2018 (9) TMI 2002 - HC - GST

Tax Authority Must Issue Show Cause Notice Before Imposing 15% Penalty Under Section 74 of APGST Act

D. RAMA KOTIAH AND CO. Versus STATE OF ANDHRA PRADESH

HC ruled that tax authority cannot demand 15% penalty without issuing a show cause notice under Section 74 of APGST Act. The order directing penalty ... Direction to pay tax and penal interest without issuing an assessment order - Section 61 of the Andhra Pradesh Goods and Services Tax Act, 2017 - HELD THAT:- While a show cause notice is required to be issued under Section 74(1) of the APGST Act for recovery of penalty equivalent to the tax specified in the notice, Section 74(5) of the said Act enables the dealer to pay 15% penalty on his own accord before receipt of a notice under Section 74(1) of the Act. Section 74(5) of the APGST Act enables the dealer to avoid payment of penalty beyond 15%, if penalty at 15% is paid before receipt of a show cause notice. That does not mean that, even without a show cause notice being issued, the dealer is obligated to pay penalty at 15% under Section 74(5) of the Act. Section 74(5) of the Act merely enables the petitioner to pay penalty at 15% on his own accord, in which event the assessing authority cannot thereafter 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. 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. Petition disposed off. Issues:Challenge to order directing payment of tax and penalty without assessment order or show cause notice.Analysis:The Writ Petition challenged an order by the second respondent 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, and without a show cause notice. The petitioner admitted liability but questioned the validity of being asked to pay a 15% penalty without a show cause notice. The relevant sections of the APGST Act were examined, specifically Section 74(1) and Section 74(5). Section 74(5) allows a person to pay tax, interest, and a 15% penalty before receiving a notice under Section 74(1). However, it does not mandate payment of the 15% penalty without a show cause notice. The petitioner has the discretion to pay the 15% penalty on their own accord, but the assessing authority cannot demand the remaining 85% penalty without issuing a show cause notice.The Court held that the order directing the petitioner to pay a 15% penalty without a show cause notice was set aside. The validity of the order was not challenged on any other ground in the Writ Petition. The Court clarified that setting aside the order does not prevent the respondent from issuing a penalty notice and recovering the penalty as per Section 74(1) of the APGST Act. The Writ Petition was disposed of accordingly, with no order as to costs. Any pending miscellaneous petitions were to be closed.