2023 (11) TMI 93 - HC - GST

Timely Tax Payment Not Enough: GST Penalty Upheld for Delayed Remittance of Collected Tax Under Sections 73(8) and 73(11)

HC upheld penalty imposed under GST Act for failure to remit collected tax within 30 days, despite tax being paid within notice period. The court ... Deemed conclusion of proceedings where tax paid with interest within thirty days of show cause notice under Section 73(8) - penalty for non-payment of tax collected from others within thirty days from the due date under non obstante provision of Section 73(11) - penalty determination equivalent to ten per cent. of tax or ten thousand rupees under Section 73(9)Deemed conclusion of proceedings where tax paid with interest within thirty days of show cause notice under Section 73(8) - penalty for non-payment of tax collected from others within thirty days from the due date under non obstante provision of Section 73(11) - penalty determination equivalent to ten per cent. of tax or ten thousand rupees under Section 73(9) - Whether an assessee who had collected tax from others but did not remit it to Government within thirty days from the due date is entitled to escape penalty by paying the tax with interest within thirty days of issue of show cause notice. - HELD THAT: - The Court examined the interplay between Sub-sections (6), (8) and (9) of Section 73 and the non obstante provision in Sub section (11). Sub section (8) provides that where a person chargeable with tax pays the tax along with interest within thirty days of issue of the show cause notice, no penalty shall be payable and proceedings shall be deemed concluded. However, where tax has been collected from others and not remitted to the Government within thirty days from the due date of payment, Sub section (11) - which operates by way of a non obstante clause - overrides the benefit of Sub section (8) and renders penalty under Sub section (9) payable. The Assessing Authority found that the petitioner had remitted the collected tax only after issuance of the show cause notice and that the collected tax had not been paid within thirty days from the due date; accordingly the authority applied Section 73(9) read with Section 73(11) and imposed penalty. The High Court held that this construction is correct and that Sub section (8) does not apply where the tax collected was not remitted within the statutory thirty day period, thus justifying imposition of penalty under Sub section (9) as saved by Sub section (11). [Paras 3, 5, 6, 7]Benefit of Section 73(8) is not available where tax collected was not remitted within thirty days from the due date; penalty under Section 73(9), supported by Section 73(11), is payable.Final Conclusion: Writ petition dismissed; the Assessing Authority correctly held that payment of tax with interest after issuance of show cause notice does not preclude penalty where the tax collected was not remitted within thirty days from the due date, and imposition of penalty under Section 73(9) read with Section 73(11) is upheld. Issues:The issue involves the interpretation of Sections 73(8) and 73(11) of the GST Act, 2017 regarding the liability for penalty when tax is paid within thirty days of notice but not deposited to the Government within the same period.Summary:The petitioner challenged the order dated 14.09.2023, focusing on the penalty of Rs. 40,000 imposed. The petitioner contended that tax was paid within thirty days of notice issuance, relying on Section 73(8) of the GST Act, 2017. Conversely, the Government Pleader argued that Section 73(11) applies when tax collected is not remitted to the Government within thirty days, attracting penalty under Section 73(9). The Assessing Authority held that penalty was due as tax collected was not paid within the stipulated period.The controversy centered on whether an assessee, who paid tax within thirty days of notice along with interest but failed to remit collected tax to the Government within the same timeframe, should be liable for penalty. The Assessing Authority concluded that penalty was applicable under Section 73(9) and Section 73(11) of the CGST/KSGST Act, 2017, as tax collected was not paid within thirty days of the due date.Sections 73(6), 73(8), and 73(9) of the GST Act, 2017 outline the consequences for failing to deposit collected tax within thirty days of the due date. It is emphasized that if a person chargeable to tax does not deposit the tax within the specified period, Section 73(8) would not absolve them from penalty liability.After considering the provisions of Sections 73(6), 73(8), and 73(9) of the GST Act, 2017, it was determined that failure to deposit tax collected within thirty days attracts penalty, as per Section 73(11). The Court upheld the Assessing Authority's decision, finding no legal error warranting intervention. Consequently, the writ petition was dismissed.