Tax authority violated natural justice by imposing penalty without following statutory 15-day notice period under Section 46

The AP HC set aside a penalty imposed under Section 122(2)(a) of the CGST Act for violating principles of natural justice. The tax authority issued a notice in Form GSTR-3A on 04.02.2019 and served it immediately without waiting for the statutory 15-day period under Section 46. An assessment order was passed the next day directing payment of tax, interest and penalty without following due process under Sections 73 and 74 of CGST Act. Following precedents in similar cases, the court remanded the matter back to authorities to deal with it afresh following proper procedure.

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Issues:
1. Challenge to the imposition of penalty under the Central Goods and Services Tax Act, 2017.
2. Violation of statutory provisions and principles of natural justice in the assessment order.
3. Dispute regarding the procedure followed for imposing penalty under Section 122(2)(a) of the CGST Act.

Detailed Analysis:
1. The Writ Petition challenged the imposition of a penalty of Rs. 1,37,31,305/- in an Assessment Order under the Central Goods and Services Tax Act, 2017. The petitioner contended that the penalty was illegal, arbitrary, and contrary to statutory provisions, violating Article 14 and 265 of the Constitution of India. The petitioner, a manufacturer of Lateral Pipes & Drippers, argued that the assessment order demanding tax, interest, and penalty was issued without following due process, including the issuance of a show cause notice.

2. The Commissioner of Central GST disputed the petitioner's claims, stating that the petitioner failed to pay GST liabilities and file monthly returns on time. The department issued notices under GSTR-3A due to the petitioner's non-compliance with filing GSTR-3B returns, leading to the assessment order imposing tax, interest, and penalty. The counter highlighted that the petitioner's actions violated Sections 9, 37, and 49 of the CGST Act, emphasizing the necessity of filing returns to transfer revenue to the government.

3. The petitioner argued that the penalty imposed under Section 122(2)(a) of the CGST Act was unlawful as proper procedures were not followed. The petitioner contended that the assessment order did not adhere to Section 62 of the Act, which requires a statutory period for filing returns before issuing orders. The petitioner also raised concerns about the lack of a separate notice directing the payment of penalty, emphasizing the procedural irregularities in the penalty imposition process.

4. The judgment acknowledged the procedural lapses in the imposition of penalty, citing previous cases where similar issues led to orders being set aside for violating principles of natural justice. The court noted that a notice in Form GSTR-3A was issued immediately without the statutory waiting period, followed by the assessment order the next day. The court emphasized the necessity of following due process under Sections 73 and 74 of the CGST Act before imposing penalties, highlighting the importance of adhering to established legal procedures.

5. Ultimately, the court set aside the order imposing the penalty and remanded the matter back to the authorities to ensure compliance with the required procedures and principles of natural justice. The judgment emphasized the need for proper adjudication following due process of law, especially in cases involving penalty imposition under the CGST Act. The Writ Petitions were disposed of with the direction to reexamine the penalty imposition in accordance with the law.

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