TaxTMI 
TaxTMI 
2020 (9) TMI 776
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....issued notices for appeal hearings to appear and argue the case, but neither the appellant nor their authorized representative has appeared for the hearings except filing adjournments. From the above, it can be concluded that the appellant has failed to respond to the above notices issued and failed to avail the opportunities of personal hearing provided to them in the present appeal. In the circumstances, there is no other alternative except to dispose off the appeal on merits considering the material/information available in the appeal file. Statement of facts:- 4. The appellant is an assessee on the rolls of the AA and doing the business of supplying the security services. 5. The A.A stated in his assessment orders (GST assessment 13), which were passed separately for each month from January, 2019 to February, 2019, that the appellant has been filing the returns in Form GSTR-1 by declaring the outward taxable supplies under the GST Act, but not filed the returns in Form GSTR-3B for the above tax periods, and not paid liable tax on its outward supplies as declared in the returns in Form GSTR-1. The A.A stated that he has issued notices for filing of the returns in Form GSTR-3....
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....ing out the margins of the appellant. Adding to the above difficulties, the GST at the rate of 18% has to be paid immediately on raising of the invoice which is becoming an added burden to the appellant. All these led to huge working capital crisis, ultimately leading to cash crunch in the hands of the appellant. Further, the main reason of bringing the security services under reverse charge (w.e.f. 1-1-2019) is relieve the suppliers of 'security services' from the above mentioned difficulties. Further, the bank accounts were frozen which had further added to the difficulties of the appellant in remitting the salaries to the security personnel affecting the livelihood of the 20,000 employees of the appellant. (4) Though the client was facing cash crunch, it prioritized the revenue of the government over business needs and started depositing cash into the electronic cash ledger as and when the collections were made from the debtors. The same can be evidenced from the Electronic cash ledger which is enclosed herewith as Annexure- (5) Therefore, the alleged delayed payment of GST is arisen mainly because of huge cash crunch, and as soon as even a part of receivables were b....
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....17, a person has to file a return in Form GSTR-3 mentioning details of inward and outward supplies of goods and services mentioning details about input tax credit availed, tax payable and tax paid on or before the 20th day of the month succeeding the tax period. (9) Due to the difficulty in the implementation of GST, returns which were designed to be implemented as per the scheme explained supra were not implemented by the Government and a new form called FORM GSTR-3B was prescribed in lieu of return in FORM GSTR-3 under rule 61(5) of CGST Rules, 2017. The extract of the rule is given below: "Where the time limit for furnishing of details in FORM GSTR-1 under Section 37 and in FORM GSTR-2 under Section 38 has been extended and the circumstances so warrant, return in FORM GSTR-3B, in lieu of FORM GSTR-02 may be furnished in such manner and subject to such conditions as may be notified by the Commissioner." (10) From the above, it can be substantiated that FORM GSTR-3B can be considered as a return filed in lieu of FORM GSTR-3 and accordingly it can be said that FORM GSTR-3B is a return filed under Section 39 of the CGST Act, 2017. (11) However, subsequently, the aforesaid su....
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....was decided in the 18th GST Council meeting to allow filing of a shorter return in Form GSTR-3B for initial period. It was not introduced as a return in lieu of return required to be filed in Form GSTR-3. The return in Form GSTR-3B is only a temporary stop gap arrangement till due date of filing the return in Form GSTR-3 is notified. Notifications are being issued from time to time extending the due date of filing of the return in Form GSTR-3 i.e., return required to be filed under Section 39 of CGST Act. It was notified vide Notification No. 44/2018-Central Tax dated 10th September, 2018 that the due date of filing the return under Section 39 of the Act, for the months of July, 2017 to March, 2019 shall be subsequently notified in the Official Gazette. 31. It would also be apposite to point out that the Notification No. 10/2017-Central Tax dated 28th June, 2017 which introduced mandatory filing of the return in Form GSTR-3B stated that it is a return in lieu of Form GSTR-3. However, the Government, on realising its mistake that the return in Form GSTR-03B is not intended to be in lieu of FORM GSTR-3, RECTIFIED ITS MISTAKE RETROSPECTIVELY VIDE notification No. 17/2017-Central Tax....
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....is involved. The appellant further explained that the main reason for the delayed/Non-payment of the admitted GST is due to huge delay in the realisation of the proceeds of its supply of services due from the clients. The ideal average time taken for the realisation is 90 days from the date of raising the invoice, whereas the appellant has to pay the salaries to the security personnel on monthly basis and certain clients allow raising invoice only after the payment of salaries to them. The interest/finance cost on the overheads (mainly salaries to the security personnel) is almost shelling out the margins of it. Adding to the above difficulties, the GST at the rate of 18% has to be paid immediately on raising of the invoices, which is becoming an added burden to it. All these led to huge working capital crisis, ultimately leading to cash crunch in its hands. 12. The appellant further put forth that in spite of the above stated cash crunch, it has always prioritized the discharging the tax liability over business needs and frequently deposited cash into its electronic cash ledger as and when the consideration is received from its recipients. Detailing about the above circumstances,....
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....be considered as a return filed in lieu of FORM GSTR-3 and accordingly it can be said that FORM GSTR-3B is a return filed under Section 39 of the CGST Act, 2017. 16. However, subsequently, the aforesaid sub-rule is amended vide Notification No. 17/2017-Central Tax dated 27-7-2017 w.e.f. 1-7-2017, by way of substitution. The substituted sub-rule reads as under: "Where the time limit for furnishing of details in FORM GSTR-1 under Section 37 and in FORM GSTR-2 under Section 38 has been extended and the circumstances so warrant, the Commissioner may, by notification, specify the manner and conditions subject to which the return shall be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner." 17. Thus, from the above retrospective amendment (i.e. w.e.f. 1-7-2017), it can be construed that FORM GSTR-3B is a return which will be notified by the Commissioner of GST and it has no nexus with FORM GSTR-3 the way it had before this amendment and accordingly, it can be construed that FORM GSTR-3B is not a return prescribed under Section 39 of CGST Act, 2017 as the very foundation of the parity clause....
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.... justifiability. Hence, the penalty under Section 122 of the Act, does not arise and such levy of penalty treating it as willful suppression of the outward supplies is erroneous. Issues for adjudication; (1) Whether the best judgment orders through estimating the outward taxable supplies by A.A, are based on any dependable and authentic evidence/basis or not? (2) Whether the appellant's contention that Section 62 cannot be invoked as GSTR-3B is not any return prescribed under Section 39 of the Act, hence these orders are legal or not? (3) Whether the willful suppression aspect and resultant levy of 100% penalty, is found to be having any basis and such willfulness, has been established by A.A or not? (4) Whether the interest levied by A.A, is in tune with the provisions of the GST Act or not? Analysis: 23. Perused the grounds of appeal along with the assessment orders passed by the A.A., and after thorough verification of records, the following findings are recorded; (1) Regarding the levy of tax of Rs. 3,43,96,432/-: A basic perusal of A A's order reveals that the findings on the turnovers are not based on analytical and exhaustive scrutiny. The palpably poi....
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....essing such turnover as is shown to have escaped assessment and has not extended it to estimate depending upon inferences to be drawn by the department from certain circumstances. It does not clothe the department with power to make a best judgment assessment." (iii) The Privy Council in the case of Commissioner of Income Tax, Central and United Provisions v. Laxminarain Badridas (1937) (5 ITR 170, 180) observed that the Assessing Authority must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. (iv) Honorable STAT in the case of M/s. Sri Krishna Timber Depot, jammalamadugu v. State of A.P. (14 APSTJ 238), wherein it was held that "A presumption without basis, on mere suspicion cannot be sustained. Suspicion can only lead to investigation and unearthing material on which any conclusion can be based, but on mere suspicion without further investigation no inference can be drawn and no conclusion can be arrived at". (v) Hon'ble Delhi High Court vide its order dated 27-5-1998 in the case of Deepak Industries v. STO & Others (Delhi High Court) 38 DSTC J-79; 73 (1998) DLT 718; 1998 (46) DRJ 208 held as follows:- To sum up, th....
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....s that the A.A has not discussed anything about the appellant's contentions and not recorded any reasons. In this connection, it needs to be emphasized that every litigant, who approaches the A.A for relief is entitled to know the reason for acceptance or rejection of his prayer, particularly when either of the parties to the list has a right of further appeal. Unless the litigant is made aware of the reasons which weighed with the A.A in denying him the relief prayed for, the remedy of appeal will not be meaningful. It is that reasoning, which can be subjected to examination at the higher forums. The appellant also averred before me that except presuming sales suppression basing on routine wild guess work, the A.A has never attempted to verify transactions/payments of anyone connected with the determined sales suppressions in issue, the same clearly points towards a conclusion that the estimates of sales suppression are pure guess work, and not based on any authenticate/dependable evidence and/details. The appellant has submitted a detailed statement and copies of the returns in Form GSTR-1 filed by it and asserted that the turnovers and taxes shown in this statement are a....
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....ssess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under Section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. (2) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue." "Rule 61(1). Form and manner of submission of monthly return. - (1) Every registered person other than a person referred to in section 14 of the Integrated Goods and Services Tax Act, 2017 or an Input Service Distributor or a non-resident taxable person or a person paying tax under Section 10 or Section 51 or, as the case may be, under Section 52 shall furnish a return specified under sub-section (1) of section 39 in FORM GSTR-3 electronically through the common portal either directly or throu....
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....rn under Section 39 of the Act, for the months of July, 2017 to March, 2019 shall be subsequently notified in the Official Gazette." Their lordships of the High Court of Gujarat were examining the legality or otherwise/validity or otherwise of the said press release which considered both GSTR-3B and GSTR-3 as one the same. The question is framed in para 28 of the said judgment and the same is answered in negative at para 33 therein. Thereby their lordships declared that for the purpose Section 39, the return means the return in Form GSTR-3 only, but not Form GSTR-3B during the relevant period. It is held therein that the Return in Form GSTR-3B is not even the return in Eeu of the return in Form GSTR-3 (para 31). Holding so, the clarification given in the said press release dated 18-10-2018 of the Government of India is held to be illegal for the disputed period. Thus, the very Jurisdictional factor to exercise the power of the best judgment assessment under Section 62 is conspicuously absent herein. Thus, I have no hesitation to declare that the best judgment common assessment, penalty and interest orders impugned herein are without the jurisdiction and hence, I declare them as n....
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....f Section 62 unlawfully, because the relevant Section 39 does not speak of GSTR-3B in the listed returns for the disputed period, as clarified in the above discussed judgment and in view of the erroneous method adopted by A.A for estimating outward taxable supplies through best judgment without mentioning reasons/evidence, hence the tax so levied by the A.A of Rs. 3,43,96,432/- is annulled and modified as per actual tax liability of the appellant for the period from January, 2019 to February, 2019. In the result, the appeal is modified by fixing the actual tax liability from Rs. 3,43,96,432/- (annulled) (to be determined as per GSTR-1 returns of the appellant for the period from January, 2019 to February, 2019. (2) Regarding levy of penalty of Rs. 3,43,96,432/-: As already discussed the A.A has not recorded exhaustive reasons, while determining the tax as well as the penalty and passed tax/penalty orders through a single order, which is not legitimate. In this connection, the following case law is relevant and essential to explore, before analyzing the penalty justifiability aspect. THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON'BLE SMT. JUSTICE KONGARA VIJAY....
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....wrongly availed or utilised input tax credit requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under Section 50, and a penalty equivalent to the tax specified in the notice. 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....
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....months from the date on which such payment becomes due; (v) fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax; (vi) fails to collect tax in accordance with the provisions of sub-section (1) of section 52, or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section 52; (vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder; (viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment o....
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....n thousand rupees or the tax due from such person, whichever is higher. The A.A has invoked Section 122, on which he has supposedly relied and treated the appellant non-submission of GSTR-3B as a means for fraudulent and willful attempt for suppression of liable tax and levied 100% penalty. The basic discrepancy in the A.A's interpretation is that it cannot be said that the appellant has acted deliberately to suppress the outward taxable supplies, because the appellant has filed GSTR-1 returns declaring the actual turnovers, hence prima facie no ground can be made for willful suppression attribution. That means, though the A.A has assigned appellant's action with a motive of willful attempt for suppression of facts, but it is beyond any doubt and the A.A also admitted that the appellant has filed GSTR-1 returns declaring the outward taxable supplies, hence attribution of willful suppression by the appellant does not hold legit. To levy of penalty under Section 122, basically there must be suppression of facts, but in the instant case the appellant has not attempted for suppression of facts and duly declared his outward taxable supplies turnovers thorough GSTR-1 returns fi....