TaxTMI 
TaxTMI 
2019 (8) TMI 1572
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.... Status of hearing 1. 19-3-2019 9-4-2019 Attended 2. 9-4-2019 23-4-2019 Adjournment filed 3. 24-4-2019 6-5-2019 Attended 4. 15-5-2019 20-6-2019 Not Attended 5. 1-6-2019 12-7-2019 Not Attended 6. 5-8-2019 19-8-2019 A.R. Attended 3. Sri P. Phani Raj, Executive Director and Authorized Representative of the supplier (hereinafter referred to as 'A.R.') has appeared on some occasions and finally on 19-8-2019 for personal hearing. Finally, he was heard personally. 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 AA stated in his assessment orders (GST assessment 13), which were passed separately for each month from December, 2017 to August, 2018, 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. 6. The AA stated that he has issued notices for filing of the retu....
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....75,22,00,588/-. Grounds of Appeal : 10. The grounds of appeal filed by appellant in the appeal are extracted hereunder; (1) Appellant submits that the impugned order is ex facie illegal and untenable in law since the same is contrary to facts and judicial decisions. (2) As stated in the background facts, and as an elaboration to the same, the appellant would like to explain the practical difficulty faced at the time of committing default of non-filing of return, which had occurred purely as a result of helplessness and was undoubtedly without any malicious intention of evading taxes. (3) Appellant submits that the main reason for delayed/Non-payment of GST is due to huge delay in the realisation of the amounts 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 securit....
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....same Ld. Adjudicating authority has raised the demand based on the turnover declared in the GSTR-01 for the month of February 2018, while the same analogy was not being followed in this month. Therefore, the demand (if any) may be restricted, on the turnover declared in GSTR-01 and not beyond that. (9) Notwithstanding anything contained above, the appellant states that, Section 62 requires that a notice under Section 46 be issued before passing any Best Judgment Assessment under this section. An extract of the said section is produced herewith for your reference, ".... where a registered person fails to furnish the return under Section 39 or Section 45, even after the service of a notice under Section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment...." However, in the present case, no such notice was issued to the appellant for the period starting from March, 2018 to August, 2018, considering which the entire proceedings under this section fails. Thus, the order is invalid and is liable to be set aside. (10) Appellant craves leave to alter, add to a....
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....ion 38 of CGST Act, 2017 read with Rule 60 of the CGST Rules, 2017, every person is required to file a FORM GSTR-2 mentioning details of the inward supplies including the debit and the credit notes, relating to such supplies before the 15th day of the month succeeding the tax period. (c) FORM GSTR-3 - As per Section 39 of the CGST Act, 2017, read with Rule 61 of the CGST Rules, 2017, 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. (4) 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 the 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 ....
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....3-2019 consequently the jurisdiction to make the assessment under Section 62 ibid is also deferred. Further, the failure in filing of the GSTR-3B returns do not give jurisdiction to make the assessment under Section 62 ibid as the GSTR-3B is not a return under Section 39 ibid. Hence, the assessment made under Section 62 ibid fails and requires to be set aside. (10) Appellant submits that the assessment under Section 62 ibid shall be made after serving of a valid notice under Section 46 ibid in form GSTR-3A. Similar to the Section 62 of CGST Act, 2017, the Section 46 ibid also refers to the returns to be filed u/s. 39 ibid i.e. GSTR-3 and not the GSTR-3B returns thereby there is no jurisdiction to serve the notice under Section 46 ibid for failure in filing of the GSTR-3B returns. The submissions made supra as to what constitutes the return under Section 39 would equally apply here and appellant would like to reiterate the same. In Re : Notice in GSTR-3A (under Section 46, ibid) was not issued prior to the assessment under Section 62 ibid : (11) Without prejudice to the above, appellant submits that the below table gives the dates o....
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.... 4,33,05,836 Jan.' 18 21,86,181 95,95,133 95,95,133 2,13,76,447 - 2,16,52,918 2,16,52,918 4,33,05,836 Feb.' 18 19,14,800 64,94,710 64,94,710 1,49,04,219 20,58,944 68,89,543 68,89,543 1,58,38,030 Mar.' 18 24,88,737 87,32,654 87,32,654 1,99,54,045 - 2,16,52,918 2,16,52,918 4,33,05,836 Apr.' 18 14,69,985 59,32,897 59,32,897 1,33,35,779 - 2,16,52,918 2,16,52,918 4,33,05,836 May.' 18 22,78,322 85,86,075 85,86,075 1,94,50,473 - 2,16,52,918 2,16,52,918 4,33,05,836 Jun.' 18 18,08,654 79,75,785 79,75,785 1,77,60,223 - 2,16,52,918 2,16,52,918 4,33,05,836 Jul.' 18 16,19,925 60,89,062 60,89,062 1,37,98,049 - 2,16,52,918 2,16,52,918 4,33,05,836 Aug.' 18 12,10,214 81,46,316 81,46,316 1,75,02,846 - 2,16,52,918 2,16,52,918 4,33,05,836 Total 1,71,67,956 6,9....
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....e, 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. 14. 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 in to its electronic cash ledger as and when the consideration is received from its recipients. Detailing about the above circumstances, the appellant strongly contended that there is no reason except cash crunch for its failure to file the returns in Form GSTR-3B. Hence, argued that holding/alleging suppression of tax and passing the best judgment orders is not justifiable and not lawful. 15. The appellant further points out tha....
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....ction 39 of the CGST Act, 2017. 18. 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 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." 19. 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 between two returns has been amended so as to partake either of the returns colour in isolation. 20. ....
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....ion 122 of the Act, does not arise and such levy of penalty treating it as wilful suppression of the outward supplies is erroneous. Issues for Adjudication : (1) Whether the best judgment orders through estimating the outward taxable supplies by AA, 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 wilful suppression aspect and resultant levy of 100% penalty, is found to be having any basis and such wilfulness, has been established by AA or not? (4) Whether the interest levied by AA, is in tune with the provisions of the GST Act or not? Analysis : 25. Perused the grounds of appeal along with the assessment orders passed by the AA, and after thorough verification of records, the following findings are recorded; (1) Regarding the levy of tax of Rs. 36,22,84,718/- : A basic perusal of AA's orde....
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....furnishing of the relevant annual return, whichever is earlier. 28. Therefore, the moot question is, whether the return in Form GSTR-3B is a return required to be filed under Section 39 of the CGST Act/GGST Act. The aforesaid press release is valid and in consonance with Section 16(4) of the CGST Act/GGST Act only if Form GSTR-3B is a return required to be filed under Section 39 of the CGST Act/GGST Act. 29. Section 39(1) of the CGST/GGST Act provides that every taxpayer, except a few special categories of persons, shall furnish a monthly return in such form and manner as may be prescribed. Rule 61 of the CGST Rules/GGST Rules prescribes the form and manner of submission of monthly return. Sub-rule 1 of Rule 61 of the CGST Rules/GGST Rules provides that the return required to be filed in terms of Section 39(1) of the CGST/GGST Act is to be furnished in Form GSTR-3. 30. It would be apposite to state that initially it was decided to have three returns in a month, i.e. return for outward supplies i.e. GSTR-1 in terms of Section 37, return for inward supplies in terms of Section 38, i.e. GSTR-2 and a combined return in Form GSTR-3. However, con....
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....er the provisions of Section 10 or Section 51 or Section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof. (2) A registered person paying tax under the provisions of section 10 shall, for each quarter or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of turnover in the State or Union territory, inward supplies of goods or services or both, tax payable and tax paid within eighteen days after the end of such quarter. (3) Every registered person required to deduct tax at source under the provisions of Section 51 shall furnish, in such form and manner as may be prescribed, a return, electronically, for the month in which such deductions have been made within ten days after the end of such month. (4) Every taxable p....
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.... return for the month of September or second quarter following the end of the financial year, or the actual date of furnishing of relevant annual return, whichever is earlier. (10) A registered person shall not be allowed to furnish a return for a tax period if the return for any of the previous tax periods has not been furnished by him. The Hon'ble High Court of Gujarat has categorically and unambiguously clarified that GSTR-3B is not a return prescribed under Section 39 of CGST/SGST Acts. This proclamation of law by Hon'ble High Court will have an important relevance and bearing on the present dispute, because the AA has basically invoked Section 62, which in turns is based on the omission of non-filing of return specified under Section 39 of the Act. Since, the Hon'ble High Court has made it clear that GSTR-3B is not the return prescribed under Section 39, it is to be deemed that the appellant has not violated the provisions of Section 39, and hence there is no necessity to assess it under Section 62 of the Act. That means, the heart beat behind the A.A's dodged findings are lacking legitimacy as well as authenticity, making the orders vulnerable to....
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.... the power to levy assessment on the best of judgment basis is not an arbitrary power, but such assessment must be based on best judgment or on relevant material. It is not a power that can be exercised on the sweet will and pleasure of the concerned authorities. (ii) State of A.P. v. Ravuri Narasimhulu (1965) 16 STC 54 (APHC) "The Legislature has confined the power of the department under this sub-section to assessing 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....
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.... bad in law and in violation to the principles of natural justice. Any best judgment assessment must be supplemented by reason, because reason is the heart beat of any conclusion and fetches clarity in conclusion of any order, as such, without the reason best judgment orders becomes lifeless and amounts to denial of fundamental justice. The reason/evidence would act as live link between the mind of assessing authority and the resultant conclusion arrived at. In the impugned orders, it is an apparent failure on the part of the AA that he has not recorded any reason or basis in estimating the quantum of the outward taxable supplies. It is also clear from the findings that the AA 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 AA 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 AA in denying him the relief prayed for, the remedy of appeal will not be me....
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....he same document of common orders in Form GST ASMT 13, levying the tax, penalty and interest therein. Thus, the short issue herein is whether the best judgment assessment under Section 62(1) can be made in respect of the non-filers of the returns in Form GSTR-3B? To answer this question, it is appropriate to extract the Section 62(1) of the Act and Rules 61(1) of the Rules hereunder. "Section 62. Assessment of non-filers of returns. - (1) Notwithstanding anything to the contrary contained in Section 73 or Section 74, where a registered person fails to furnish the return under Section 39 or Section 45, even after the service of a notice under Section 46, the proper officer may proceed to assess 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 o....
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....e, in order to ease the burden of the taxpayer for some time, it 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 GST-3, i.e. return required to be filed under Section 39 of the CGST Act/GGST 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." 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. There by their lordships declared that for t....
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.... the estimations involved in the best judgment assessment herein are not sustainable. They are whimsical. They have no basis. It is declared accordingly. The same are deleted. Besides, it is judicially settled law that the estimations fall foul of law if they are smacked off factors like wildness, vindictiveness, arbitrariness, capriciousness, etc., The best judgment orders in issue cannot be sustained even on these touch stones laid down by the Apex Court in the catena of cases starting from the case of Commissioner of Sales Tax, M.P. v. H.M. Esuf Ali Abdulla (way back in 1973) 32 STC 77 SC. Conclusion : Therefore, in view of the above emerged anomalies involving invoking of Section 62 unlawfully, because the relevant Section 39 does not speak of GSTR-3B in the listed returns, as clarified in the above discussed judgment and in view of the erroneous method adopted by AA for estimating outward taxable supplies through best judgment without mentioning reasons/evidence, hence the tax so levied by the AA of Rs. 36,22,84,718/- is annulled and modified as per actual tax liability of the appellant for the period from Dec., 2017 to Aug., 2018. In the result, the....
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....on (1), pay the amount of tax along with interest payable under Section 50 and a penalty equivalent to 15% of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer, and inform the proper officer in writing of such payment. Section 74(1) of the APGST Act stipulates that, where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been short paid or to whom refund has erroneously been made, or who has 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 ena....
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...., it is very much essential to have a comprehensive understanding of Section 122 (1 & 2) of GST Act, 2017, which are abstracted below : Section 122. (1) Where a taxable person who - (i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply; (ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made there under; (iii) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three 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 t....
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....r section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher. (2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the Input Tax Credit has been wrongly availed or utilised, - (a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher; (b) for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher. The AA 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 wilful....