TaxTMI 
TaxTMI 
Penalty under Section 73(1) of CGST Act, 2017
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....enalty under Section 73(1) of CGST Act, 2017<br> Query (Issue) Started By: - Alkesh Jani Dated:- 1-5-2024 Last Reply Date:- 4-5-2024 Goods and Services Tax - GST<br>Got 16 Replies<br>GST<br>Dear All Experts, Show Cause Notice was issued for recovery of short payment of CGST Rs.1600/- and SGST Rs.1500/- under Section 73 of CGST Act, 2017. Now the Query is :- what will be the amount of penalty Rs.10,000/- for CGST and SGST or Rs.10,000/- for CGST and Rs.10,000/- for SGST (Total Rs.20,000/-) (Refer Section 73(9) of CGST /SGST Act, 2017). Please share your valuable insight and any of such quantification. Thanks in advance. Reply By Sadanand Bulbule: The Reply: Dear Sir Minimum penalty is Rs.10,000/- both under Section 73[9] of the CGST ....
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....Act and the SGST Act respectively. So total penalty shall be Rs. 20,000/- Your query contains the answer. Reply By Alkesh Jani: The Reply: Shri Sadanand Bulbule ji, Thanks for your prompt reply. The query is raised as some jurisdictions are following different procedure. i.e. Rs. 10,000/- for both. The reason is, when penalty equivalent to tax is prescribed for fraud, suppression of facts etc under Section 74. than Rs.20,000/- for other than fraud, suppression of facts etc cannot be imposed. I invite all our experts to share their insights. Thanks With regards. Reply By Sadanand Bulbule: The Reply: Dear Sir As are your aware, the objects of the size of penalty under Section 73 and 74 are entirely contrast. So while quantifying pena....
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....lty under Section 73[9], one need look at Section 74. Reply By Sadanand Bulbule: The Reply: Pleas read it as; Need not look at Section 74. Reply By KASTURI SETHI: The Reply: Sh.Alkesh Jani Ji, (i) Section 73 or 74. are independent of each other. (ii) Both Sections are not to be compared for any purpose. (iii) The emphasis is laid on the phrase, 'whichever is higher' If tax evaded is Re.one and Section 73 has been invoked, even then a penalty of Rs.10,000/- (Tax-wise each) i.e. Rs.10,000/- + Rs.10,000/-has to be imposed upon. Reply By KASTURI SETHI: The Reply: In continuation of my previous post, (iv) Rationally, logically and practically, it looks preposterous. Law should be amended to the extent that the quantum of pen....
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....alty should not be more than the amount of tax evaded whether penalty is to be imposed under Section 73 or 74. Reply By KASTURI SETHI: The Reply: Sh. Alkesh Jani Ji, The issue raised by you is full of logic and reason inasmuch as a person who plays fraud with the Govt. is liable for penalty equal to the amount of tax evaded under Section 74 whereas a person who pays short payment of tax due to technical lapse or procedural lapse or clerical mistake/typographical mistake etc. he is liable to pay the amount of penalty more than the amount of tax evaded under Section 73 by virtue of the wording, ''whichever is higher''. I am of the view that it is a flaw in the law which requires amendment. The issue is worth making represe....
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....ntation to the GST Council. Disclaimer : These are my personal views for exchange of views with the experts on TMI. Reply By Sadanand Bulbule: The Reply: Dear Sh. Sethi Sirji While fully endorsing your deep analysis of the disparity as regards to the quantum of penalty under Section 73 & 74, my understanding is: The Acts of Parliament/Legislature are not drafted with divine presence and perfect clarity. it is not possible for the legislators to foresee the manifold sets of facts and controversies that may arise while giving effect to a particular provision. Indeed, the legislators do not deal with the specific controversies. It is for the Hon'ble High Courts/Apex Court to clarify the legislative intent and to cure the defects and d....
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....isparity in law, if any. Secondly, your apprehension can also be expanded to the provisions of Section 129 as well. [ These are purely my personal thoughts]. Reply By Alkesh Jani: The Reply: Shri Kasturiji Sir & Shri Sadanand Bulbule ji, I am very thankful to you for responding to my query. "whichever is higher" very clear and without any ambiguity, I fully agree to your views expressed at Sl. No. 06 above. The Government has made many amendment to benefit the small taxpayer, and these small taxpayer are not in a position to contest the issue before higher legal forum, as it will be expensive for them. Imposition of such penalty is against the spirit of the law. Here, I am neither comparing any provisions with each other, but few p....
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....oints are to be referred and is noteworthy. If we refer Section 122(2)(a) of the CGST Act, 2017, the penalty is 10% of the tax short paid (if for the reason, other than fraud, suppression of facts etc. (Section 73)) and penalty equal to ten thousand rupees or the tax due from such person ( for reason of fraud, suppression of facts etc. (Section 74)). I think it would be harsh to impose such huge penalty. As the upper limit in all other section is equivalent to tax and not beyond that. I am of the view that deliberation in the matter is required. Thanks With regards Reply By KASTURI SETHI: The Reply: Sh.Sadanand Bulbule Ji, Sir, I am highly thankful to you. In support of your views, it is worthwhile to peruse the following: "Jud....
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....ges do not make law, they only discover or find the correct law".--------Supreme Court in the case of Asstt. Commissioner, Income Tax, Rajkot Vs. Saurashtra Kutch Stock Exchange Ltd. - 2008 (9) TMI 11 - SUPREME COURT The department's appeal was dismissed. Reply By Shilpi Jain: The Reply: Is there no way you can contest the penalty levy? Reply By Alkesh Jani: The Reply: Shri/Ku. Shilpi Madam, First of all thanks for participating in this discussion. One can contest but on what ground and which authority has the power to drop the penalty, APL-1, Tribunal, High Court or Supreme Court of India. The Expense may be more than what penalty is imposed. A small taxpayer may not be in the position to bear the expense to contest. Ple....
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....ase suggest. Thanks, Reply By Padmanathan Kollengode: The Reply: You may try the argument that provisions of section 126 would apply as penalty envisaged under 73 is neither a fixed sum nor expressed as a fixed percentage but both. Reply By Alkesh Jani: The Reply: Dear Experts, The Section 75(13) of the CGST Act, 2017, same is reproduced below:- "(13) Where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act." Do any other provision includes Section 6 of the CGST Act, 2017. Please offer your comments. Thanks Reply By Padmanathan Kollengode: The Reply: Dear Alkesh JI, Could you explain the context more?....
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.... How is penalty imposed under section 6 of the Act? Isn't section 6 for limited purpose of authorisation of officers? Reply By Alkesh Jani: The Reply: Shri Padmanathan Kollengode ji, This would be too lengthy, but in short CGST Officer passes an order whereby confirming CGST & SGST, under which Authority, SGST is confirmed? I think it's under the authorization under Section 6. Further, Section 6 talks of Order only and not of SCN. Therefore, I am of the view that Section 75(13) is restricting the penalty under both CGST & SGST, as this cannot be the intention of the law maker or the spirit of the law to impose penalty more than the amount of tax short paid or not paid, that too in the circumstances where there is no intention to eva....
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....de, the tax or there is no suppression of facts. When there is intention to evade the tax by suppression of fact etc. under Section 74, equivalent penalty is imposed means if the person is charged for the same amount of short paid tax, penalty under 74 would be Rs.3100/-. Moreover, where there is short payment of Rs. 1600/- of CGST and Rs.1500/- for SGST, total of Rs. 3100/- penalty will be Rs.20,000/- (10,000/- each) under Section 73. Here, I may be wrong in interpreting the statute, but I am not able to accept this with full heart. These are my personal views. Thanks<br> Discussion Forum - Knowledge Sharing ....