assessment under this section. An extract of the said section is produced herewith for your reference, ".... where a registered person fails to furnish the return under Section 39 or Section 45, even after the service of a notice under Section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment...." However, in the present case, no such notice was issued to the appellant for the period starting from March, 2018 to August, 2018, considering which the entire proceedings under this section fails. Thus, the order is invalid and is liable to be set aside. (10) Appellant craves leave to alter, add to and/or amend the aforesaid grounds. (11) Appellant wish to be personally heard before any decision is taken in this matter. Additional Grounds of Appeal : 11. At the time of hearing on 2-5-2019, the A.R. has submitted the additional grounds in support of his contentions, which are extracted hereunder; (1) Appellant submits that the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of inward and outward supplies of goods and services mentioning details about input tax credit availed, tax payable and tax paid on or before the 20th day of the month succeeding the tax period. (4) Due to the difficulty in the implementation of GST, returns which were designed to be implemented as per the scheme explained supra were not implemented by the Government and a new form called FORM GSTR-3B was prescribed in lieu of return in FORM GSTR-3 under Rule 61(5) of the CGST Rules, 2017. The extract of the rule is given below : "Where the time limit for furnishing of details in FORM GSTR-1 under Section 37 and in FORM GSTR-2 under Section 38 has been extended and the circumstances so warrant, return in FORM GSTR-3B, in lieu of FORM GSTR-3. may be furnished in such manner and subject to such conditions as may be notified by the Commissioner." (5) From the above, it can be substantiated that FORM GSTR-3B can be considered as a return filed in lieu of FORM GSTR-3 and accordingly it can be said that FORM GSTR-3B is a return filed under Section 39 of the CGST Act, 2017. (6) However, subsequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar to the Section 62 of CGST Act, 2017, the Section 46 ibid also refers to the returns to be filed u/s. 39 ibid i.e. GSTR-3 and not the GSTR-3B returns thereby there is no jurisdiction to serve the notice under Section 46 ibid for failure in filing of the GSTR-3B returns. The submissions made supra as to what constitutes the return under Section 39 would equally apply here and appellant would like to reiterate the same. In Re : Notice in GSTR-3A (under Section 46, ibid) was not issued prior to the assessment under Section 62 ibid : (11) Without prejudice to the above, appellant submits that the below table gives the dates of notice served to the appellant in form GSTR-3A. Period Reference and Date of Issuance of Notice Date on which notice was received by the appellant Reference and Date of Issuance of Order Date on which order was received by the appellant November, 2017 to August, 2018 DCTO-I/ Nil/2018, dated 24-9-2018 28-2-2019 (served by hand) Dy.AC-I/37A-AACO2542G-1ZO, dated 25-10-2018 1-11-2018 served by hand January, 2018 to December, 2018 DCTO-I/ Nil/2018, dated 25-1-2019 28-2-2019 (Served by hand) Dy. AC-I/37-AAACO2542-G1ZO, dated 22-2-2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 062 60,89,062 1,37,98,049 - 2,16,52,918 2,16,52,918 4,33,05,836 Aug.' 18 12,10,214 81,46,316 81,46,316 1,75,02,846 - 2,16,52,918 2,16,52,918 4,33,05,836 Total 1,71,67,956 6,95,92,755 6,95,92,755 15,63,53,466 20,58,944 18,01,12,887 18,01,12,887 36,22,84,718 Table showing differential demand : (Figures in '()' indicate excess demanded by the assessment order) Month Differential Amount IGST CGST SGST SUB-TOTAL Dec.' 17 21,91,139 (1,36,12,794) (1,36,12,794) (2,50,34,449) Jan.' 18 21,86,181 (1,20,57,786) (1,20,57,786) (2,19,29,391) Feb.' 18 (1,44,144) (3,94,834) (3,94,834) (9,33,812) Mar.' 18 24,88,737 (1,29,20,264) (1,29,20,264) (2,33,51,791) Apr.' 18 14,69,985 (1,57,20,021) (1,57,20,021) (2,99,70,057) May' 18 22,78,322 (1,30,66,843) (1,30,66,843) (2,38,55,363) Jun.' 18 18,08,654 (1,36,77,133) (1,36,77,133) (2,55,45,613) Jul.' 18 16,19,925 (1,55,63,856) (1,55,63,856) (2,95,07,787) Aug.' 18 12,10,214 (1,35,06,602) (1,35,06,602) (2,58,02,990) Total 1,53,97,301 (11,05,20,133) (11,05,20,13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant further points out that it has filed the returns in Form GSTR-1, that means actually scored outward taxable supplies are disclosed to the Department, and as such there are no circumstances or logic to estimate the outward supplies turnovers. The appellant also advanced two more objections. Firstly, the AA has added 50% to its actually scored turnover, while estimating the total turnover for all the months except for February, 2018. The same analogy applied by the AA to February, 2018 must have been applied to all the months, while passing the orders. But, arbitrarily added 50% more turnover without any basis or evidence. Secondly, the appellant also pointed out that as per the contents of Section 62 a notice under Section 46 ought to have been issued before passing the best judgment assessment orders as per Section 46, but the A.A has not issued any such notices for the tax periods from March, 2018 to August, 2018, and hence such orders are unlawful and liable to be set aside. 16. The appellant further contends that it has already submitted the returns in Form GSTR-3B for the months of December, 2017 to February, 2018, which shall be seen as a genuine effort by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Thus, interpreting Section 39 in its point of view as discussed above, the appellant contemplated that since GSTR-3 is deferred now vide Notification No. 12/2019, dated 7-3-2019, consequently the jurisdiction to make the assessment under Section 62 ibid is also deferred. Further, the failure to file the returns in Form GSTR-3B do not give jurisdiction to make the assessment under Section 62 ibid as the GSTR-3B is not a return for the purpose of Section 39 of the Act ibid. Hence, the assessment made under Section 62 ibid fails and requires to be set aside. 21. The appellant further contends that the assessment under Section 62 ibid shall be made after serving a valid notice under Section 46 ibid in form GSTR-3A. Similar to the Section 62 of CGST Act, 2017, the Section 46 ibid also refers to the returns to be filed under Section 39 ibid i.e. GSTR-3 and not the GSTR-3B returns and hence there is no jurisdiction to serve the notice under Section 46 ibid for failure to file the returns in Form GSTR-3B. 22. Without prejudice to the above objections, the appellant also questioned that the AA has not served notice under Section 46 for certain months, and hence orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not based on analytical and exhaustive scrutiny. The palpably pointing out certain anomalies, which are discussed hereunder :- Firstly, the appellant raised some strong dissensions regarding invoking Section 62 with reference to Section 39, contemplating that GSTR-3B is not a statutory return prescribed under Section 39. Thus, the appellant's objections caused necessity for analysis and interpretation of statutory provisions i.e. Section 39 and Section 62 of the Act. In this connection, the following judgment - 2019-VIL-314-GUJ = 2019 (26) G.S.T.L. 481 (Guj.) though not advanced and relied on by appellant, but proclaimed recently, will be much helpful in understanding the present issue. IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18962 of 2018 Dated 24-6-2019 AAP AND CO., CHARTERED ACCOUNTS THROU AUTHORISED PARTNER Versus UNION OF INDIA & 3 other(s) 26. The writ-application has been filed seeking quashing and setting aside of the press release dated 18th October, 2018 to the extent that its para 3 purports to clarify that the last date for availing the input tax credit relating to the invoices issued during the period from July, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided to keep filing of GSTR-2 and GSTR-3 in abeyance. Therefore, in order to ease the burden of the taxpayer for some time, it was decided in the 18th GST Council meeting to allow filing of a shorter return in Form GSTR-3B for initial period. It was not introduced as a return in lieu of return required to be filed in Form GSTR-3. The return in Form GSTR-3B is only a temporary stop gap arrangement till due date of filing the return in Form GSTR-3 is notified. Notifications are being issued from time to time extending the due date of filing of the return in Form GST-3, i.e. return required to be filed under Section 39 of the CGST Act/GGST Act. It was notified vide Notification No. 44/2018-Central Tax, dated 10th September, 2018 that the due date of filing the return under Section 39 of the Act, for the months of July, 2017 to March, 2019 shall be subsequently notified in the Official Gazette. 31. It would also be apposite to point out that the Notification No. 10/2017-Central Tax, dated 28th June, 2017 which introduced mandatory filing of the return in Form GSTR-3B stated that it is a return in lieu of Form GSTR-3. However, the Government, on realising its mistake that the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectronically, within thirteen days after the end of such month. (5) Every registered non-resident taxable person shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, within twenty days after the end of a calendar month or within seven days after the last day of the period of registration specified under sub-section (1) of Section 27, whichever is earlier. (6) The Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing the returns under this section for such class of registered persons as may be specified therein : Provided that any extension of time limit notified by the Commissioner of State tax or Union territory tax shall be deemed to be notified by the Commissioner. (7) Every registered person, who is required to furnish a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return. (8) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve that as held in many judgments that, if there is any ambiguity in the language of statutory provisions, the benefit of that ambiguity must be given to the assessee. Secondly, the A.A has chosen to determine the turnovers on his best judgment and presumes the suppression of outward taxable supplies by the appellant on mere guess work. He has not conducted any worthy verifications or elaborate enquiries. We have to read and comprehend that Section 62 thoroughly before analyzing the present issue. Hence Section 62(1) of the Act, is abstracted hereunder :- Section 62(1) "Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates". A f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be arrived at". (v) Hon'ble Delhi High Court vide its order dated 27-5-1998 in the case of Deepak Industries v STO & Others (Delhi High Court) 38 DSTC 3-79; 73 (1998) DLT 718; 1998 (46) DRJ 208 held as follows :- To sum up, the principles governing a best judgment assessment are : (1) A best judgment assessment is not a wild assessment. Exclusion of arbitrariness and caprice is an obligation implicit in the power to assess to the best of judgment. (2) Assessment to the best of judgment must be founded upon some rational basis, relevant material and logic so that nexus between such basis or material and the figure of assessment arrived at can be objectively seen though some amount of guess work or estimation is to be allowed like a play in the joint. Though, the above case laws are pertaining to Sales Tax/Income Tax Acts, but the principles and concepts regarding the best judgment assessment formulated by the earlier judicial pronouncements would be squarely applicable to the GST disputes also. The essential principle emerges from the above judgments is that presumption of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that the estimates of sales suppression are pure guess work, and not based on any authenticate/dependable evidence and/details. The appellant has submitted a detailed statement and copies of the returns in Form GSTR-1 filed by it and asserted that the turnovers and taxes shown in this statement are actually scored outward supplies. Since, the returns in Form GSTR-1 filed by it are found to be not rejectable due to lack of any additional contra evidence, hence the turnover & tax liability disclosed through these GSTR-1 returns, is to be confirmed as the real turnovers of the appellant. It is also an anomaly in the AA's determination, wherein the AA stated that he has added 50% to the declared turnover of the appellant. But, the thorough examination of the said GSTR-1 returns of the appellant, it is revealed that the AA's computations on this aspect even after adding 50% are observed to be erroneous. The common best judgement assessment, penalty and interest orders are passed in a single order called Form GST ASMT 13 under Section 62 of the AP GST Act, 1917 read with Rule 61(1) and Rule 100 (1) of the AP GST Rules, 2017. The turnovers of the dealer are estimated unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 or an Input Service Distributor or a non-resident taxable person or a person paying tax under Section 10 or Section 51 or, as the case may be, under Section 52 shall furnish a return specified under sub-section (1) of section 39 in FORM GSTR-3 electronically through the common portal either directly or through a Facilitation Centre notified by the Chief Com missioner." Thus, it is very clear that the best judgment assessment under Section 62 can be made only when the dealer fails to file the return specified in Section 39(1) of the Act, read with Rule 61(1) of the Rules, that is the return in Form GSTR-3. Nothing else. Thus, the next question to answer is whether the return in Form GSTR-3B can be treated as return in Form GSTR-3 within the meaning of Section 39(1) of the Act read with Rule 61(1) of the Rules. But, my enquiry is made easy by the judgment and orders of the Hon'ble High Court of Judicature of Gujarat at Ahmadabad in R/special Civil Application No. 18962 of 2018, dated 24-6-2019. Thus, the issue is no more a res integra. Their lordships at para 28 and 30 of the said judgment and orders held as under :- Para 28 :- "Therefore, the moot question is, whether the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spicuously absent herein. Thus, I have no hesitation to declare that the best judgment common assessment, penalty and interest orders impugned herein are without the jurisdiction and hence, I declare them as non est/void. (2) For another reason also, these best judgment orders cannot be sustained in law. The best judgment assessment under Section 62 can be made by taking into account all the relevant material which are already available and/or the material available which is gathered from the other sources. It is also clear from the settled judicial principles on best judgment assessment that the estimations involved in the best judgment assessment should not be based on mere surmises and/or conjectures. Though estimations are involved in the best judgment assessment, the same cannot be without any basis or with some basis. In the instant case, uniformly the suppressed turnovers for a particular month are estimated either mostly on the basis of returns of the outward supplies of the dealer in Form GSTR-1 of that month or on the basis of the return in Form GSTR-3B for the preceding month. The quantum of the outward supplies declared by the dealer in such return is held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing case law is relevant and essential to explore, before analyzing the penalty justifiability aspect. THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON'BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI WRIT PETITION NO. 33777 OF 2018, dated 26-9-2018 [ORDER : Per the Hon'ble Sri Justice Ramesh Ranganathan] Heard Sri P. Balaji Varma, Learned Counsel for the petitioner and Sri Shaik Jeelani Basha, Learned Special Standing Counsel for Commercial Taxes and, with their consent, the Writ Petition is disposed of at the stage of admission. The proceedings under challenge in this Writ Petition is the order passed by the second respondent on 20-8-2018, for the tax period March, 2018, directing the petitioner to pay tax and penal interest without issuing an assessment order under Section 61 of the Andhra Pradesh Goods and Services Tax Act, 2017 ("the APGST Act" for brevity), and without issuing a show cause notice, as illegal, arbitrary and without jurisdiction. By the order, impugned in the Writ Petition, dated 20-8-2018 the Assistant Commissioner directed payment of penalty at 15% along with interest under Section 50 read with Section 79(5) of the APGST Act and Rule 143 of the AP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereafter issue a notice seeking recovery of the balance 85% penalty (i.e. penalty equivalent to the tax specified in the notice). Whether penalty at 15% should be paid or not is for the assessee to decide. While he would, undoubtedly, run the risk of being subjected to penalty at 100% of the tax specified, the power conferred on the assessing authority to recover penalty, equivalent to the tax specified in the notice, is only after a notice is issued calling upon the petitioner to show cause why penalty should not be imposed on him. The impugned order, to the limited extent the petitioner was called upon to pay penalty at 15%, is set aside. As the validity of the order is not subjected to challenge in this Writ Petition on any other ground, it is wholly unnecessary for us to examine the said order on its merits. Suffice it, therefore, to set aside the impugned order to the limited extent the petitioner was called upon to pay penalty at 15%. The Writ Petition stands disposed of accordingly. Needless to state that this order shall not disable the respondent from issuing a penalty notice and recover the penalty payable in term s of Section 74(1) of the APGST Act. There shall be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20, or the rules made there under; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; Non-appealable decisions and orders. Penalty for certain offences. (xi) is liable to be registered under this Act but fails to obtain registration; (xii) furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) obstructs or prevents any officer in discharge of his duties under this Act; (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; (xv) suppresses his turnover leading to evasion of tax under this Act; (xvi) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made there under; (xvii) fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made there under or furnishes false information or documents during any proceedings under this Act; (xviii) supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of penalty under Section 122, basically there must be suppression of facts, but in the instant case the appellant has not attempted for suppression of facts and duly declared his outward taxable supplies turnovers thorough GSTR-1 returns filed by them. Though, non-filing of GSTR-3B returns, is certainly an omission on the part of the appellant, but such non-filing shall not lead to penalty under Section 122, because there is no prima facie suppression by the appellant regarding his outward taxable supplies. The additions made by the AA towards the probable suppressions that formed the basis for the levy of penalty should also fall to the ground. It is trite to say that when the tax is set aside the corresponding penalty should also be set aside. Hence, the penalty which is proportionate to the tax additions made towards the probable suppression is also set aside. Besides, there is not even an iota of evidence established by the AA pointing out the wilfulness in the omission to file the return in Form GSTR-3B and/or in the determined suppression of outward tax. None of the facts that could give rise to the inferences of the 'wilfulness' are specified in the very brief pre-c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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