TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 1518
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....uary 2017 and carrying on the business of a works contractor, which is executing infrastructure based Engineering Procurement Construction contracts. The petitioner registered itself under the GST Act. The primary and main business of the petitioner, for the relevant period from July, 2017 to March 2018, was the execution of works, as a sub-contractor, for one M/s. Vijay Nirman Company Ltd. b) The petitioner raised nine invoices with an aggregate value of Rs. 20,92,02,422/-. These invoices, were inclusive of GST of Rs. 3,19,12,234/-. The said invoices were raised in the month of March, 2018. c) The petitioner, though paid certain amounts, by M/s. Vijay Nirman Company Ltd., was unable to pay GST as the payments received from M/s. Vijay Nirman Company Ltd., were not sufficient even for executing the works awarded by it. As the GST portal, does not accept filing of returns, unless accompanied by payment of tax, the petitioner was unable to file the GSTR-3B returns within the statutory time limit. d) On 31.07.2018, the principal place of business of the petitioner was inspected, by the DGGI officers, on the authorization given by the Joint Director, DGGI, Visakhapatnam Zonal Unit....
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....r. Thereafter, the 4th respondent issued a notice dated 19.08.2023, demanding payment of Rs. 3,20,72,233/- failing which recovery action would be initiated under Section 79 of the CGST Act, 2017. 3. The petitioner being aggrieved by these proceedings, has approached this Court challenging the appellate order of the 1st respondent, dated 26.07.2022, upholding penalty under Section 74 of the GST Act, along with other penalties imposed in the original order of the 2nd respondent dated 24.12.2021. 4. Sri V. Raghuram, learned Senior Counsel representing Sri Anil Bezawada, learned counsel appearing for the petitioner, assails the impugned orders, essentially on three grounds: a) The provisions of Section 74 (5) of the GST Act, 2017 could not have been invoked merely on the ground that the petitioner had not paid pending GST taxes till the visit of the tax authorities on 31.07.2018. Such non-payment cannot be treated to have been done by way of fraud or that there was wilful misstatement or suppression of facts to evade tax. b) Section 74 of the GST Act can be invoked only where payment of tax had not been made before issuance of show cause notice under Section 74. In the present ca....
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....t. Apart from this, interest can be levied for delayed payment, under Section 50 of the CGST Act. 8. Sri V. Raghuram, learned Senior Counsel, contends that the annual returns had been filed, by the petitioner, for the relevant period, within the time stipulated under Section 44 of the CGST Act, and that the necessary tax had also been paid by the said date. He would contend that such filing of return and payment of tax is sufficient compliance of the requirement of CGST Act and as such the question of invoking the penal provisions of either Section 73 or Section 74 or Section 122 of the CGST Act would not arise. He would further submit that as far as the interest payable under Section 50 of the CGST Act is concerned, necessary interest of Rs. 25,49,481/- was paid, on 20.07.2022, by way of debiting the same in the electronic cash ledger of the petitioner. 9. There is no dispute between the petitioner and the tax authorities that a sum of Rs. 3,19,12,233/- is the tax liability of the petitioner under the CGST, SGST and IGST Acts. There is also no dispute that this amount had been paid. The petitioner also does not appear to dispute the fact that a sum of Rs. 25,49,481/- is payable ....
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....y the proper officer and inform the proper officer in writing of such payment. (6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. (7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. (8) Where any person chargeable with tax under sub-section (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five percent of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. (10) The proper officer shall issue the order under sub-section (9) within a period of five ....
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....ed in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. 13. Under Section 74 (1) of the Act, a penalty, equivalent to the tax, is leviable, where a tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized (for purposes of brevity the said scenario is being referred to as the "non payment of tax"). Similarly, under Section 73 (1) read with Section 73 (9) a penalty, equivalent to 10% of the tax not paid or Rs. 10,000/-, whichever is higher, can be levied. 14. The differentiation, between invocation of Section 73 and the invocation of section 74, is on the basis of the circumstances in which such tax has not been paid. Section 74 is to be invoked where non-payment of tax occurs on account of fraud, wilful misstatement or suppression of facts for the purpose of evading tax. Where non-payment or short payment is for reasons other than the aforesaid reasons set out under Section 74, the provisions of Section 73 of the GST Act would be applicable. 15. The learned Senior Counsel relied upon the judgments in CCE vs. Adecco ....
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....tion (3) of Section 73 of the Finance Act, 1994, which stipulates that no notice can be issued after the payment of service tax and interest, had made the afore said observations. 18. The learned Senior Counsel relied upon Commissioner of Central Excise, Visakhapatnam vs. Tirupathi Fuels Pvt. Ltd. In this case, the assessee, after the authorities had found that the assessee had not filed the returns or paid the tax, had sought to levy penalty on the assessee. However, the assessee paid the service tax and interest before any show cause notice could be issued. The argument before the Hon'ble High Court was that the penalty could not have been levied, in view of the fact that Section 78 prohibits initiation of any penalty proceedings, if tax and interest had already been paid. The Hon'ble High Court, in terms of the specific language of Section 73 (3) of the Finance Act, 2015, had held in favour of the assessee. However, the language of Section 73(3) stipulated that no penalty could be levied if the service tax payable, had been paid by the assessee on his own verification or on the basis of tax ascertained by a Central Excise Officer. In this case, the statute itself stipulated tha....
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....to consider the scope of section 74, on the plain language of the provision. At the cost of repetition, the relevant part of section 74 (1) reads as follows: 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 utilized by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, 22. Non-payment of tax, would attract penalties, under Section 74 (1), in three circumstances. The first two circumstances are fraud and wilful mis-statement. Both these require an intention to evade tax by unfair or illegal means. The third circumstance is suppression of fact, which is also defined, in Explanation-2, as non-declaration of relevant information. In view of the collocation of the terms, before this term, and in view of the requirement, under the two earlier terms of mens rea, the term "suppression of facts" would have to be read as wilful or deliberate suppression of fact, for evading tax. The term "evade" puts this issue beyond controversy, as this term means that the suppression must be for the purpose of evasion, which clearly requires intention and mens ....
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....Within 30 days of communication of the order under Section 74 (9) Tax along with interest under Section 50 and penalty equivalent to 50% of such tax 26. The scheme, under section 74, appears to be in the nature of a permanent amnesty/settlement/compunding scheme, where the tax payer, liable to pay penalty under Section 74, is given an opportunity to voluntarily accept wrong doing and reduce the penalty that would be payable. In such circumstances, the contention of the Petitioner, that action can not be taken, under section 74, against him may have force. However, this issue is not being decided as the petitioner does not meet the requirements of section 74 (5). This provision, read with Section 74 (6), as extracted above, sets out that the proper officer cannot issue a notice, under sub-section (1) of Section 74, where the person chargeable with tax, has already paid the tax and the interest payable under Section 50 and penalty equivalent to 15% of such tax even before the issuance of notice. While the petitioner had paid the tax prior to the issuance of notice under Section 74 (1) of the CGST Act, the interest payable under section 50, was paid after the notice had been issued....