Supreme Court Dismisses Review Petition, Holding Non-Filing of Returns Despite Tax Collection Amounts to Willful Suppression Under Section 74 CGST Act

Supreme Court Dismisses Review Petition, Holding Non-Filing of Returns Despite Tax Collection Amounts to Willful Suppression Under Section 74 CGST Act

Issue

Facts

• The assessee raised invoices amounting to Rs. 20.92 crores (which included GST of Rs. 3.19 crores) for the Financial Year 2017–18 and received partial payments from clients.
• Despite collecting tax and issuing invoices, the assessee consistently failed to file monthly GSTR-3B returns and failed to deposit the GST amount with the exchequer.
• Following an inspection by tax authorities, the assessee subsequently filed the pending returns and deposited the outstanding tax amount.
• The High Court held that non-filing of returns while collecting tax constitutes willful suppression and ruled that the benefit of Section 74(5) of the CGST Act was unavailable as interest was paid after notice issuance and the mandatory 15% penalty was not paid.
• The Supreme Court initially refused to interfere with the High Court’s order, prompting the assessee to file a review petition under Article 137 of the Constitution of India.

Decision

• The Supreme Court reviewed the petition under Article 137 of the Constitution of India against its earlier decision.
• The Apex Court held that there was no merit in the review petition filed by the assessee.
• The review petition was accordingly dismissed, affirming the view in favor of the Revenue.

Key Takeaways

• Willful Suppression Established: Collecting GST on invoices or receiving client payments without filing GSTR-3B returns constitutes intentional evasion and willful suppression under Section 74 of the CGST Act.
• Strict Compliance for Section 74(5) Escape Clause: To avail immunity or reduced penalty benefits under Section 74(5), the tax, applicable interest, and the mandatory 15% penalty must be paid before the service of notice.
• Post-Notice Compliance Ineffective: Payment of interest after notice issuance without paying the 15% penalty disqualifies the taxpayer from claiming relief under the escape clause.
• Review Jurisdiction Scope: The Supreme Court will not entertain a review petition under Article 137 unless a clear, manifest error of law or fact is shown in the original order.