HC sets aside penalty order after authority failed to verify GSTIN cancellation proceedings under Section 129(1)(a)

The HC set aside a penalty order under CGST/IGST Act provisions after finding the authority's denial to apply Section 129(1)(a) was based on inadequate factual findings. The respondents relied solely on communication from CGST Delhi regarding cancellation proceedings without verifying if such proceedings were actually initiated. The petitioner's GSTIN status showed returns filed, contradicting the authority's claims. The matter was remanded to the competent authority for fresh consideration with proper factual verification.

---

---

Issues:
1. Impugned demand of penalty order under CGST/IGST Act and Rules.
2. Imposition of penalty under Section 129(1)(b) instead of Section 129(1)(a).
3. Factual correctness of the indication regarding the existence of the firm and initiation of cancellation proceedings.
4. Dispute over the application of clarification dated 31.12.2018 and previous judgments.
5. Validity of the denial to apply provisions of Section 129(1)(a) based on factual findings.
6. Review of material on record and setting aside the penalty order.

Analysis:
The writ petition was filed challenging the penalty order imposed under the CGST/IGST Act and Rules. The petitioner contended that the penalty should have been levied under Section 129(1)(a) instead of Section 129(1)(b) as per a clarification issued by the Central Board of Taxes and Customs GST Policy Wing. The authority based its decision on a communication indicating the firm's non-existence and initiation of cancellation proceedings. However, the petitioner argued that this was factually incorrect as evidenced by the timely filing of returns and GSTIN status report (Annexure-2) showing consistent filing. Reference was made to previous court judgments supporting the petitioner's position (Para 2-4).

The respondents did not dispute the applicability of Section 129(1)(a) based on the clarification and previous judgments but argued that the finding of the firm's non-existence precluded this plea. The court examined the submissions and the material on record, noting that the authority's finding was solely based on the communication from CGST, Delhi, without concrete evidence of cancellation proceedings initiation. The GSTIN status provided by the petitioner contradicted the authority's claim, showing timely return filing. Consequently, the court held that the denial to apply the clarification and previous judgments was unsustainable (Para 5-8).

Considering the factual discrepancies and lack of concrete evidence supporting the penalty order, the court set aside the impugned penalty order and remanded the matter to the competent authority for a fresh decision within two months. The judgment emphasized the importance of factual accuracy and proper application of legal provisions in penalty imposition under the GST laws (Para 9).

---