Incorrect Application of section 129 Penalty Provision in GST , order set aside and matter remanded for readjudication due to lack of proper notice.
Summary in Key Points:
- Issue: Whether the penalty was correctly levied under Section 129(1)(b) of the GST Act, considering a clarification issued by the CBIC and the assessee’s claim that Section 129(1)(a) was applicable.
- Facts: The assessee argued that the penalty should have been levied under Section 129(1)(a) based on a CBIC clarification. The revenue department proceeded under Section 129(1)(b) based on information that the assessee’s firm was non-existent. However, the assessee contested this claim, presenting evidence of filing returns and having a valid GSTIN.
- Decision: The High Court set aside the penalty order, finding that the revenue department’s reliance on the information about the firm’s non-existence was insufficient and that the assessee’s evidence was not adequately considered.
Analysis:
The High Court ruled in favor of the assessee, setting aside the penalty order and remanding the matter. The court highlighted the following:
- CBIC Clarification: The clarification issued by the CBIC suggested that Section 129(1)(a) might be the appropriate provision for levying the penalty in this case.
- Insufficient Evidence: The revenue department’s claim of the firm’s non-existence was based solely on external communication and was not supported by evidence on record.
- Assessee’s Evidence: The assessee provided evidence of filing returns and having a valid GSTIN, which contradicted the revenue department’s claim.
Important Note: This case highlights the importance of considering relevant clarifications issued by the CBIC and conducting thorough investigations before levying penalties. Relying on unsubstantiated information and ignoring the assessee’s evidence can lead to incorrect application of penalty provisions and ultimately invalidate the penalty order. This case serves as a reminder to the tax authorities to ensure that their actions are based on proper evidence and legal provisions.
HIGH COURT OF ALLAHABAD
Vridhi Enterprises
v.
State of U.P.
Arun Bhansali, CJ.
and Vikas Budhwar, J.
and Vikas Budhwar, J.
WRIT TAX No. – 1875 of 2024
NOVEMBER 6, 2024
Shubham Agrawal for the Petitioner. Ankur Agrawal, S.C. for the Respondent.
ORDER
1. This writ petition has been filed by the petitioner aggrieved of the impugned demand of penalty order passed in form GST MOV-09 dated 17.09.2024 by Respondent No.2 under the provisions of CGST/ IGST Act and Rules.
2. Submissions have been made that penalty has been imposed under Section 129 (1) (b) of the Act whereas in terms of the clarification dated 31.12.2018 issued by the Central Board of Taxes and Customs GST Policy Wing, the penalty in the present case could have been levied under Section 129 (1) (a) of the Act, to which the petitioner is not disputing.
3. Further submissions have been made that the authority while passing the order, despite the specific appearance and claim that the goods in question were owned by the petitioner-firm, found the same as incorrect only on account of a communication dated 10.09.2024 received from the Deputy Commissioner, CGST, Delhi (North) indicating that the firm was non-existent and that cancellation proceedings have been initiated.
4. Submissions have been made that the said indication made is factually incorrect pertaining to the existence of the firm and the fact that the cancellation proceedings have been initiated inasmuch as the petitioner has filed his return for the month of September on 20th of October and, therefore, it cannot be said that any proceedings pertaining to cancellation has been initiated against the petitioner and/ or that the firm is non-existent, as the firm is consistently filing returns, which is evident from the GSTIN status report (Annexure-2). Reliance has also been placed on M/s Margo Brush India and others v. State of U.P. and another, Writ Tax No. 1580 of 2022 decided on 16.01.2023 and M/s Singh Traders and two others v. State of U.P. and another, Writ Tax No. 459 of 2024 decided on 22.03.2024.
5. Learned counsel for the respondents though does not dispute the fact that the issue pertaining to the imposition of penalty under provisions of Section 129 (1) (a) of the Act is covered by the clarification dated 31.12.2018 as well as the judgment in the case of M/s Margo Brush India and others, however, submissions have been made that as a finding pertaining to the non-existence of the firm has been recorded, the said plea is not available.
6. We have considered the submissions made by counsel for the parties and have perused the material available on record.
7. The denial by the respondents to apply provisions of Section 129 (1) (a) of the Act in light of the clarification dated 31.12.2018 and judgments of this Court are based on the finding as indicated by the authority in Para-4 of its order. A perusal thereof indicates that the said finding essentially is factual and only based on the communication received from the CGST, Delhi regarding the initiation of cancellation proceedings. However, apparently, nothing was available on record of Respondent No.2 to indicate as to whether at all proceedings in this regard were initiated by the authority at Delhi. Further the GSTIN status produced by the petitioner indicates a status different form what is being claimed by the authority at Delhi wherein return has been filed on 20.10.2024 by the petitioner.
8. In that view of the matter, the denial of applying the clarification and the judgments of this Court based on the said finding, apparently cannot be sustained.
9. In view of above fact situation, the impugned demand of penalty order dated 27.09.2024 (Annexure-1) passed by Respondent No.2 is set aside. The writ petition is allowed. The matter is remanded back to the competent authority to pass a fresh order in terms of the observations made hereinbefore within a period of two months from the date of the receipt of the copy of this order.